One would think that by now we would have a handle on measuring economic activity in the tangible economy. But, it appears that a simple thing like a house can cause an uproar. Take the case of an article in today's Wall Street Journal about a fight between two well known housing experts -- Robert Shiller and Thomas Lawler -- over whose data is correct. As the story points out:
No one has found a precise way to measure changes in house prices. Because no two homes are exactly alike, changes in the price of one won't necessarily be matched even by apparently similar homes nearby, much less those hundreds of miles away. Though some indexes track price changes in the same set of houses over time, those can be distorted by major improvements in some of the houses and deterioration in others. The publicly recorded transaction prices, used to create indexes, often are distorted by incentives given to buyers that aren't tallied in the price.Yet, as I pointed out yesterday, the housing market seems to work (even in these bad times).
A lesson to be learned about valuation of intangibles. Valuation is a complex issue, even for things that we think we understand.
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