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CPI only measures a vary narrow range of goods The basket of goods used to calculate CPI includes thousands of items covering all categories of consumption by
by harryh 6y ago
CPI only measures a vary narrow range of goods
The basket of goods used to calculate CPI includes thousands of items covering all categories of consumption by US consumers. It includes housing, energy, education, health care, consumer staples, durable goods, etc.
- fakedang 6y agoCPI is such a bullshit measure precisely because of its definition. A lot of items have had their prices go down significantly due to globalization, efficiency in production, Chinese production, regulation or just by going obsolete and inconvenient. At the same time, the measures that matter - Healthcare, education, housing, have all gone up. Not to mention CPI does not account for wage stagnation.
- harryh 6y agoAt the same time, the measures that matter - Healthcare, education, housing, have all gone up. I literally listed those three categories in my comment as components in the CPI calculation.
- fakedang 6y agoAnd you listed a lot of other components which pull down the overall CPI drastically, thus averaging out the increases in these categories, making the whole exercise pointless. For instance, consumer goods, or electronic products, or automobiles, or gasoline, or literally n other products that have suffered from lower or stagnant prices.
- harryh 6y agoWhen measuring the buying power of the US dollar, it's important to look at a broad based basket of goods that is consistent with how Americans spend their money. Focusing on just a few items that have gotten more expensive will deliver an incorrect result.
- fakedang 6y agoAnd yet they are delivering an incorrect result, since the 3 key goods are enablers of the rest of the basket. Without an college education (and thus a reasonable job these days), adequate healthcare or a proper roof over your head near your employer, you're not going to be buying cars or electronics. And I'm not alone in the economics field for criticizing the CPI, yet somehow a bunch of HNers find the very idea of it repulsive.
- harryh 6y agoWithout food, clothing or energy you're not going to be buying cars or electronics either. At the end of the day, you gotta measure inflation based on where people are actually spending their money. Not on an arbitrary ranking of which goods are "enablers of the rest of the basket."