10 ms·

Its probably being cancelled out in the basket by healthcare and education prices skyrocketing. Oh wait.

hedora 6y ago
Don’t forget utilities (also skyrocketing here).
SilasX 6y ago
No joke, back in 2011, a Fed executive insisted that iPad deflation was canceling out higher food prices. Not even that iPads were getting cheaper, just, new ones had faster CPUs, so their effective price was lower. (Which somehow frees up more money for food?) https://www.reuters.com/article/us-usa-fed-dudley-ipad-idUSTRE72A4AC20110311 https://www.reuters.com/article/us-usa-fed-dudley-ipad-idUST...
- fennecfoxen 6y ago
  The official was correct, from the perspective of economy-wide price stability. The problem wasn't inflation, the problem was expensive food. Obviously, this particular exchange was of no comfort to those who suffer from high food prices, but why should monetary policy be the remedy for high food prices (to the exclusion of its current goals) instead of looking for remedies in fiscal policy, trade policy, regulatory policy, or other instruments better suited to a more targeted redress?
  - SilasX 6y ago
    Well, there's technically correct, and substantively correct. Most people would take away the lesson that "hey, the current definition of inflation doesn't quite capture the reality of normal people's cost of living", not "computer says no suffering, sorry bro". But I don't think it's even technically correct from the perspective of price stability. The inflation the central bank cares about is the kind that is the result of (to simplify) "too much money chasing too few goods". Technological deflation is totally orthogonal to that, and should be ignored to the extent possible. Furthermore, even on its on terms, the calculation isn't correct. A fifty percent faster CPU doesn't mean the effective price has fallen fifty percent, because the CPU is only occasionally the bottleneck. (And do they ever adjust inflation upward for quality reductions?)
    - fennecfoxen 6y ago
      The BLS does not include a CPU-megahertz (or gigahertz) in its market basket. It uses CPU speed (and other characteristics) to divide the market into "high-end", "mainstream", or "economy" computers, then substitutes new items in the correct slot when as the new items become available, rather than waiting for the price of the older computer to plummet.
      - SilasX 6y ago
        That's still equating technological deflation with (absence of) money-induced inflation, and it still assumes that the more powerful computer can displace the effects of food price inflation (or that the out-of-date computer can keep up with the same present needs). Also, Dudley said: >>“Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful,”
        fennecfoxen 6y ago
        > it still assumes that the more powerful computer can displace the effects of food price inflation Well, yes-kind-also-no? It's not an index that describes the cost of necessities or human survival. It's an index that describes how consumers spend money on goods and services, such that the value of the money remains more or less constant. In that sense, yes, people's computer-money spending patterns can affect the price of food. Literally anything else in the index can do so as well. No, the index is not "assuming" anything can "displace" food; it's just never set out to be a thing where food is this sort of baseline. I can't be 100% sure, but you seem to think that there should be an index which cares more about food. Moreover, you seem to think that more public policy should revolve around this price index rather than the vanilla CPI that is currently used. However, I would suggest that monetary policy is far blunt an instrument. It is one of the least-targeted tools possible, with the largest set of possible side effects, and food is too small a slice of the economy. There's a reason we go for economy-level price stability instead of sector-specific. Imagine if the US had a real bumper crop, more corn and soybeans than you could eat: to meet food price stability targets the Fed would be obligated to shrink the money supply until the corn was as expensive as it used to be, and everyone's mortgages, loans, and credit cards would be harder to pay off.
  - anm89 6y ago
    You are playing a word game here by taking a very specific definition of inflation useful to bureaucrats to argue that ipad processor speeds meaningfully counteract food prices in the way an average person perceives the price level. This simply isn't true unless again you redefine all of those words, which, while not hard to do, isn't particularly useful to people who aren't that specific group of bureaucrats. So pick whatever definition of inflation you want. Just understand that what normal people care about in terms of inflation is how many pieces of paper they need to achieve the basic goals of their life and your definition is totally irrelevant to their set of concerns. Your having a totally separate conversation then they are with nothing but some semantic overlap.
- owenversteeg 6y ago
  Which was horribly tone deaf, but not incorrect: yes, technological improvements do free up money for food. According to the New York Times, in the 70s your average car would survive for 100k miles. Today you can buy a car that not only survives more than twice as long, but it has far fewer costs: engines using a tiny fraction of the oil, coolants that last the car's lifetime, spark plugs that last several times as long, incredible safety features... The 2021 Chevrolet Spark costs $13,400 (and appears to come with $1000 of "bonus cash" that would bring that down to $12.4k?), gets 38 MPG highway, and has a standard rear camera and touchscreen. You can buy it today - a brand new car, of reasonable quality, from a top name American company, for $160-ish a month for a 7-year note. It is far safer than any car sold in the 70s, it accelerates faster than most cars sold in 1970, it has navigation and a backup camera standard in the base model. Its paint and coatings will last forever, its battery is sealed, and it requires nearly zero service in the beginning of its life. Look at a budget car in 1970 - Car and Driver's recommended budget pick was the Ford Pinto, $2500 as tested. It was described as "uncomfortable" with four adults - you really should stick to two, they said. The fact that the cars were still running after the first 15,000 miles was, according to Car and Driver, "an indication of the soundness of their basic engineering." It had painful, uncomfortable bucket seats. The Pinto, and I quote, "substantially more powerful than normal store-bought economy cars", had a 0-60 time of eighteen seconds - this is a car described as "nimble and powerful" in its time. _All_ of the budget cars delivered to Car and Driver had "serious defects" straight from the factory - in the Pinto's case, the camshaft had been installed incorrectly. Ford apparently built a whole series of them that way, then lost track of which. For a budget car to not squeak while braking was apparently impossible, so instead of discussing _if_ they squeaked reviews discussed how the squeaks sounded (the Pinto was apparently not bad - the Chevy Vega was described as a "depths of hell" squeak.) According to the manufacturer, in the first 24k miles, you would need a minimum of eleven hours of shop time, best case scenario, to keep the vehicle running. People describing their normal use mentioned they added a quart of oil a week to the Pinto - ludicrous today. And I won't even get into the safety of 1970s cars - a reminder that the Ford Pinto was famous for literally exploding into flames (the controversy came eight years later, 1978 or so), but despite this its safety is considered today "comparable to other 1970s subcompact cars" (aka terrible, but not remarkably so for the time.) Despite all this, it was a popular car for the time and got good reviews in its day. At the current low minimum wage of $7.25 an hour, you would have had to work about the same amount of hours to buy a budget car today as in 1970 - the budget cars of today being spaceships in comparison. Drive a 70s car and a 2020s car down the road and you'll quickly understand that the modern car is a paradise of comfort in comparison - noise, smoothness, how it drives, handles, vibrations, emissions, etc etc. Many Western states have top speed limits of 80 mph, where the flow of traffic is 85 or higher - your Pinto would feel terrifying and be extremely unsafe at such a speed: if you crash you die. Of course, the same applies to many things. Improvements in phone cameras mean that for many people, the cost of a phone+camera has gotten far cheaper. Quartz watches can last a lifetime and are far more accurate than mechanical watches. Remote control toys, flashlights, batteries, lightbulbs, washing machines - all cheaper. These things add up! Reading your other comments in the adjacent thread, I think you're not seeing the forest for the trees. Yes, a CPU that is 10% faster has little marginal utility, and it does not provide you with much (if any) dollar savings in your pocket. But at the same time, the largest single-year increase in the price of bananas in the last few decades was a few cents a pound: those few cents in your pocket don't really do much either. For increases in both the cost of living and food, you're going to have to look at the ten- or twenty-year picture. Look at the total cost of a laptop that meets your average Joe's requirements. Look at the total cost of ownership of a car. Look at the cost of lightbulbs, toothbrushes and bicycles. So yes, he is correct: technological improvements do cancel out increases in the cost of living elsewhere! The few bucks you save by not topping up your oil can pay for more expensive bananas, the thousands you save by your car lasting longer can pay for higher rent, the hundreds you save by not needing a camera can pay for a fatter bar tab. But, at the same time, tone deaf to say that to a working class audience in Queens NY in the depths of a recession while you're bailing out the big banks.
gruez 6y ago
>Its probably being cancelled out in the basket by healthcare and education prices skyrocketing. Oh wait. If you go to bls's site, you can easily tell what it's being canceled out by. From the looks of it, it's mostly being canceled out by low energy prices. https://www.bls.gov/cpi/tables/supplemental-files/home.htm https://www.bls.gov/cpi/tables/supplemental-files/home.htm
- plank_time 6y ago
  I live near San Fran and I paid over $4/gallon for regular gas. That’s the same price I paid when gas was at all time highs. I know that a lot of it is taxes but the BLS must be taking that into consideration, no? Also electricity is at all time highs, depending on the tier and time of day I’m paying 0.50/kWh. During the pandemic this has been killing me. I can’t believe that energy prices are low at least around here.
  - gruez 6y ago
    Here's the data for the san francisco area: https://www.bls.gov/regions/west/news-release/2021/pdf/consumerpriceindex_sanfrancisco_20210113.pdf https://www.bls.gov/regions/west/news-release/2021/pdf/consu..., dated december 2020. on page 5 it says gasoline prices are down 9.2% YOY, but electricity is up 5.9% YOY.
  - mdorazio 6y ago
    You’re using local price factors when BLS is looking at National ones. Outside California, things are quite different. For example, see [1]. In general, just assume that California doesn’t reflect the broader US on basically any measure. [1] https://www.eia.gov/dnav/pet/pet_pri_gnd_dcus_nus_a.htm https://www.eia.gov/dnav/pet/pet_pri_gnd_dcus_nus_a.htm
  - souprock 6y ago
    You're in a different world. https://www.gasbuddy.com/gaspricemap https://www.gasbuddy.com/gaspricemap
- jjav 6y ago
  Electricity prices have gone up substantially last 10 years.

Don’t forget utilities (also skyrocketing here).

No joke, back in 2011, a Fed executive insisted that iPad deflation was canceling out higher food prices. Not even that iPads were getting cheaper, just, new ones had faster CPUs, so their effective price was lower. (Which somehow frees up more money for food?) https://www.reuters.com/article/us-usa-fed-dudley-ipad-idUSTRE72A4AC20110311 https://www.reuters.com/article/us-usa-fed-dudley-ipad-idUST...

fennecfoxen 6y ago
The official was correct, from the perspective of economy-wide price stability. The problem wasn't inflation, the problem was expensive food. Obviously, this particular exchange was of no comfort to those who suffer from high food prices, but why should monetary policy be the remedy for high food prices (to the exclusion of its current goals) instead of looking for remedies in fiscal policy, trade policy, regulatory policy, or other instruments better suited to a more targeted redress?
- SilasX 6y ago
  Well, there's technically correct, and substantively correct. Most people would take away the lesson that "hey, the current definition of inflation doesn't quite capture the reality of normal people's cost of living", not "computer says no suffering, sorry bro". But I don't think it's even technically correct from the perspective of price stability. The inflation the central bank cares about is the kind that is the result of (to simplify) "too much money chasing too few goods". Technological deflation is totally orthogonal to that, and should be ignored to the extent possible. Furthermore, even on its on terms, the calculation isn't correct. A fifty percent faster CPU doesn't mean the effective price has fallen fifty percent, because the CPU is only occasionally the bottleneck. (And do they ever adjust inflation upward for quality reductions?)
  - fennecfoxen 6y ago
    The BLS does not include a CPU-megahertz (or gigahertz) in its market basket. It uses CPU speed (and other characteristics) to divide the market into "high-end", "mainstream", or "economy" computers, then substitutes new items in the correct slot when as the new items become available, rather than waiting for the price of the older computer to plummet.
    - SilasX 6y ago
      That's still equating technological deflation with (absence of) money-induced inflation, and it still assumes that the more powerful computer can displace the effects of food price inflation (or that the out-of-date computer can keep up with the same present needs). Also, Dudley said: >>“Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful,”
      - fennecfoxen 6y ago
        > it still assumes that the more powerful computer can displace the effects of food price inflation Well, yes-kind-also-no? It's not an index that describes the cost of necessities or human survival. It's an index that describes how consumers spend money on goods and services, such that the value of the money remains more or less constant. In that sense, yes, people's computer-money spending patterns can affect the price of food. Literally anything else in the index can do so as well. No, the index is not "assuming" anything can "displace" food; it's just never set out to be a thing where food is this sort of baseline. I can't be 100% sure, but you seem to think that there should be an index which cares more about food. Moreover, you seem to think that more public policy should revolve around this price index rather than the vanilla CPI that is currently used. However, I would suggest that monetary policy is far blunt an instrument. It is one of the least-targeted tools possible, with the largest set of possible side effects, and food is too small a slice of the economy. There's a reason we go for economy-level price stability instead of sector-specific. Imagine if the US had a real bumper crop, more corn and soybeans than you could eat: to meet food price stability targets the Fed would be obligated to shrink the money supply until the corn was as expensive as it used to be, and everyone's mortgages, loans, and credit cards would be harder to pay off.
- anm89 6y ago
  You are playing a word game here by taking a very specific definition of inflation useful to bureaucrats to argue that ipad processor speeds meaningfully counteract food prices in the way an average person perceives the price level. This simply isn't true unless again you redefine all of those words, which, while not hard to do, isn't particularly useful to people who aren't that specific group of bureaucrats. So pick whatever definition of inflation you want. Just understand that what normal people care about in terms of inflation is how many pieces of paper they need to achieve the basic goals of their life and your definition is totally irrelevant to their set of concerns. Your having a totally separate conversation then they are with nothing but some semantic overlap.
owenversteeg 6y ago
Which was horribly tone deaf, but not incorrect: yes, technological improvements do free up money for food. According to the New York Times, in the 70s your average car would survive for 100k miles. Today you can buy a car that not only survives more than twice as long, but it has far fewer costs: engines using a tiny fraction of the oil, coolants that last the car's lifetime, spark plugs that last several times as long, incredible safety features... The 2021 Chevrolet Spark costs $13,400 (and appears to come with $1000 of "bonus cash" that would bring that down to $12.4k?), gets 38 MPG highway, and has a standard rear camera and touchscreen. You can buy it today - a brand new car, of reasonable quality, from a top name American company, for $160-ish a month for a 7-year note. It is far safer than any car sold in the 70s, it accelerates faster than most cars sold in 1970, it has navigation and a backup camera standard in the base model. Its paint and coatings will last forever, its battery is sealed, and it requires nearly zero service in the beginning of its life. Look at a budget car in 1970 - Car and Driver's recommended budget pick was the Ford Pinto, $2500 as tested. It was described as "uncomfortable" with four adults - you really should stick to two, they said. The fact that the cars were still running after the first 15,000 miles was, according to Car and Driver, "an indication of the soundness of their basic engineering." It had painful, uncomfortable bucket seats. The Pinto, and I quote, "substantially more powerful than normal store-bought economy cars", had a 0-60 time of eighteen seconds - this is a car described as "nimble and powerful" in its time. _All_ of the budget cars delivered to Car and Driver had "serious defects" straight from the factory - in the Pinto's case, the camshaft had been installed incorrectly. Ford apparently built a whole series of them that way, then lost track of which. For a budget car to not squeak while braking was apparently impossible, so instead of discussing _if_ they squeaked reviews discussed how the squeaks sounded (the Pinto was apparently not bad - the Chevy Vega was described as a "depths of hell" squeak.) According to the manufacturer, in the first 24k miles, you would need a minimum of eleven hours of shop time, best case scenario, to keep the vehicle running. People describing their normal use mentioned they added a quart of oil a week to the Pinto - ludicrous today. And I won't even get into the safety of 1970s cars - a reminder that the Ford Pinto was famous for literally exploding into flames (the controversy came eight years later, 1978 or so), but despite this its safety is considered today "comparable to other 1970s subcompact cars" (aka terrible, but not remarkably so for the time.) Despite all this, it was a popular car for the time and got good reviews in its day. At the current low minimum wage of $7.25 an hour, you would have had to work about the same amount of hours to buy a budget car today as in 1970 - the budget cars of today being spaceships in comparison. Drive a 70s car and a 2020s car down the road and you'll quickly understand that the modern car is a paradise of comfort in comparison - noise, smoothness, how it drives, handles, vibrations, emissions, etc etc. Many Western states have top speed limits of 80 mph, where the flow of traffic is 85 or higher - your Pinto would feel terrifying and be extremely unsafe at such a speed: if you crash you die. Of course, the same applies to many things. Improvements in phone cameras mean that for many people, the cost of a phone+camera has gotten far cheaper. Quartz watches can last a lifetime and are far more accurate than mechanical watches. Remote control toys, flashlights, batteries, lightbulbs, washing machines - all cheaper. These things add up! Reading your other comments in the adjacent thread, I think you're not seeing the forest for the trees. Yes, a CPU that is 10% faster has little marginal utility, and it does not provide you with much (if any) dollar savings in your pocket. But at the same time, the largest single-year increase in the price of bananas in the last few decades was a few cents a pound: those few cents in your pocket don't really do much either. For increases in both the cost of living and food, you're going to have to look at the ten- or twenty-year picture. Look at the total cost of a laptop that meets your average Joe's requirements. Look at the total cost of ownership of a car. Look at the cost of lightbulbs, toothbrushes and bicycles. So yes, he is correct: technological improvements do cancel out increases in the cost of living elsewhere! The few bucks you save by not topping up your oil can pay for more expensive bananas, the thousands you save by your car lasting longer can pay for higher rent, the hundreds you save by not needing a camera can pay for a fatter bar tab. But, at the same time, tone deaf to say that to a working class audience in Queens NY in the depths of a recession while you're bailing out the big banks.

gruez 6y ago

>Its probably being cancelled out in the basket by healthcare and education prices skyrocketing. Oh wait. If you go to bls's site, you can easily tell what it's being canceled out by. From the looks of it, it's mostly being canceled out by low energy prices. https://www.bls.gov/cpi/tables/supplemental-files/home.htm https://www.bls.gov/cpi/tables/supplemental-files/home.htm

plank_time 6y ago
I live near San Fran and I paid over $4/gallon for regular gas. That’s the same price I paid when gas was at all time highs. I know that a lot of it is taxes but the BLS must be taking that into consideration, no? Also electricity is at all time highs, depending on the tier and time of day I’m paying 0.50/kWh. During the pandemic this has been killing me. I can’t believe that energy prices are low at least around here.
- gruez 6y ago
  Here's the data for the san francisco area: https://www.bls.gov/regions/west/news-release/2021/pdf/consumerpriceindex_sanfrancisco_20210113.pdf https://www.bls.gov/regions/west/news-release/2021/pdf/consu..., dated december 2020. on page 5 it says gasoline prices are down 9.2% YOY, but electricity is up 5.9% YOY.
- mdorazio 6y ago
  You’re using local price factors when BLS is looking at National ones. Outside California, things are quite different. For example, see [1]. In general, just assume that California doesn’t reflect the broader US on basically any measure. [1] https://www.eia.gov/dnav/pet/pet_pri_gnd_dcus_nus_a.htm https://www.eia.gov/dnav/pet/pet_pri_gnd_dcus_nus_a.htm
- souprock 6y ago
  You're in a different world. https://www.gasbuddy.com/gaspricemap https://www.gasbuddy.com/gaspricemap
jjav 6y ago
Electricity prices have gone up substantially last 10 years.