6 ms·

The official US inflation measure is garbage. It doesn't include enough of the big 3 costs in people's lives : housing, education and healthcare. It includes

The official US inflation measure is garbage. It doesn't include enough of the big 3 costs in people's lives : housing, education and healthcare. It includes whacky stuff like "oh your cellphone is faster now than 5 years ago, we're going to say that you're getting 10x the phone for roughly the same price and use that to disprove inflation". It ignores asset inflation (stocks, real estate, venture capital, everything else) driven by QE. The average person never saw the QE because it went straight to banks and inflated asset prices. Rich people with assets made 4x their money. Wage slaves saw none of it. None of this is counted in inflation measures.

joycian 7y ago
Could you point me to resources where I could learn about this?
- oppositelock 7y ago
  The BLS is completely nuts with computing CPI. What the previous poster is referring to is called "hedonic adjustment" [1]. For example, the CPI contains a TV, and adjusts its price [2]. As an example, say that you put a 19" CRT TV in there in the 1980's, and it cost $400 at the time. Over time, as televisions got better, and it became impossible to buy that specific TV, the BLS started adjusting the price of the original tv down, because it's clearly inferior to anything available today. At the end of those adjustments, you end up with a situation where the TV may "cost" $100 post-adjustment, but it's impossible to buy any $100 TV today because that would be the price of something which doesn't exist. This type of adjustment happens in many categories, and it biases the CPI downwards. It's a giant sham. 1: https://www.bls.gov/cpi/quality-adjustment/home.htm https://www.bls.gov/cpi/quality-adjustment/home.htm 2: https://www.bls.gov/cpi/quality-adjustment/televisions.htm https://www.bls.gov/cpi/quality-adjustment/televisions.htm
  - TheCoelacanth 7y ago
    You can easily buy a TV for $100. BestBuy alone has 9 different TV models for under $100: https://www.bestbuy.com/site/tvs/tvs-under-500/pcmcat1539183860210.c?id=pcmcat1539183860210&sp=%2Bcurrentprice%20skuidsaas https://www.bestbuy.com/site/tvs/tvs-under-500/pcmcat1539183...
  - aidenn0 7y ago
    You can get a 22" LCD 1080p TV for $60. However the actual calculation would be more like: 19" color TV in 1980 $600. "Equivalent today" price $9.21 which is a bit absurd, though the 22" TV has roughly 6x the pixels, so it's not entirely divorced from reality.
aishvar 7y ago
That's just flat false. Look at the latest CPI report: https://www.bls.gov/news.release/pdf/cpi.pdf https://www.bls.gov/news.release/pdf/cpi.pdf It includes the list of items, weightings, and price changes. All 3 of those (shelter, medical care, and education) are on there.
- bpt3 7y ago
  The parent poster didn't say they weren't there, but that they are under-weighted, and I'd agree with that assessment personally.
- tree3 7y ago
  What he said was: > It doesn't include enough
- deleted 7y ago
  [deleted]
deleted 7y ago
[deleted]
airstrike 7y ago
I'm no CPI expert, but I don't think this statement is really accurate. Rent is including in CPI; home prices are not. See https://economics.stackexchange.com/a/4779 https://economics.stackexchange.com/a/4779. The sidebar should provide links to multiple other questions asking why that is the case. Tuition and fees are included in the CPI as well. See https://www.bls.gov/cpi/factsheets/college-tuition.htm https://www.bls.gov/cpi/factsheets/college-tuition.htm and https://www.bls.gov/cpi/factsheets/elementary-and-high-school-tuition.htm https://www.bls.gov/cpi/factsheets/elementary-and-high-schoo... Finally, some measure of healthcare is also part of the CPI. See https://www.bls.gov/cpi/factsheets/medical-care.htm https://www.bls.gov/cpi/factsheets/medical-care.htm. It includes "out-of-pocket" expenses which in the BLI's definition means: * patient payments made directly to retail establishments for medical goods and services; * health insurance premiums paid for by the consumer, including Medicare Part B; and * health insurance premiums deducted from employee paychecks.
rayiner 7y ago
Most inflation measures include housing, education, and healthcare. The perception that the national inflation measure isn’t accurate is rooted in the fact that a small but very vocal segment of the population (yuppies in coastal metro areas) are facing very high housing and educational costs. But that’s not true of most people. Housing prices aren’t skyrocketing in the Kansas City suburbs. Most people aren’t in college and don’t have any college debt.
- claudeganon 7y ago
  They’re actually beginning to blow up in smaller markets as well, causing a housing and affordability crisis for people without higher education (and because wages are lower on average in these regions): https://www.wsj.com/articles/in-boise-and-grand-rapids-the-housing-market-looks-red-hot-11565521202 https://www.wsj.com/articles/in-boise-and-grand-rapids-the-h... I don’t know if or when it will reach the Kansas City suburbs, but here in Michigan, my brother, a construction worker, is priced out of the market. He could move way out to the country, but his kid would have to change schools and have a long commute, and it’s actually a lot more dangerous to do so in the winter here.
- steveklabnik 7y ago
  I don't know if Austin is considered a "coastal metro area" or a "Kansas City suburb," but it's certainly happening here. Largely due to tech.
- danans 7y ago
  > Housing prices aren’t skyrocketing in the Kansas City suburbs. True, but neither are employment opportunities, so it's not a great comparison. They have plenty of housing supply relative to the demand. https://www.bls.gov/regions/mountain-plains/news-release/areaemployment_kansascity.htm https://www.bls.gov/regions/mountain-plains/news-release/are...
jrs235 7y ago
>It ignores asset inflation (stocks, real estate, venture capital, everything else) I consider education and health[care] to be assets too (which you include in the big three costs, in fact the big three costs are all assets). I agree the official US inflation measure is garbage.
paulddraper 7y ago
??? You can read the weights here: https://www.bls.gov/news.release/pdf/cpi.pdf https://www.bls.gov/news.release/pdf/cpi.pdf . * Rent of shelter 33.1% * Medical care services 7.1% * Medical care commodities 1.7% * Tuition, other school fees, and childcare 2.9% * Educational books and supplies 0.1% Rent is the biggest item in the entire report. The healthcare number seems about right. And remember that education is averaged over an entire lifetime. It's objectively true that people are choosing to spend more on better/faster phones. That doesn't necessarily mean inflation; it means that phones have become more useful and capable and therefore worth a larger relative expense to people. If people started buying $100k self-driving cars, you can't claim that inflation did that.

joycian 7y ago

Could you point me to resources where I could learn about this?

oppositelock 7y ago
The BLS is completely nuts with computing CPI. What the previous poster is referring to is called "hedonic adjustment" [1]. For example, the CPI contains a TV, and adjusts its price [2]. As an example, say that you put a 19" CRT TV in there in the 1980's, and it cost $400 at the time. Over time, as televisions got better, and it became impossible to buy that specific TV, the BLS started adjusting the price of the original tv down, because it's clearly inferior to anything available today. At the end of those adjustments, you end up with a situation where the TV may "cost" $100 post-adjustment, but it's impossible to buy any $100 TV today because that would be the price of something which doesn't exist. This type of adjustment happens in many categories, and it biases the CPI downwards. It's a giant sham. 1: https://www.bls.gov/cpi/quality-adjustment/home.htm https://www.bls.gov/cpi/quality-adjustment/home.htm 2: https://www.bls.gov/cpi/quality-adjustment/televisions.htm https://www.bls.gov/cpi/quality-adjustment/televisions.htm
- TheCoelacanth 7y ago
  You can easily buy a TV for $100. BestBuy alone has 9 different TV models for under $100: https://www.bestbuy.com/site/tvs/tvs-under-500/pcmcat1539183860210.c?id=pcmcat1539183860210&sp=%2Bcurrentprice%20skuidsaas https://www.bestbuy.com/site/tvs/tvs-under-500/pcmcat1539183...
- aidenn0 7y ago
  You can get a 22" LCD 1080p TV for $60. However the actual calculation would be more like: 19" color TV in 1980 $600. "Equivalent today" price $9.21 which is a bit absurd, though the 22" TV has roughly 6x the pixels, so it's not entirely divorced from reality.

aishvar 7y ago

That's just flat false. Look at the latest CPI report: https://www.bls.gov/news.release/pdf/cpi.pdf https://www.bls.gov/news.release/pdf/cpi.pdf It includes the list of items, weightings, and price changes. All 3 of those (shelter, medical care, and education) are on there.

bpt3 7y ago
The parent poster didn't say they weren't there, but that they are under-weighted, and I'd agree with that assessment personally.
tree3 7y ago
What he said was: > It doesn't include enough
deleted 7y ago
[deleted]

deleted 7y ago

[deleted]

airstrike 7y ago

I'm no CPI expert, but I don't think this statement is really accurate. Rent is including in CPI; home prices are not. See https://economics.stackexchange.com/a/4779 https://economics.stackexchange.com/a/4779. The sidebar should provide links to multiple other questions asking why that is the case. Tuition and fees are included in the CPI as well. See https://www.bls.gov/cpi/factsheets/college-tuition.htm https://www.bls.gov/cpi/factsheets/college-tuition.htm and https://www.bls.gov/cpi/factsheets/elementary-and-high-school-tuition.htm https://www.bls.gov/cpi/factsheets/elementary-and-high-schoo... Finally, some measure of healthcare is also part of the CPI. See https://www.bls.gov/cpi/factsheets/medical-care.htm https://www.bls.gov/cpi/factsheets/medical-care.htm. It includes "out-of-pocket" expenses which in the BLI's definition means: * patient payments made directly to retail establishments for medical goods and services; * health insurance premiums paid for by the consumer, including Medicare Part B; and * health insurance premiums deducted from employee paychecks.

rayiner 7y ago

Most inflation measures include housing, education, and healthcare. The perception that the national inflation measure isn’t accurate is rooted in the fact that a small but very vocal segment of the population (yuppies in coastal metro areas) are facing very high housing and educational costs. But that’s not true of most people. Housing prices aren’t skyrocketing in the Kansas City suburbs. Most people aren’t in college and don’t have any college debt.

claudeganon 7y ago
They’re actually beginning to blow up in smaller markets as well, causing a housing and affordability crisis for people without higher education (and because wages are lower on average in these regions): https://www.wsj.com/articles/in-boise-and-grand-rapids-the-housing-market-looks-red-hot-11565521202 https://www.wsj.com/articles/in-boise-and-grand-rapids-the-h... I don’t know if or when it will reach the Kansas City suburbs, but here in Michigan, my brother, a construction worker, is priced out of the market. He could move way out to the country, but his kid would have to change schools and have a long commute, and it’s actually a lot more dangerous to do so in the winter here.
steveklabnik 7y ago
I don't know if Austin is considered a "coastal metro area" or a "Kansas City suburb," but it's certainly happening here. Largely due to tech.
danans 7y ago
> Housing prices aren’t skyrocketing in the Kansas City suburbs. True, but neither are employment opportunities, so it's not a great comparison. They have plenty of housing supply relative to the demand. https://www.bls.gov/regions/mountain-plains/news-release/areaemployment_kansascity.htm https://www.bls.gov/regions/mountain-plains/news-release/are...

jrs235 7y ago

>It ignores asset inflation (stocks, real estate, venture capital, everything else) I consider education and health[care] to be assets too (which you include in the big three costs, in fact the big three costs are all assets). I agree the official US inflation measure is garbage.

paulddraper 7y ago

??? You can read the weights here: https://www.bls.gov/news.release/pdf/cpi.pdf https://www.bls.gov/news.release/pdf/cpi.pdf . * Rent of shelter 33.1% * Medical care services 7.1% * Medical care commodities 1.7% * Tuition, other school fees, and childcare 2.9% * Educational books and supplies 0.1% Rent is the biggest item in the entire report. The healthcare number seems about right. And remember that education is averaged over an entire lifetime. It's objectively true that people are choosing to spend more on better/faster phones. That doesn't necessarily mean inflation; it means that phones have become more useful and capable and therefore worth a larger relative expense to people. If people started buying $100k self-driving cars, you can't claim that inflation did that.