Talk:Real and nominal value

(Redirected from Talk:Real versus nominal value (economics))
Latest comment: 4 years ago by Colin.champion in topic Definition of real value

The explanation is hard to understand.

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I think the explanation given on this other page is much more clear: [1] —Preceding unsigned comment added by 99.179.5.231 (talk) 21:18, 15 August 2009 (UTC)Reply

Yes, you're right. The wiki process can work to flag a situation like this but it's pretty poor at being able to correct it. Thanks for the link, and the informed reader will be allerted to what this says about economic topics in wiki generally. 72.228.190.243 (talk) 13:25, 11 December 2012 (UTC)Reply
However, I'll give it a shot. 72.228.190.243 (talk) 13:28, 11 December 2012 (UTC)Reply
I think the definition on www.econlib.org captures the key to understanding the difference. Wikipedia does not allow me to add www.econlib.org as a reference, but I like the definition there so much, I added it anyway. --Jonathan G. G. Lewis 10:22, 8 July 2019 (UTC) — Preceding unsigned comment added by Jonazo (talkcontribs)

Example: Peppercorns

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"A classic example is a peppercorn rent." I noticed this was deleted. Why? would the editor reponsible care to justify the deletion of this apparently useful illustration of the concept? TobyJ 15:13, 24 October 2005 (UTC)Reply

Question

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From the article: "versus real value which removes the effect of inflation" Shouldn't that read, "which adds the effect of inflation" or "which accounts for the effect of inflation"?

Classical economics

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Real price refers to how much labor a good costs. This is in contrast to nominal price which refers to how much money a good costs. This terminology is used by Adam Smith. In inflation, the nominal price of a good would increase with the real price remaining the same. However, the real price of money would decrease as it is not able to purchase as much labor.

How does real GDP account for present market equilibrium?

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Real GDP uses a base year price how can it account for market demand and supply?

Say, due to better production technology, and higher demand, you managed to produce and to sell 130 computers this year, comparing to 100 computers last year. In real terms, "your product" (GDP) is 30% higher.
But it's true that market forces affect prices and quatities simultaneously. Probably, article's language needs to be improved to avoid the misunderstanding. --Econn 06:54, 10 October 2006 (UTC)Reply
I removed the part on "market demand and supply" as not related, partially restoring one of the previous editions. Please check it out. --Econn 07:40, 10 October 2006 (UTC)Reply

Real versus Nominal in broad sense

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I was chipping away at Metrology when I realized that this topic is a better home for a poorly understood characteristic of all measurements. Because most economics are based in counts (am I wrong?) as opposed to instrument-assisted measurements, what I added does not apply to economics. George5530 (talk) 22:38, 4 December 2008 (UTC)Reply

Money of the day?

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This is confusing... please re-word... Wilkos (talk) 15:53, 5 January 2009 (UTC)Reply

other meaning of the word?

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This page is redirected to from a search for 'nominal fee.' I was under the impression that a nominal fee would be taking a small, useless amount of money for goods or services that, for various reasons, can't be done for free...for example, $1/year salaries. Does anyone else know this meaning for this term, is there a better word for it, and should there be a disambiguity link at the top?74.10.227.130 (talk) 14:54, 12 February 2009 (UTC)Reply

The article is about the terms nominal and real in economics, not the vernacular usage of nominal which is popular in the United States.Jonathan G. G. Lewis 06:10, 24 March 2016 (UTC) — Preceding unsigned comment added by Jonazo (talkcontribs)

Batteries and Modems!

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Hi... I have a real beef with these two examples. One is just erroneous, and the other is a misinterpretation.

  • NiCad and NiMH batteries DO NOT have a nominal voltage of 1.5v. They are always listed as 1.2 or rarely 1.25v. Like their alkaline counterparts at 1.5v (and PP3s at 9v, car batteries at 12.0v, Lithium Ion at 3.7v/10.8v), this is the rough design voltage of the battery and the connected electrical equipment under a typical load, and for some sensitive equipment it is the minimum supply voltage at which normal service can be guaranteed. The actual voltage supplied can vary quite a bit depending on the battery's charge state and equipment load, up to the point where the current demand exhausts its ability completely and the internal resistance gets too high. Typically speaking, a rechargable at no load and full charge will be somewhere between 1.35 and 1.45v, and an alkaline at 1.55 to 1.65 (lithium-based single use "high power" batteries marketed for use in digital cameras can be as high as 1.7v) - and car batteries/multicell LiIon being upto 14.0/12.0v. In heavy use this may drop to the rated nominal value. But you can usually be fairly sure that a cell measured under no load showing its nominal voltage or a little below is as good as dead for most applications that will put a meaningful load on it. You may be able to eke a single-use one out for a bit longer by putting it in a low-load device or one that isn't too fussy about the actual voltage, e.g. a small torch, radio/tape ghetto blaster or set of portable NXT speakers, but for rechargables it's time to stuff them back in the charger. A car battery that's actually showing less than 12.8v is generally considered "flat", as there's no way it's going to start the engine or even properly run the headlights.

(of course, the actual entry would be a lot shorter and more succinct when summarised for the actual page - but at least it would retain an element of accuracy. Batteries are NOT sold at an artificially high nominal voltage and then operate at a lower one, much more the other way round)

  • 56k Modems CAN manage 56000 bits per second quite happily if you're on a decent line (and in fact, after internal compression, much more than this). The problem is the wierd FCC ruling in the USA that means phone lines are actually artificially limited to be too low quality for the modems to successfully handshake at this speed. I've had various successful hookups at 54000 and 56000bps in the UK back when I had a K56flex modem on a local fibreoptic cable provider phone line (before switching to their 512k digital service) - the 53.3 speed itself is merely a feature of the X56 and V90 systems that competed against and eventually triumphed over Flex, and is the highest speed they typically manage to reach from their fixed speeds (the next notch up is 56000 itself) rather than anything particularly important. There may also be an element of interference in it because of how analogue phone transmissions get multiplexed onto digital lines (e.g. T1s) where the full 64000 bps (8khz at 8bit) sampling resolution isn't strictly fully available - a certain fraction of it is sacrificed for error checking and control purposes even before we get into the bandpass filtering on a typical consumer phoneline.

Whatever the reasons behind it all, two 56k modems hooked together with a plain length of phone cable and suitable control signal (eg dialtone) simulated between them will run right up to 56000 with no issues. It's nothing to do with the modems themselves consistently giving a result almost 3kbits adrift of their marketed speed, but the retarded nature of the lines a certain number of them (and that number being artificially significant in representation amongst the population of wikipedia editors, one presumes) are connected to. The modems are doing their job just fine under poor conditions in a certain area.

Now, if you want to talk about the advertised nominal speeds of ADSL and other cable services, that's an entirely different kettle of fish, as they will operate at their maximum nominal rate (say, 8mbit) at certain low-load parts of the day, but will quickly drop off in speed under load. A bit like a road with a 60mph speed limit that experiences chronic rush hours... (this effect also has a minor influence on modem transfer speed - if the remote server is heavily loaded or the link in-between is congested, you won't even get the (actually "nominal") 53.3kbit/s it reports as having connected at, but maybe 40kbit/s or far, far less).

Thanks for trying but it helps to have the facts straight first 193.63.174.10 (talk) 13:10, 13 May 2009 (UTC)Reply

Rewrite

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I have rewritten this article as far as the bottom of the Example section. I hope no-one is offended. I don't much like the rest of the article. Maybe I will come back and rewrite that later. Jonathan G. G. Lewis 06:07, 24 March 2016 (UTC) — Preceding unsigned comment added by Jonazo (talkcontribs)

Definition of real value

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It seems to me that the article places too much weight on inflation. Real value can’t be defined as nominal value adjusted for inflation because (a) inflation is the increase in nominal value over and above the increase in real value, and (b) real value can be defined for a barter economy.

The defining properties of real value, I think, are these.

  • Two items which are exchangeable at current market rates have the same real value.
  • The real value of n baskets of goods is n times the value of a single basket of goods.

These rules allow us to determine the real value of anything we own.

  • Exchange bits of it against other goods until you’re left with items in the same proportion as in the basket of goods.
  • See how many baskets of goods you’ve got.

So far as I can see, the first defining property is not mentioned in the article. Colin.champion (talk) 09:40, 13 July 2020 (UTC)Reply

You should refer to what authoritative sources have to say on the subject. If you think real value is not defined well in the article, point to a source that defines real value differently. Then you can weave that view into the article, paying attention to not overweight any particular source. Coastside (talk) 00:01, 15 July 2020 (UTC)Reply
Sorry, I’m not in a position to do that, that’s why I limited my intervention to the talk page. In fact you could say that it’s implicit in the article that real values are proportional to exchange values since they are nominal values corrected for inflation. But I still feel it’s back-to-front to define real values in terms of nominal values. Perhaps someone else agrees with me who knows of a reliable reference; otherwise I can’t take what I’ve said any further. Colin.champion (talk) 07:24, 15 July 2020 (UTC)Reply
However one valid reference is Box 2.3 (p50) in Abel and Bernanke’s ‘Macroeconomics’ (5th ed). The authors suggest that inflation rates have been over-estimated by 1-2% owing to a failure to make adequate allowance for the increase in the real value of supposedly comparable goods. Colin.champion (talk) 07:39, 15 July 2020 (UTC)Reply