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I don't understand the point about the cars and inflation, don't your inflation measures use a basket of goods and services that get updated looking at current

by IanCal 7y ago

I don't understand the point about the cars and inflation, don't your inflation measures use a basket of goods and services that get updated looking at current market shares? That's how it works in the UK. Source: https://www.ons.gov.uk/economy/inflationandpriceindices/methodologies/consumerpricesindicestechnicalmanual2019 https://www.ons.gov.uk/economy/inflationandpriceindices/meth... (search vehicle)

ryandrake 7y ago
Doesn’t inflation as measured in the US omit most of the big things that drive the majority of people’s expenses like housing, healthcare, and education? It seems like as soon as the cost of some good starts growing out of control, -poof- it’s omitted from the inflation measurement!
- lazerpants 7y ago
  Housing is absolutely included in CPI and PCE calculations. I'm less knowledgeable about how education and healthcare are accounted for but they are also included.
Zenst 7y ago
Well for cars in the UK, https://www.racfoundation.org/wp-content/uploads/2017/11/car-ownership-in-great-britain-leibling-171008-report.pdf https://www.racfoundation.org/wp-content/uploads/2017/11/car... shows what I thought and that is car ownership per household has increased in the UK since 1985. Equally, whilst comparing money and inflation etc, you also need to factor in the increase in `standards` and by that, things like TV, phones, transport.... and compare to the past period. Heck, give it a few years and if you don't own a 4k TV, fiber internet and a 5G smartphone - you will be classed as living in poverty in the UK. Many things have become cheaper over time, which has also seen social patterns change. Less pubs and pub usage, though offset that with restaurant usage and you see how in some ways, it is hard to compare A to B, when their makeup is different that the aspect you can compare, become blurred in interpretation. Thus whilst you could say things like the headline, the nuances become much harder the further you compare.
vkou 7y ago
The problem is that the basket of goods is not representative of a real family's actual expenditures. The basket of goods may include the price of gasoline, but does not include the cost of car insurance, car tabs, toll roads, or a parking space. The basket of goods may include the cost of an X-Ray, which doubled in 20 years, but does not the cost of buying a health insurance plan (Which quintupled in 20 years). In this way, the basket of goods is an accurate, but completely misleading metric for inflation. I don't care how much an X-ray costs, I care how much health insurance costs. I don't care how much buying a new car costs, I care about the total cost of ownership of a car. I don't care about how much a 3-bedroom house in the Mid-west costs, I care about how much I pay my landlord for a tiny apartment in a coastal economic center. I don't care about how much the tuition-only part of my degree costs, I care about the total cost of going to college, which includes unresellable textbooks, mandatory housing, mandatory meal plans, and student fees that fund a new stadium. I don't care about how much an analog land-line phone costs (About 29 bucks, lasts you for life), because everyone I interact with expects me to have a $300 cellphone that breaks every 4 years. But if you only look at a basket of goods which is based on the cost of an X-ray, a bottle of aspirin, a monthly payment on a new car, rent for a house on the outskirts of JoblessTown, Nowhere, the cost of a single credit-hour of college, and the ammortized cost of an analog telephone, you get a fantastic metric.
- IanCal 7y ago
  > The basket of goods may include the price of gasoline, but does not include the cost of car insurance Seems like CPI in the US does include motor vehicle insurance though. > but does not the cost of buying a health insurance It does according to the business insider article. Seems to include wireless telephone services and telephone hardware so I'd be surprised if that doesn't cover a mobile. Where are you using for your list of the basket of goods? https://www.businessinsider.com/breakdown-of-consumer-price-index-basket-2014-1?r=US&IR=T https://www.businessinsider.com/breakdown-of-consumer-price-...
  - Rury 7y ago
    There's many things CPI doesn't factor. For example house prices: https://www.thebalance.com/consumer-price-index-cpi-index-definition-and-calculation-3305735 https://www.thebalance.com/consumer-price-index-cpi-index-de... "Note that the CPI does not include sales price of homes. Instead, it calculates the monthly equivalent of owning a home, which it derives from rents. That's misleading. Rental prices are likely to drop when there is a high vacancy rate. It occurs when interest rates are low and housing prices are rising. People are more likely to buy houses when the market is improving. Conversely, home prices fall when interest rates rise. As the housing market deteriorates, people move into apartments. That makes rents increase." Anyhow, the point is that CPI is largely cherry picked data, and the way it factors things can be misleading. I wouldn't be surprised that it doesn't accurately measure people being priced out certain assets entirely.

by IanCal 7y ago

ryandrake 7y ago

Doesn’t inflation as measured in the US omit most of the big things that drive the majority of people’s expenses like housing, healthcare, and education? It seems like as soon as the cost of some good starts growing out of control, -poof- it’s omitted from the inflation measurement!

lazerpants 7y ago
Housing is absolutely included in CPI and PCE calculations. I'm less knowledgeable about how education and healthcare are accounted for but they are also included.

Zenst 7y ago

Well for cars in the UK, https://www.racfoundation.org/wp-content/uploads/2017/11/car-ownership-in-great-britain-leibling-171008-report.pdf https://www.racfoundation.org/wp-content/uploads/2017/11/car... shows what I thought and that is car ownership per household has increased in the UK since 1985. Equally, whilst comparing money and inflation etc, you also need to factor in the increase in `standards` and by that, things like TV, phones, transport.... and compare to the past period. Heck, give it a few years and if you don't own a 4k TV, fiber internet and a 5G smartphone - you will be classed as living in poverty in the UK. Many things have become cheaper over time, which has also seen social patterns change. Less pubs and pub usage, though offset that with restaurant usage and you see how in some ways, it is hard to compare A to B, when their makeup is different that the aspect you can compare, become blurred in interpretation. Thus whilst you could say things like the headline, the nuances become much harder the further you compare.

vkou 7y ago

The problem is that the basket of goods is not representative of a real family's actual expenditures. The basket of goods may include the price of gasoline, but does not include the cost of car insurance, car tabs, toll roads, or a parking space. The basket of goods may include the cost of an X-Ray, which doubled in 20 years, but does not the cost of buying a health insurance plan (Which quintupled in 20 years). In this way, the basket of goods is an accurate, but completely misleading metric for inflation. I don't care how much an X-ray costs, I care how much health insurance costs. I don't care how much buying a new car costs, I care about the total cost of ownership of a car. I don't care about how much a 3-bedroom house in the Mid-west costs, I care about how much I pay my landlord for a tiny apartment in a coastal economic center. I don't care about how much the tuition-only part of my degree costs, I care about the total cost of going to college, which includes unresellable textbooks, mandatory housing, mandatory meal plans, and student fees that fund a new stadium. I don't care about how much an analog land-line phone costs (About 29 bucks, lasts you for life), because everyone I interact with expects me to have a $300 cellphone that breaks every 4 years. But if you only look at a basket of goods which is based on the cost of an X-ray, a bottle of aspirin, a monthly payment on a new car, rent for a house on the outskirts of JoblessTown, Nowhere, the cost of a single credit-hour of college, and the ammortized cost of an analog telephone, you get a fantastic metric.

IanCal 7y ago
> The basket of goods may include the price of gasoline, but does not include the cost of car insurance Seems like CPI in the US does include motor vehicle insurance though. > but does not the cost of buying a health insurance It does according to the business insider article. Seems to include wireless telephone services and telephone hardware so I'd be surprised if that doesn't cover a mobile. Where are you using for your list of the basket of goods? https://www.businessinsider.com/breakdown-of-consumer-price-index-basket-2014-1?r=US&IR=T https://www.businessinsider.com/breakdown-of-consumer-price-...
- Rury 7y ago
  There's many things CPI doesn't factor. For example house prices: https://www.thebalance.com/consumer-price-index-cpi-index-definition-and-calculation-3305735 https://www.thebalance.com/consumer-price-index-cpi-index-de... "Note that the CPI does not include sales price of homes. Instead, it calculates the monthly equivalent of owning a home, which it derives from rents. That's misleading. Rental prices are likely to drop when there is a high vacancy rate. It occurs when interest rates are low and housing prices are rising. People are more likely to buy houses when the market is improving. Conversely, home prices fall when interest rates rise. As the housing market deteriorates, people move into apartments. That makes rents increase." Anyhow, the point is that CPI is largely cherry picked data, and the way it factors things can be misleading. I wouldn't be surprised that it doesn't accurately measure people being priced out certain assets entirely.