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.