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I don't think cost of living is accounted in relation. For instance most wealthy people live in houses. Costs for that have risen, but "value" has risen too. At

by erikb 8y ago

I don't think cost of living is accounted in relation. For instance most wealthy people live in houses. Costs for that have risen, but "value" has risen too. At the same time rents have risen as well, additionally to the utility costs etc. So for the rich this point might be net zero or small loss, while for the poor it's a double loss. The same applies to food. If you can afford eating in a restuarant for $20+ twice a day, you probably haven't seen any significant prise rises. But if you have trouble not spending more than $100 to feed four mouths a week, you probably a big decline in quality of your food since 2000. E.g. this requirement is hard to come by when you try to include fresh fruits. Thus I'd say it's still an important point to consider.

jhall1468 8y ago
Food is included in the CPI calculation, as is rent. Mortgages are not as they are an investment vehicle rather than an expense.
- IanCal 8y ago
  I think their point is that CPI calculations use a single basket of goods for 'everyone' while in reality different people So their example was that if restaurant food hasn't increased in price by much, but basic groceries have then the 'inflation' seen by different groups may be very different. Another example may be that if average housing costs increase just a bit, but the lowest rents have increased the most then cost of living changes could be significantly different between mid and low income families. I'm not saying either of those examples accurately reflect how things are changing in the US (as I don't have the data to hand), but they are realistic scenarios.
  - xapata 8y ago
    For most goods, it's the opposite -- over the last decades, luxury goods have inflated faster than staples. Similarly, real incomes have increased faster for higher incomes. At least, that's what the last paper I read on the topic said, which was published about 8 years ago.
- erikb 8y ago
  I think I've shown some examples that are really tough to represent in the statistics. Please read them again and reply how you think they are considered. E.g. how is it considered that cost of owning a house has increased together with the sell value, while the rent has increased without increasing the quality/value/size of the apartments? My whole point is that adding things and then dividing by the sum of things is not a way to represent the reality that people face. You need to argue against that if you want to make a counter point. Just repeating what the person said that I responded to (after reading what he wrote) doesn't provide anything to the discussion.
xapata 8y ago
Are you saying that inflation is unevenly distributed across the "quality" spectrum of products? Yes, this has been studied. Perhaps it deserves more research, but the results I remember demonstrated that price inflation rates are higher among more expensive products. One might hypothesize that greater wage inflation and other income gains among wealthier people is causing the corresponding higher inflation for the products they buy. When home-values inflate, it's a wealth transfer from first-time buyers to retirees that are downsizing, selling a large home for a smaller one, putting the profits into stocks and bonds. To your point, that's not a net loss, just a wealth transfer. Note, it's not a net gain either. Building homes is a gain (usually), inflating asset prices are not. As for the rising rent, that's part of inflation ... Anyway, you seem distressed that things are "really tough to represent in the statistics" but I assure you many of your concerns have been considered.
- vanderZwan 8y ago
  > Are you saying that inflation is unevenly distributed across the "quality" spectrum of products? Yes, this has been studied. Perhaps it deserves more research, but the results I remember demonstrated that price inflation rates are higher among more expensive products. Doesn't technological progress complicate this question even further? When I think of more expensive products, I think of computers, smartphones, etc. Yes, the new flagship products stay expensive, but that also represents new possibilities that weren't possible a decade ago (let alone a few decades ago). But nowadays you can get a functioning computer that lets you browse the Internet, watch videos and do your emails for the price of a Raspberry Pi (and the investment of a separate keyboard, mouse, charger, SD card and TV - but those can be gotten for cheap as well). Similarly, a lot of things that used to be expensive are now cheap. So basically: technological progress is shifting the "quality" spectrum itself, in some cases very quickly, in some cases barely. (I'm not saying you're wrong, I'm just curious how economists deal with questions like this)
  - xapata 8y ago
    Computing is the extreme example of this phenomenon. Economists don't in general have a great way to handle this issue, because it varies so greatly across industries. A loaf of bread is just about the same as it's always been. Oh wait, maybe wonderbread is worse and artisinal ciabatta is better? Sometimes economists like to create some aggregate measure of increasing consumer choice by counting the number of SKUs available in a store. Big box stores pushing out Mom & Pop made that awkward. Now Amazon makes it tougher still. Back in grad school, I was not aware of any consensus on the topic. I haven't kept up with it since. One technique is to focus your research on products that are largely stable in quality. For example, wine glasses. Not plastic ones, but glass or crystal. They've got a fairly large distribution in "quality" or at least in price and yet had a fairly stable range of quality since the 1950s.

by erikb 8y ago

jhall1468 8y ago

Food is included in the CPI calculation, as is rent. Mortgages are not as they are an investment vehicle rather than an expense.

IanCal 8y ago
I think their point is that CPI calculations use a single basket of goods for 'everyone' while in reality different people So their example was that if restaurant food hasn't increased in price by much, but basic groceries have then the 'inflation' seen by different groups may be very different. Another example may be that if average housing costs increase just a bit, but the lowest rents have increased the most then cost of living changes could be significantly different between mid and low income families. I'm not saying either of those examples accurately reflect how things are changing in the US (as I don't have the data to hand), but they are realistic scenarios.
- xapata 8y ago
  For most goods, it's the opposite -- over the last decades, luxury goods have inflated faster than staples. Similarly, real incomes have increased faster for higher incomes. At least, that's what the last paper I read on the topic said, which was published about 8 years ago.
erikb 8y ago
I think I've shown some examples that are really tough to represent in the statistics. Please read them again and reply how you think they are considered. E.g. how is it considered that cost of owning a house has increased together with the sell value, while the rent has increased without increasing the quality/value/size of the apartments? My whole point is that adding things and then dividing by the sum of things is not a way to represent the reality that people face. You need to argue against that if you want to make a counter point. Just repeating what the person said that I responded to (after reading what he wrote) doesn't provide anything to the discussion.

xapata 8y ago

Are you saying that inflation is unevenly distributed across the "quality" spectrum of products? Yes, this has been studied. Perhaps it deserves more research, but the results I remember demonstrated that price inflation rates are higher among more expensive products. One might hypothesize that greater wage inflation and other income gains among wealthier people is causing the corresponding higher inflation for the products they buy. When home-values inflate, it's a wealth transfer from first-time buyers to retirees that are downsizing, selling a large home for a smaller one, putting the profits into stocks and bonds. To your point, that's not a net loss, just a wealth transfer. Note, it's not a net gain either. Building homes is a gain (usually), inflating asset prices are not. As for the rising rent, that's part of inflation ... Anyway, you seem distressed that things are "really tough to represent in the statistics" but I assure you many of your concerns have been considered.

vanderZwan 8y ago
> Are you saying that inflation is unevenly distributed across the "quality" spectrum of products? Yes, this has been studied. Perhaps it deserves more research, but the results I remember demonstrated that price inflation rates are higher among more expensive products. Doesn't technological progress complicate this question even further? When I think of more expensive products, I think of computers, smartphones, etc. Yes, the new flagship products stay expensive, but that also represents new possibilities that weren't possible a decade ago (let alone a few decades ago). But nowadays you can get a functioning computer that lets you browse the Internet, watch videos and do your emails for the price of a Raspberry Pi (and the investment of a separate keyboard, mouse, charger, SD card and TV - but those can be gotten for cheap as well). Similarly, a lot of things that used to be expensive are now cheap. So basically: technological progress is shifting the "quality" spectrum itself, in some cases very quickly, in some cases barely. (I'm not saying you're wrong, I'm just curious how economists deal with questions like this)
- xapata 8y ago
  Computing is the extreme example of this phenomenon. Economists don't in general have a great way to handle this issue, because it varies so greatly across industries. A loaf of bread is just about the same as it's always been. Oh wait, maybe wonderbread is worse and artisinal ciabatta is better? Sometimes economists like to create some aggregate measure of increasing consumer choice by counting the number of SKUs available in a store. Big box stores pushing out Mom & Pop made that awkward. Now Amazon makes it tougher still. Back in grad school, I was not aware of any consensus on the topic. I haven't kept up with it since. One technique is to focus your research on products that are largely stable in quality. For example, wine glasses. Not plastic ones, but glass or crystal. They've got a fairly large distribution in "quality" or at least in price and yet had a fairly stable range of quality since the 1950s.