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Yeah, maybe a gallon of milk did not increase that much. But did you see prices for houses? for education? for cars? for entertainment? even high-end electronic

Yeah, maybe a gallon of milk did not increase that much. But did you see prices for houses? for education? for cars? for entertainment? even high-end electronics? Yes, for all those categories there are other (even more important) factors than inflation, but overall, we see a growth much larger than CPI

pauldickwin 6y ago
The prices for these things did not go up because the fed gave people stimulus checks to pay for their daily needs.
- btilly 6y ago
  Yes they did. When you give people stimulus checks, they spend it. That money enters circulation. It winds up in the pockets of businesses. And from there to the owners of said businesses. Which, since they have money and this is a horrible business environment to invest in, means that money goes into assets. Which drives up the price of the assets.
notafraudster 6y ago
I'm having a hard time parsing your comparison; the prices for houses and education are out of control, the prices of cars rise rapidly but are mostly driven by the evolving conception of what cars are, entertainment and electronics seem historically cheap. Was your intent to say that all of these have rapidly increasing prices?
rory 6y ago
All the things you enumerated are included in the fed's calculation of CPI. Are you arguing their weightings are bad?
- rllearneratwork 6y ago
  yes
  - rory 6y ago
    How then? Higher education and houses, sure, but car price inflation has been tame since the 90s, and equivalent electronics plummet in price over time. As far as I can tell entertainment has only gone up sharply in price where it's supply-limited (e.g. Hamilton, the Super Bowl), because more people are rich than in the past. I'm most curious about that one, since there are so many interesting substitutes and prices are all over.
- speeder 6y ago
  FED changed the weightings in 1980, notably if I remember correctly they greatly reduced the importance of housing prices (not what they call "housing" category, but the price of the shelter itself) There was some article coming out some days ago about how when using old CPI calculations inflation is actually 10%, and wages are lagging extremely behind inflation when using old CPI.
  - Bjartr 6y ago
    Are there "unofficial" weightings available so that inflation could be analyzed under a different set of assumptions?
    - Qasaur 6y ago
      Yes: http://www.shadowstats.com/alternate_data/inflation-charts http://www.shadowstats.com/alternate_data/inflation-charts This site calculates CPI using the old way of calculating it, and according to that method the inflation rate is closer to 10%.
      - em500 6y ago
        That's what the site author claimed he does. Others claim that what he actually does is just adding a few percentage points to the official stats[1]. Among academic economists, the site author is largely regarded as some kooky conspiracy theorist[2]. Personally I just see him more as small time business man making a nice living from satisfying some market demand for figures that proof government is lying to you. For those who want to find out for themselves, here's the raw BLS data[3] and methodology[4]. [1] https://azizonomics.com/2013/06/01/the-trouble-with-shadowstats/ https://azizonomics.com/2013/06/01/the-trouble-with-shadowst... [2] https://www.thestreet.com/economonitor/emerging-markets/deconstructing-shadowstats-why-is-it-so-loved-by-its-followers-but-scorned-by-economists https://www.thestreet.com/economonitor/emerging-markets/deco... [3] https://www.bls.gov/developers/home.htm https://www.bls.gov/developers/home.htm [4] https://www.bls.gov/opub/hom/pdf/cpihom.pdf https://www.bls.gov/opub/hom/pdf/cpihom.pdf
- chrischattin 6y ago
  Home prices are not included in the CPI.
  - rory 6y ago
    You're right, housing inflation measurement != house-price inflation measurement. Not sure how much that distinction really affects the median person though, if housing (rent) inflation is under control. I suppose people with kids may prefer to buy for long-term consistency, so CPI misses them in a way.
  - nkurz 6y ago
    You are right, but this might just be semantics. Perhaps you already know this, but for others, rent is included in CPI, and for those those who own, "owner equivalent rent" is used as an estimate of the amount of rent they would be paying. Incredibly, the amount of OER is determined by asking the owner they think they could rent out their home! I'd guess that home prices must correlate strongly to this estimation. So while home prices are not directly included, over time, as homes are bought and sold, they sale prices almost certainly influence the CPI, even if they are not directly a component. Here's the Bureau of Labor Services Q&A on the topic: "How the CPI measures price change of Owners’ equivalent rent of primary residence (OER) and Rent of primary residence (Rent)" https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...
    - mcfly1985 6y ago
      Rent is not the same thing as house prices. Additionally, it's imputed rent - not actual rent. The fed released their own study just the other week showing that if house prices were included in the cpi as they were in the past, cpi would be drastically higher.
- lotsofpulp 6y ago
  The missing something in CPI is the volatility or perception of volatility of income, which makes everything more expensive if you have to act more conservatively than people did in decades past. You feel certain regions of the country are far outpacing others in economic growth and high paying jobs, you feel healthcare costs can and will cause issues for you in the future, you feel automation could come after you. So you bid up housing in areas you feel have higher probabilities of economic growth so you have access to more jobs, in case you get laid off, and you save more since if you get laid off, you have to spend a lot more for healthcare. You delay having kids because maybe before it felt like things would fall into place, but now you have access to data and decide it's wiser to wait to gather more resources before trying for relationships/kids, so it feels more "expensive" to start a family than in decades past. But it's probably impossible to reflect all of that in a number.
  - rory 6y ago
    This is insightful. My speculative impression is that the phenomenon you describe does have an impact on the real economy and that the difference is primarily one of perception and information. People in the past were also at great risk of job automation, regional economic decline, etc. etc., but didn't seem to stress them and try to hedge for them as much. I could be wrong though.
    - lotsofpulp 6y ago
      I also wonder how much fear is simply due to having access to more data, and how much is kind of a feedback loop due to actions stemming from that fear causing even more fear. But 2 parameters that are different than the past: 1) The rate of change of job destruction from automation and outsourcing to up and coming countries may not be the same over all time periods. If it happens slowly enough, then it may not be perceived by people and it may only have a negligible economic effect if the obviated people are able to be put to use elsewhere. But with computers and mobile high speed internet and GPS, you can roll out products that obviate entire fields within years if not months. Email/Calendars/Online Shopping/Travel Search/Reviews/Search Engines/Online Auctions/Craigslist/Real Estate/low cost index funds have all laid waste to enormous numbers of people's professions or lowered the barrier to entry heavily. The younger generation has no or much lower demand for travel agents, secretaries, stock brokers, real estate agents, journalists, etc. 2) The birthrate in the past pretty much guaranteed growth. If many people have 3 and 4 children, then growing demand and hence growing growth is basically built into the system. But what happens if people start having 0, 1, and 2 children? And they're all utilizing databases and internet connections to cut out numerous middlemen that their numerous parents and grandparents needed to use?

pauldickwin 6y ago

The prices for these things did not go up because the fed gave people stimulus checks to pay for their daily needs.

btilly 6y ago
Yes they did. When you give people stimulus checks, they spend it. That money enters circulation. It winds up in the pockets of businesses. And from there to the owners of said businesses. Which, since they have money and this is a horrible business environment to invest in, means that money goes into assets. Which drives up the price of the assets.

notafraudster 6y ago

I'm having a hard time parsing your comparison; the prices for houses and education are out of control, the prices of cars rise rapidly but are mostly driven by the evolving conception of what cars are, entertainment and electronics seem historically cheap. Was your intent to say that all of these have rapidly increasing prices?

rory 6y ago

All the things you enumerated are included in the fed's calculation of CPI. Are you arguing their weightings are bad?

rllearneratwork 6y ago
yes
- rory 6y ago
  How then? Higher education and houses, sure, but car price inflation has been tame since the 90s, and equivalent electronics plummet in price over time. As far as I can tell entertainment has only gone up sharply in price where it's supply-limited (e.g. Hamilton, the Super Bowl), because more people are rich than in the past. I'm most curious about that one, since there are so many interesting substitutes and prices are all over.
speeder 6y ago
FED changed the weightings in 1980, notably if I remember correctly they greatly reduced the importance of housing prices (not what they call "housing" category, but the price of the shelter itself) There was some article coming out some days ago about how when using old CPI calculations inflation is actually 10%, and wages are lagging extremely behind inflation when using old CPI.
- Bjartr 6y ago
  Are there "unofficial" weightings available so that inflation could be analyzed under a different set of assumptions?
  - Qasaur 6y ago
    Yes: http://www.shadowstats.com/alternate_data/inflation-charts http://www.shadowstats.com/alternate_data/inflation-charts This site calculates CPI using the old way of calculating it, and according to that method the inflation rate is closer to 10%.
    - em500 6y ago
      That's what the site author claimed he does. Others claim that what he actually does is just adding a few percentage points to the official stats[1]. Among academic economists, the site author is largely regarded as some kooky conspiracy theorist[2]. Personally I just see him more as small time business man making a nice living from satisfying some market demand for figures that proof government is lying to you. For those who want to find out for themselves, here's the raw BLS data[3] and methodology[4]. [1] https://azizonomics.com/2013/06/01/the-trouble-with-shadowstats/ https://azizonomics.com/2013/06/01/the-trouble-with-shadowst... [2] https://www.thestreet.com/economonitor/emerging-markets/deconstructing-shadowstats-why-is-it-so-loved-by-its-followers-but-scorned-by-economists https://www.thestreet.com/economonitor/emerging-markets/deco... [3] https://www.bls.gov/developers/home.htm https://www.bls.gov/developers/home.htm [4] https://www.bls.gov/opub/hom/pdf/cpihom.pdf https://www.bls.gov/opub/hom/pdf/cpihom.pdf
chrischattin 6y ago
Home prices are not included in the CPI.
- rory 6y ago
  You're right, housing inflation measurement != house-price inflation measurement. Not sure how much that distinction really affects the median person though, if housing (rent) inflation is under control. I suppose people with kids may prefer to buy for long-term consistency, so CPI misses them in a way.
- nkurz 6y ago
  You are right, but this might just be semantics. Perhaps you already know this, but for others, rent is included in CPI, and for those those who own, "owner equivalent rent" is used as an estimate of the amount of rent they would be paying. Incredibly, the amount of OER is determined by asking the owner they think they could rent out their home! I'd guess that home prices must correlate strongly to this estimation. So while home prices are not directly included, over time, as homes are bought and sold, they sale prices almost certainly influence the CPI, even if they are not directly a component. Here's the Bureau of Labor Services Q&A on the topic: "How the CPI measures price change of Owners’ equivalent rent of primary residence (OER) and Rent of primary residence (Rent)" https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...
  - mcfly1985 6y ago
    Rent is not the same thing as house prices. Additionally, it's imputed rent - not actual rent. The fed released their own study just the other week showing that if house prices were included in the cpi as they were in the past, cpi would be drastically higher.
lotsofpulp 6y ago
The missing something in CPI is the volatility or perception of volatility of income, which makes everything more expensive if you have to act more conservatively than people did in decades past. You feel certain regions of the country are far outpacing others in economic growth and high paying jobs, you feel healthcare costs can and will cause issues for you in the future, you feel automation could come after you. So you bid up housing in areas you feel have higher probabilities of economic growth so you have access to more jobs, in case you get laid off, and you save more since if you get laid off, you have to spend a lot more for healthcare. You delay having kids because maybe before it felt like things would fall into place, but now you have access to data and decide it's wiser to wait to gather more resources before trying for relationships/kids, so it feels more "expensive" to start a family than in decades past. But it's probably impossible to reflect all of that in a number.
- rory 6y ago
  This is insightful. My speculative impression is that the phenomenon you describe does have an impact on the real economy and that the difference is primarily one of perception and information. People in the past were also at great risk of job automation, regional economic decline, etc. etc., but didn't seem to stress them and try to hedge for them as much. I could be wrong though.
  - lotsofpulp 6y ago
    I also wonder how much fear is simply due to having access to more data, and how much is kind of a feedback loop due to actions stemming from that fear causing even more fear. But 2 parameters that are different than the past: 1) The rate of change of job destruction from automation and outsourcing to up and coming countries may not be the same over all time periods. If it happens slowly enough, then it may not be perceived by people and it may only have a negligible economic effect if the obviated people are able to be put to use elsewhere. But with computers and mobile high speed internet and GPS, you can roll out products that obviate entire fields within years if not months. Email/Calendars/Online Shopping/Travel Search/Reviews/Search Engines/Online Auctions/Craigslist/Real Estate/low cost index funds have all laid waste to enormous numbers of people's professions or lowered the barrier to entry heavily. The younger generation has no or much lower demand for travel agents, secretaries, stock brokers, real estate agents, journalists, etc. 2) The birthrate in the past pretty much guaranteed growth. If many people have 3 and 4 children, then growing demand and hence growing growth is basically built into the system. But what happens if people start having 0, 1, and 2 children? And they're all utilizing databases and internet connections to cut out numerous middlemen that their numerous parents and grandparents needed to use?