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Comment by gruez | Hacker News Reader

> if they're using the CPI then it can be very misleading. One need only compare nominal wages vs nominal rents per square foot for the last 50 years to see that actual wages have dropped by 30% and yet the "real" hourly average wage calculated via the CPI is flat, falsly implying that actual wages have not dropped.

Yes, if you get to pick prices of arbitrary items to compare against, it's easy to come to whatever conclusion you want[1]. That's why CPI uses a basket of goods, specifically to avoid cherry picking shenanigans.

[1] https://www.aei.org/wp-content/uploads/2022/07/cpi2022junea-...

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CPI functions to obscure disproportionate price increases in essentials by lumping them in with cheapening commodities (e.g. electronics) that have a high demand elasticity. It's as much a choice to to use CPI to come to the conclusion things are fine, as it would be picking "arbitrary items" such as the essentials: food, shelter, medical care, and transportation that would paint a picture distinctly less fine.

>CPI functions to obscure disproportionate price increases in essentials by lumping them in with cheapening commodities (e.g. electronics) that have a high demand elasticity.

Right, because it's not "essentials price index" or whatever.

>as it would be picking "arbitrary items" such as the essentials: food, shelter, medical care, and transportation that would paint a picture distinctly less fine.

The BLS makes the constituent price indices available as well as their weights, so you can easily vibecode an "essentials" index.

shelter isn't just a cherry picked item. It's by an far the largest spending category, that and healthcare. I couldn't care less about all the other categories, personally.

>shelter isn't just a cherry picked item. It's by an far the largest spending category, that and healthcare.

The BLS agrees. That's why "shelter" is weighted 35.6% in the CPI basket, by far the biggest item.

> I couldn't care less about all the other categories, personally.

If we're going by what people "care" about (whatever that means), the basket would probably be like 70% gas prices, 20% grocery prices, and 10% for everything else. Empirically speaking, those two are far more salient politically than housing.

yeah, staggering. it's utterly amazing how much people care about gas prices. i can't wrap my mind around it. I mean, would people really rather be out on the street rather than get an EV or god forbid a hybrid?

Gas prices affect very nearly everyone in America. High housing prices benefit the most vocal middle class constituencies (ie boomer homeowners)

Rent is a bigger consideration for most people i know, but most people i know take public transit.

Also keep in mind: people's rents don't suddenly triple in the span of a month when the president starts another illegal war... The shock value of gas, uh, shocks makes it easier to talk about than the slow relentless squeezing of the working class via rent increases that outpace inflation and wages

Gas is misleading - petrol / oil would be better. I don't know if natural gas is going up, but if we mean pump prices of the liquid that goes into cars: that's also used (although with some differences) to heat people's homes - oil heat is extremely common in rural areas. This winter it cost me about 600 dollars in one month to heat a home in the Northeast I kept at 60 degrees except weekends!

Electricity is even worse.

Petroleum also impacts industrial goods prices, flight costs, etc. It's more than just a talking point for drivers.

Remember, CPI exists to attempt to figure out how the value of a currency has changed over time. It's not a cost of living index, a housing cost index, a wellness index, or anything of the sort. It is not trying to measure how you are doing in life. It is not there to determine the value of labour, the value of housing, the value of food, or the value of anything other than currency. It is simply compiled to determine the difference in value between $1 yesterday and $1 today, so to speak. As you can see, you cannot use the currency itself to provide that measurement. $1 and $1 are visibly the same; except we know that $1 and $1 aren't the same over time. That is where CPI steps in.

If you want to understand something else, use the measures and data that are focused on that something else. Right tool for the job and all that.

> that and healthcare

Careful.

Much of the western world has healthcare that is free at the point of use and paid for by taxation; one cannot extrapolate consumer inflationary healthcare costs in quite the manner the USA does.

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