>What’s more, the substitution of quality for price as firms’ main way of responding to changing market conditions weakens the case for keeping inflation low and stable. Inflation makes relative prices less informative, economists reckon, making it harder to decide what to buy and how to spend. Rather than clarity, low inflation has brought a different sort of confusion: one of shrinking chocolate bars and lost holidays.
What has long been suspected by those outside the field, and rarely acknowledged by economists and statisticians inside the field. Consumer Price Index (CPI), a standard methodology of nearly every national bureau of statistics and economic measurement is susceptible to manipulation and gaming by producers and retailers because the statistical agencies employ limited resources to perform quality adjustments to the item price data.
The adjustment methodology is quite limited in what adjustments are made and the resources dedicated to comparing items and differences—there is no lab testing being performed and the most extensive research performed on some items is using product brochure data to make adjustments based on listed features at face value only (the brochure says this is better or comes with better features).
Often product data is limited so no adjustments are made, only assumptions like “we believe this product has the same quality or content” or “we will impute the missing price or data based on similarly available data or some kind of modeling abstraction.”
This standard methodology led by the U.S. BLS and other agencies has done a complete disservice to the reputability of economics as a hard science instead of a bureaucratic ideology.