Apparently, the Fed (and everyone else) uses the Census Bureau's survey of manufacturing plants (capacity utilization only refers to manufacturing which raises other questions). The Census Survey is jointly funded by the Fed and the Defense Dept. and all the other surveys (including the major private ones) have ceased. The Fed then does some eclectic "adjustments" on the Census Bureau's results based on their own judgements (the Fed's paper does not submit these to much scrutiny).
The Census Bureau's Survey questionnaire is annual and mandatory. There have been questions raised about accuracy and biases in the self-reporting by plant managers (e.g. see Shaikh) when contrasted with other sources, hence the Fed's subjective "adjustments". This seems similar to the large discrepancies and biases that appear in household surveys (e.g. the Census Bureau's CPS vs. the Fed's SCF vs. the IRS data). BTW, the plant managers are supposed to assume "normal and realistic" operating conditions, numbers of shifts, etc so this is not an estimate of sheer physical capacity (and the way "normal and realistic" is described to them has changed over time.
2) Interesting points about Gardner Means and deflating prices. Sounds like a parallel to the disparities that emerged among industries with different market power during inflation in the '70s.
Clearly there are big differences in pricing power among industries and some sectors should be called "monopoly" - at least in the traditional "pre-Sweezy" sense of a contingent dominance. But some (not Michael P) take this so far as to make these sectors nearly immune from all competitive concerns and does this translate to a suspension (even the reversal) of whole tendencies in the macro economy? I thought Jim D. made this point well.
Paul
Michael P. wrote:
Anwar's approach is interesting, but I think that any macro data will prove to be a bit
shaky. With respect to electronic motors, imagine that you were trying to get at the value
of the stock of computers, by looking at the motors in their fans. Excess capacity exist
because of both technical obsolescence and product demand.
What is interesting is that some industries have the market power to withstand the
withering effect of competition; others don't.
Gardiner Means noted that between 1929 and 1932, while the Great Depression was sweeping
across the economy, motor vehicle prices fell only 12 percent whereas production dropped by
74 percent. Other concentrated industries, such as agricultural implements, iron and
steel, and cement demonstrated a pattern that was only slightly less extreme. True, prices
of agricultural commodities fell 54 percent, while output decreased by only 1 percent, but
the oft-used example of agriculture was the exception rather than the rule.
Today, commodity industries, such as steel may resemble the agriculture of the Depression
era in terms of their ability to withstand demand shocks. Others, with more market power,
are more like the motor vehicle industry of that time.
