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The CPI shows higher inflation than the PCE, which would seem to contradict your claim that PCE is better measure for capturing those categories. Given the lar
by GatorD42 8y ago
The CPI shows higher inflation than the PCE, which would seem to contradict your claim that PCE is better measure for capturing those categories.
Given the large errors I have observed in measurement of electronics and wireless plans (biased towards overstating inflation) it wouldn’t necessarily surprise me if the CPI or PCE erred in measuring the prices of housing, healthcare etc in the opposite direction (biased towards understating inflation). That said, the whole point of such measures is to record the prices of these services over time, and the measurement seems much more straightforward than for personal electronic devices(no need to account for large quality changes or changing product categories except in medicine). So if the CPI were mismeasuring such areas, it would be a fairly embarrassing mistake.
- mdorazio 8y agoI made no claim that PCE is better at capturing those categories; only that it is a better method overall than CPI. Both indexes take into account tuition, for example, but not student loan obligations, which are absolutely massive in comparison to things like electronics and wireless plan obligations. The same is true for medical expenditures, but not medical debt. And of course a huge issue is that any national measure of inflation is not accurate for people who live in places outside the median, such as cities in California where rising costs of living routinely push local CPI increases far beyond national levels (BLS does provide more local numbers, but they're rarely discussed). I don't doubt that your data is correct, I just don't think it's very important in the scope of the overall contributing factors to real-world inflation for most people.