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I am not an economist, so anyone more familiar with this please educate me on this matter, but surely a single number like inflation can't capture difficult iss

I am not an economist, so anyone more familiar with this please educate me on this matter, but surely a single number like inflation can't capture difficult issues like rent going up very quickly, or any other issue that basically affects specific subsections of society disproportionately? (and I'm not even mentioning the issue of housing shortage) EDIT: I probably should have used "express" rather than "capture", apologies.

apexalpha 8y ago
Rising rent will absolutely be in the inflation number. Sure, it might not be correct if you live in a big city where rents have risen way beyond inflation numbers, but it's good on average. Every European capital / big city has seen absolutely massive increases in rent and house prises since the ECB started printing money. (Housing sector if very 'close' to the banking sector and so more directly affected by the availability of cheap credit). Not causes by the ECB 100%, but accelerated by it nonetheless. But if the cost of all other goods has stayed the same, plus the rent and house prises in rural areas has been normal or even dropped, inflation on average will be ok. (And then the ECB says: inflation is less than 2% _on average_ so no problem here. print. print.. print...)
- pg314 8y ago
  > Every European capital / big city has seen absolutely massive increases in rent and house prises since the ECB started printing money. For Brussels at least, that is simply not true. See the graph in section 'Brussels Hoofdstedelijk Gewest' of [1] for the evolution of real estate prices in the Brussels region since 2008. There are also strict rent controls in Belgium: if you are renting your landlord can increase the rent with inflation, but not more. Every three years the landlord can theoretically increase the price, if he has made improvements to the property or he can prove that the rental value has objectively increased by more than 20% (which is hard, if there are disputes courts tend to side with tenants). [1] https://statbel.fgov.be/nl/themas/bouwen-wonen/vastgoedprijzen#news https://statbel.fgov.be/nl/themas/bouwen-wonen/vastgoedprijz...
- mistermann 8y ago
  > Rising rent will absolutely be in the inflation number. Sure, it might not be correct if you live in a big city where rents have risen way beyond inflation numbers, but it's good on average. This assumes the numbers accurately represent reality. Here in Canada, the shelter component of our CPI numbers do not reflect at all the massive price inflation that has been occurring in both buying and renting shelter. https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1810000501 https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=181000... If one was to take their numbers at face value, you would conclude that shelter price inflation is generally consistent with all other goods, and that it has been consistent across all regions, neither of which is true.
- vanderZwan 8y ago
  I'm sorry but this statement is full of FUD. Printing money is what central banks do. It's what every Eurozone nation used to do with their own money as well before switching to the Euro. So unless you can explain what the ECB does differently that makes this worse than the central banks before it, you don't really have much of an argument. Is it printing money faster than the central banks before it did? If so, give some numbers and sources please. And in general, be explicit about your claims, because as written you're practically suggesting that the Eurozone is acting like the Weimar Republic.
  - tomp 8y ago
    ECB, FED and the Swiss National Bank have been "printing" money but not the same as before. They're only using it to buy securities, first bonds, and now even stocks/index ETFs. Search "FED balance sheet vs S&P" or something similar. E.g. http://whattheythink.com/data/84893-feds-balance-sheet/ http://whattheythink.com/data/84893-feds-balance-sheet/
IkmoIkmo 8y ago
Well of course such a number can. You just calculate average price increases, weighed by their share of spending (a 1% increase in healthcare has more implications than a 1% increase in telephone bills) to the best of your ability. The question is, how good is the approximation and how meaningful is an average statistic? The statistic is useful and meaningful, but doesn't say everything. Fortunately we have hundreds of inflation metrics, for different groups (urban, rural), age groups, countries, states, regions and sectors. Virtually none of these are published in media outside the general CPI measure, but all can be found on government/centralbank/consultants etc websites, typically with methodological sections explaining how they came to their conclusions. For example: https://www.bls.gov/cpi/home.htm https://www.bls.gov/cpi/home.htm Here you can find various inflation figures, methodology and data.
- vanderZwan 8y ago
  Not to get sidetracked into a semantic argument, but as a non-native speaker of English: isn't that exactly what "capture" in "capture difficult issues" is supposed to mean?
  - IkmoIkmo 8y ago
    You're right, I think I was misreading you. Indeed (as you edited), the national inflation figure can 'capture' it in the statistic sense, but cannot capture it in the sense that the number expresses individual paint points that different subsections of the population experiences, like rent in a HCOL urban area, or the inability for wages to catch up with an ever increasing downpayment requirement.
    - vanderZwan 8y ago
      Thank you for clarifying!
JulianMorrison 8y ago
This seems clearly true for highly regional things like rent but probably not true for non-regional things like the price of a camera on Amazon. Those are likely to be well-described by inflation numbers.
deleted 8y ago
[deleted]
alter_eco123 8y ago
From an economics standpoint, inflation is an increase in the money supply. What we see in our everyday lives is sometimes called "price inflation", i.e. prices rising, and that can happen disproportionally. As a US-centric example, computer prices have been gradually decreasing, while healthcare and housing costs have skyrocketed. So an increase in the supply of money is separate from an increase in "a concentration" of money in a "market area" like healthcare, and productivity and material costs and whatever else factors into prices at any given time. Of course, an increase in the supply of money factors into prices where ever the money goes.
- nabla9 8y ago
  > From an economics standpoint, inflation is an increase in the money supply. This is not true unless you live in early 1900's or only surf some crackpot websites. In the language of economics inflation without specifics means price inflation. If you mean monetary inflation, you must use two words. Increasing money supply is not going to prices if 1) economy grows and demand for money matches the supply or 2) velocity of money decreases. https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V As a thought experiment: If you mint a trillion dollar coin but are not using it, monetary supply increases radically but it has no effect on price inflation because it has zero velocity.
  - _dps 8y ago
    I imagine you're referring to Austrian economics here, but much more mainstream economists believe inflation to be fundamentally about money supply as well. Here's (nobel prize winner) Milton Friedman, from Wikiquote: "Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output. … A steady rate of monetary growth at a moderate level can provide a framework under which a country can have little inflation and much growth. It will not produce perfect stability; it will not produce heaven on earth; but it can make an important contribution to a stable economic society." That's not so say that many don't hold the belief you have (i.e. that inflation should be understood primarily as price inflation, and monetary inflation is a secondary consideration). But it's not the only mainstream opinion.
pg_bot 8y ago
Inflation is typically calculated via two indexes in the United States. The consumer price index (CPI) and the producer price index (PPI). The consumer price index does its best to calculate difficult issues such as improvements in technology, changes in shelter and prices for other goods and services urban consumers use across the country. Each report is calculated monthly I will link to the most recent versions of each report below: tl;dr Of course it can. [0]: CPI https://www.bls.gov/opub/hom/pdf/homch17.pdf https://www.bls.gov/opub/hom/pdf/homch17.pdf [1]: PPI https://www.bls.gov/ppi/ppidr201804.pdf https://www.bls.gov/ppi/ppidr201804.pdf
- xapata 8y ago
  I think he meant that the mean is not the message. If you're an outlier, you don't care what the mean consumer price inflation is.
  - vanderZwan 8y ago
    Correct, but I think it is very understandable that I was misinterpretated. Luckily, the replies to the misinterpretation are still very informative in a different way! :)
xapata 8y ago
You're saying that a single statistic, like a "mean" or "average" is only one representation of a distribution. Many other aspects of the distribution are important, such as the variance or the mean conditional on some other factor. Inflation is a vague concept. When people try to measure inflation, they're using filters and aggregates. Criticism that those filters and aggregations are distorting the view (for political purposes) is valid and a frequent motivation to publish academic papers.

apexalpha 8y ago

Rising rent will absolutely be in the inflation number. Sure, it might not be correct if you live in a big city where rents have risen way beyond inflation numbers, but it's good on average. Every European capital / big city has seen absolutely massive increases in rent and house prises since the ECB started printing money. (Housing sector if very 'close' to the banking sector and so more directly affected by the availability of cheap credit). Not causes by the ECB 100%, but accelerated by it nonetheless. But if the cost of all other goods has stayed the same, plus the rent and house prises in rural areas has been normal or even dropped, inflation on average will be ok. (And then the ECB says: inflation is less than 2% _on average_ so no problem here. print. print.. print...)

pg314 8y ago
> Every European capital / big city has seen absolutely massive increases in rent and house prises since the ECB started printing money. For Brussels at least, that is simply not true. See the graph in section 'Brussels Hoofdstedelijk Gewest' of [1] for the evolution of real estate prices in the Brussels region since 2008. There are also strict rent controls in Belgium: if you are renting your landlord can increase the rent with inflation, but not more. Every three years the landlord can theoretically increase the price, if he has made improvements to the property or he can prove that the rental value has objectively increased by more than 20% (which is hard, if there are disputes courts tend to side with tenants). [1] https://statbel.fgov.be/nl/themas/bouwen-wonen/vastgoedprijzen#news https://statbel.fgov.be/nl/themas/bouwen-wonen/vastgoedprijz...
mistermann 8y ago
> Rising rent will absolutely be in the inflation number. Sure, it might not be correct if you live in a big city where rents have risen way beyond inflation numbers, but it's good on average. This assumes the numbers accurately represent reality. Here in Canada, the shelter component of our CPI numbers do not reflect at all the massive price inflation that has been occurring in both buying and renting shelter. https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1810000501 https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=181000... If one was to take their numbers at face value, you would conclude that shelter price inflation is generally consistent with all other goods, and that it has been consistent across all regions, neither of which is true.
vanderZwan 8y ago
I'm sorry but this statement is full of FUD. Printing money is what central banks do. It's what every Eurozone nation used to do with their own money as well before switching to the Euro. So unless you can explain what the ECB does differently that makes this worse than the central banks before it, you don't really have much of an argument. Is it printing money faster than the central banks before it did? If so, give some numbers and sources please. And in general, be explicit about your claims, because as written you're practically suggesting that the Eurozone is acting like the Weimar Republic.
- tomp 8y ago
  ECB, FED and the Swiss National Bank have been "printing" money but not the same as before. They're only using it to buy securities, first bonds, and now even stocks/index ETFs. Search "FED balance sheet vs S&P" or something similar. E.g. http://whattheythink.com/data/84893-feds-balance-sheet/ http://whattheythink.com/data/84893-feds-balance-sheet/

IkmoIkmo 8y ago

Well of course such a number can. You just calculate average price increases, weighed by their share of spending (a 1% increase in healthcare has more implications than a 1% increase in telephone bills) to the best of your ability. The question is, how good is the approximation and how meaningful is an average statistic? The statistic is useful and meaningful, but doesn't say everything. Fortunately we have hundreds of inflation metrics, for different groups (urban, rural), age groups, countries, states, regions and sectors. Virtually none of these are published in media outside the general CPI measure, but all can be found on government/centralbank/consultants etc websites, typically with methodological sections explaining how they came to their conclusions. For example: https://www.bls.gov/cpi/home.htm https://www.bls.gov/cpi/home.htm Here you can find various inflation figures, methodology and data.

vanderZwan 8y ago
Not to get sidetracked into a semantic argument, but as a non-native speaker of English: isn't that exactly what "capture" in "capture difficult issues" is supposed to mean?
- IkmoIkmo 8y ago
  You're right, I think I was misreading you. Indeed (as you edited), the national inflation figure can 'capture' it in the statistic sense, but cannot capture it in the sense that the number expresses individual paint points that different subsections of the population experiences, like rent in a HCOL urban area, or the inability for wages to catch up with an ever increasing downpayment requirement.
  - vanderZwan 8y ago
    Thank you for clarifying!

JulianMorrison 8y ago

This seems clearly true for highly regional things like rent but probably not true for non-regional things like the price of a camera on Amazon. Those are likely to be well-described by inflation numbers.

deleted 8y ago

[deleted]

alter_eco123 8y ago

From an economics standpoint, inflation is an increase in the money supply. What we see in our everyday lives is sometimes called "price inflation", i.e. prices rising, and that can happen disproportionally. As a US-centric example, computer prices have been gradually decreasing, while healthcare and housing costs have skyrocketed. So an increase in the supply of money is separate from an increase in "a concentration" of money in a "market area" like healthcare, and productivity and material costs and whatever else factors into prices at any given time. Of course, an increase in the supply of money factors into prices where ever the money goes.

nabla9 8y ago
> From an economics standpoint, inflation is an increase in the money supply. This is not true unless you live in early 1900's or only surf some crackpot websites. In the language of economics inflation without specifics means price inflation. If you mean monetary inflation, you must use two words. Increasing money supply is not going to prices if 1) economy grows and demand for money matches the supply or 2) velocity of money decreases. https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V As a thought experiment: If you mint a trillion dollar coin but are not using it, monetary supply increases radically but it has no effect on price inflation because it has zero velocity.
- _dps 8y ago
  I imagine you're referring to Austrian economics here, but much more mainstream economists believe inflation to be fundamentally about money supply as well. Here's (nobel prize winner) Milton Friedman, from Wikiquote: "Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output. … A steady rate of monetary growth at a moderate level can provide a framework under which a country can have little inflation and much growth. It will not produce perfect stability; it will not produce heaven on earth; but it can make an important contribution to a stable economic society." That's not so say that many don't hold the belief you have (i.e. that inflation should be understood primarily as price inflation, and monetary inflation is a secondary consideration). But it's not the only mainstream opinion.

pg_bot 8y ago

Inflation is typically calculated via two indexes in the United States. The consumer price index (CPI) and the producer price index (PPI). The consumer price index does its best to calculate difficult issues such as improvements in technology, changes in shelter and prices for other goods and services urban consumers use across the country. Each report is calculated monthly I will link to the most recent versions of each report below: tl;dr Of course it can. [0]: CPI https://www.bls.gov/opub/hom/pdf/homch17.pdf https://www.bls.gov/opub/hom/pdf/homch17.pdf [1]: PPI https://www.bls.gov/ppi/ppidr201804.pdf https://www.bls.gov/ppi/ppidr201804.pdf

xapata 8y ago
I think he meant that the mean is not the message. If you're an outlier, you don't care what the mean consumer price inflation is.
- vanderZwan 8y ago
  Correct, but I think it is very understandable that I was misinterpretated. Luckily, the replies to the misinterpretation are still very informative in a different way! :)

xapata 8y ago

You're saying that a single statistic, like a "mean" or "average" is only one representation of a distribution. Many other aspects of the distribution are important, such as the variance or the mean conditional on some other factor. Inflation is a vague concept. When people try to measure inflation, they're using filters and aggregates. Criticism that those filters and aggregations are distorting the view (for political purposes) is valid and a frequent motivation to publish academic papers.