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In general I agree that more reporting should include measures of uncertainty. But I also think there are cases when talking about inflation where uncertainty
by repiret 8y ago
In general I agree that more reporting should include measures of uncertainty. But I also think there are cases when talking about inflation where uncertainty measures are inappropriate.
You can have uncertainty in the average price of avocados, or in the number of avocados that millennials consume on average. But those aren't very holistic views of inflation.
If I define my holistic measure of inflation to be the CPI, then there's no margin of error. Its just a number that the Bureau of Labor Statistics publishes every month. I can say, for example, that the CPI for June 2009 was exactly 215.693. Or that the CPI increased by 1.47%, exact to the nearest 0.01%, between March 2012 and 2013.
On the other hand, if you want to ask whether the CPI is any good as a measure of inflation, then in general inflation isn't precisely enough defined to talk about that with a simple margin of error. There is no exact definition of inflation that we're trying to approximate, so we can't say things like "we're 95% confident that the actual inflation value was between 1.4% and 1.5%".
- skybrian 8y agoIt looks like there's a principled way to compute it: "Variance is a measure of the uncertainty caused by the use of a sample of retail prices, instead of the complete universe of retail prices. Each month the U.S. Bureau of Labor Statistics collects prices from a sample of approximately 77,400 commodities and services (C&S) quotes in approximately 21,500 outlets around the United States for the Consumer Price Index (CPI). In addition, we collect approximately 5,100 housing quotes each month." [...] "Margins of error are usually expressed as a statistic’s point estimate plus or minus two standard errors, so the margin of error on this CPI’s 1-month change is approximately 0.15 percent plus or minus 0.06 percent." https://www.bls.gov/cpi/tables/variance-estimates/home.htm https://www.bls.gov/cpi/tables/variance-estimates/home.htm