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Comment by Am4TIfIsER0ppos | Hacker News Reader

lol

Inflation is only 10% if you try to lie about it by averaging in new TVs. When your electricity bill doubles, when your gas bill triples, when food rises by 30% you are not going to be buying a new TV.

lmao

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You're describing an "income effect." There's also a "substitution effect." The fundamental idea is that people will change their purchases in response to changing prices. If there's a sale on bread, then you might pick up an extra loaf (substitution effect). But if you were a peasant mainly eating bread, then you might actually purchase less bread and more cheese (income effect).

Inflation statistics should correspond to what people buy, like an average across households. That's essentially what the government statistical agencies attempt to do using some combination of (1) actual market transactions, and (2) household surveys. Inflation stats are definitely imperfect--but not so obviously flawed as you suggest (weighting TV prices the same as energy prices).

Since inflation numbers are an average across households, inflation will certainly differ across households. (For some it will be higher, and for others it will be lower.) It's particularly concerning when food, energy, and housing inflation are higher than other categories (as they are today). Poorer households tend to spend more money on those staple goods. In that case, inflation will be higher for those households already less well off.

For anyone interested: "The Government Isn't Cooking the Books on Inflation"

https://www.discoursemagazine.com/economics/2021/07/16/the-g...

>You're describing an "income effect." There's also a "substitution effect." The fundamental idea is that people will change their purchases in response to changing prices. If there's a sale on bread, then you might pick up an extra loaf (substitution effect). But if you were a peasant mainly eating bread, then you might actually purchase less bread and more cheese (income effect).

Maybe you'll substitute cheese for bread, but you're not going to substitute a TV and some extra pairs of jeans for your electricity and gas.

The article specifically addresses that; it's ~5% excluding those two bits.

> However, core inflation, which excludes food and energy, climbed 4.8% on the year, up from 4.3% in August, and economists broadly expect the situation to get worse before it gets better.

It's waaaaay more than 10% for the average joe though, the person you replied to is right. Day to day purchase are closer to +30% than 10% but if you throw in useless gadgets no one buy in a crisis it goes down a lot.

Take Germany for example: https://www.destatis.de/EN/Themes/Economy/Prices/Consumer-Pr...

That list is a specific set of - again - mostly food and energy items.

Yes, but that’s the OPs point. No one cares about the price of TVs. The metric (core inflation and CPI) isn’t measuring peoples experience accurately.

> The metric (core inflation and CPI) isn’t measuring peoples experience accurately.

Yes; that's why the number in the headline is 10%, not the 5% core number.

When things like used cars were driving numbers people absolutely wanted to include those in the messaging. I saw zero inflation-bugs complaining that really we should be using food and energy only when those weren't the dominant forces.

> I saw zero inflation-bugs complaining that really we should be using food and energy only when those weren't the dominant forces.

Because it is never that clear cut.

If food goes up by 2%, gas/electricity by 3% and TV/video games/cars by 2.5% you can say inflation is ~3%

If food goes up by 30%, gas/electricity by 100% and TV/video games/cars by 2.5% saying inflation is 10% by using magic maths is bullshit

But what if food goes up by 2% and cars/lumber go up by 50%? In that case will you still exclude the cars and lumber?

Let's talk about that when it happens, I feel like it's not a very realistic scenario

Literally last fall.

Yes and yes. Lumber will come back around into people's expenses for shelter. Cars are harder to justify leaving out.

But these people are largely hired and paid for by the government. The government, who has to pay extra if inflation goes up (esp. in Europe). Obviously they have a preference for lower inflation.

(and frankly, to a small extent their argument is valid. If everyone switches from Coca-Cola to Pepsi, even if they do so because it's cheaper, then Coca-Cola has no place anymore in an inflation index. Prices are meant to affect buying behaviour and products must be allowed to replace each other)

Well guess what people live on ? Food and energy items

Which, again, the 10% number includes. It's 5% with them excluded.

Yes but it's artificially lowered and doesn't reflect what people are going through

10% doesn't sound bad, but irl you're spending 30%+ while consuming less

Yes, the things that hurt the 50% below the median the worst. I can stomach my utilities bill going from 200 to 800 eur, I won't like it but we'll manage.

The other half of the country will revolt, probably.

The 10% includes food and energy items, but also things that people won't be spending money on when the price of food an energy goes up so it underestimates the impact of an increase in the price of food and energy.

I'm not in the EU, but this is what our family has done. Our food bill alone has gone from around 30% of our takehome pay to around 40%, and we just don't have the income to absorb that increase.

So the useless crap, the things that make inflation look not so bad, gets cut out.

I'm in the US and this is what I hear from the people I know.

Most of those people don't carefully track their expenses so they just know that they have less left over after paying for the necessities. A couple of them do track expenses carefully and when I was talking to them a few months ago they said that their personal inflation rates were at least 20% over the previous 12 months. I just checked heating fuel costs and they're up 36% from last year, which is less than I expected given what other people have said about their costs but it's still significant. It's definitely going to be a hard winter for a lot of people I know.

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