It's funny to me economists think they can measure inflation/deflation down to a single digit percentile with any level of certainty.
Everyone should keep in mind that inflation for each individual is different because we all consume different things. The BLS calculation is a weighted average of prices. It’s their best guess and they don’t hide how they make the guess.
What is wrong with their methodology? How should it change? Have you read about the different measure they use and how they make their calculations? Do you think they shouldn’t measure it at all?
We’ve all experienced a general rise in prices the past year and have a sense that something abnormal is occurring. BLS’s calculation confirms this. Our sense of abnormality is confirmed by the data.
Basically, each month, the Bureau of Labor Statistics (BLS) hires people to manually look up the price (online, in person, of by telephone) of 80 thousand different items, then computes a weighted average price change. The weights come from the Consumer Expenditures Survey (conducted by the Census Bureau on behalf of the BLS) of 8 thousand households to collect data on how much they spend on what.
Is inflation negative? (will never be true anymore)
Is inflation 0-5%? (somewhat acceptable)
Is inflation 5-10%? (dangerous level)
Is inflation 10-100%? (critical level)This would be strictly worse for the United States than any of the other options. It would result in hoarding and the cessation of spending which would likely destroy the economy. Please don’t post stuff that seems like common sense but is in fact not sensical at all or at worst a complete fabrication which I’m guessing this is by the numbers.
Probably why he said it will never be true? The fed would never allow deflation.
I did not say it should or would.
It's like IQ tests. They're measuring something that may or may not be what some people think it measures.
There's also shadow inflation, where you pay the same as before, but get less, or pay in other ways. You can see this with hotels for instance. The price of a room hasn't changed, but many hotels have reduced the number of services that are included like the frequency of cleaning, free breakfast, etc. So you're paying the same amount for your room, but you're getting less value in return. How does this get reflected in the CPI?
And this is bad... how? I'm not sure how presuming the opposite (ie. demand stays the same) makes more sense. For instance, during the 1973 oil crisis, supply was literally lower than demand. If we expected demand to stay the same (for whatever reason), wouldn't the price of oil go to infinity?
>How does this get reflected in the CPI?
hedonic and/or quality adjustments are done for certain CPI categories.
They tell you exactly what they are buying and do, in fact, adjust for qualitative differences like reduced service at a hotel.
The entire point of the CPI is that it is an exact representation of what buying the exact same set of things exactly one year of part will cost.
The socks are irrelevant as far as CPI is concerned since it concerns itself with pricing only, and not the knock on effects of reductions in demand due to pricing.
There are teams of PHDs in every major country in the world that only work on this one number, their methodology is then picked apart by more teams of phds in academia who produce alternate methodologies and slightly different numbers. Do you really think that in the past 100 years of doing this work that they haven’t come up with ways of adjusting for the fact that Motel 8 stopped serving waffles?
The original point in this thread was that it's laughable to do this to tenth of percent or more, when as you and others freely point out that a lot of this is qualitative and not quantitative.
If I buy figure out the cost to obtain 100 grams of Cheetos at ten convenience stores in urban areas I can very much tell you the price change with two significant digits. We get it, you don’t like the way they measure inflation. But the CPI is not some hand wavy number, and your comments across this thread indicate that you also don’t understand what it is and how it is derived.
Well, [1] quotes Alan Cole, who is "formerly a senior economist at the Joint Economic Committee of the U.S. Congress"
He believes that, although the official figures aim to account for quality changes, they fail to fully capture the current deterioration in quality. (he also believed, in the past, the figures failed to fully capture increases in quality)
The article gives the explicit example that hotel prices may be the same or higher, yet hotels are skimping on the services they used to provide. Reductions in maid service. Fresh, hot breakfast buffets replaced with plastic-wrapped pastries and warm milk.
After all, plenty of item categories that make up the CPI just don't have hedonic quality adjustments applied [2] - including HB021 and FV051.
Do you believe you understand the inflation statistics better than Cole?
[1] https://text.npr.org/1048892388 [2] https://www.bls.gov/cpi/quality-adjustment/home.htm
FWIW the CPI does attempt to measure this: https://www.bls.gov/cpi/quality-adjustment/questions-and-ans...
> To measure price change accurately, the CPI must be able to distinguish the portion of price change due to this quality change.
1. The experts act as if they skipped the first month of high school science class.
2. You don’t understand the topic well enough.
E.g. we should have seen headlines saying inflation has been increasing dramatically over the last few years as housing prices have shot up, but conveniently for politicians, housing prices were not included in the ‘basket’
The cost of housing, not houses, is the biggest single component of the CPI. That means that the cost of rent, or rent equivalent, is very much factored in.
We very much do have headlines about the crazy costs of houses. But housing costs, that is the price to consume one month of housing service (aka rent) are a different thing.
Let's take just one example, Nobel Prize winning Economist and New York Times contributor, Paul Krugman.
The 1998, this gentlemen made the following bold declaration:
"By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s."
This is the same individual who mocked anyone who questioned the dogma of unlimited globalization and free trade in the 80's and 90's, only to admit later that he and others were very wrong about the damage it would do to the American middle class.
And then there's the fact that Krugman and the vast majority of economists completely failed to see the 2008 crisis building.
And mind you, Krugman isn't just any economist, he's a Nobel Prize winning economist who writes for "the newspaper of record".
So yes, when the "experts" of economics get things so miserably wrong, I'll stick with my original claim that they skipped the first month of high school science class.
Economists are modern-day tarot card readers.