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Actually it is how inflation works. The BLS actually goes out and buys a basket of household items and groceries at regular intervals across the USA
by anonu 6y ago
Actually it is how inflation works. The BLS actually goes out and buys a basket of household items and groceries at regular intervals across the USA
- taylodl 6y agoThe key to remember is it's not the same basket of household items - they provide for substitution. Apples are too expensive? Maybe they'll be replaced with grapes. Beef is too expensive? Maybe it'll get replaced by chicken. They substitute items in such a manner to keep the inflation index as low as possible. That's important because social security checks are adjusted based off that inflation index so they're motivated to keep it as low as possible. As you can imagine people claim this doesn't reflect true inflation as we're not necessarily comparing apples-to-apples (ha!) and it also excludes energy costs.
- jfengel 6y agoI don't see anything wrong with accounting for substitutions. If beef is too expensive this month, then people do switch to chicken. They haven't lost anything. It would be false if somehow this became an infinite treadmill where the basket went from beef to chicken to lentils to sawdust, but that's not what happens. The substition smooths out short term changes in price the same way people actually do. The economy acquires robustness through this redundancy, and the CPI measure reflects that. It's far from a perfect measure, but its failures aren't caused by the perfectly commonplace action of buying the cheapest goods today. Insisting that it has to be precisely the same goods would indeed be a distorted measure of the economy.