5 ms·

This made me wonder if inflation is enough to account for price increases. For instance, it could be the case - I don't know since I'm not an acquainted with th

This made me wonder if inflation is enough to account for price increases. For instance, it could be the case - I don't know since I'm not an acquainted with the field/data - that the costs of important goods such as homes, cars, education, health care, etc. has increased more or less that what that 10k approx. 70k figure tells you. For instance, maybe its the case that for a generic 10k its worth 70k distributed over all goods and services, but for those that matter most maybe its 250k or 20k, I don't know. Does anyone know more about this topic? I think they use a basket of goods to calculate inflation, but how has that basket changed / been updated over time? Can any economist weigh in here?

JorgeGT 5y ago
You are right. Inflation is usually computed by tracking the price of a "basket of goods". But this only makes sense in the short term and doesn't account for profound societal changes that technology, ideology, etc. brings to that basket. Consider this quote by Agatha Christie (1890-1976): I never thought I would be so poor as to not have live-in staff, or so Rich as to have a car.
distortedsignal 5y ago
I think you're referring to the CPI (https://en.wikipedia.org/wiki/Consumer_price_index https://en.wikipedia.org/wiki/Consumer_price_index), which, as I understand it, is a pretty hotly contested tool in econ/business circles today. If you want to check out the raw data for the CPI that the US Federal Reserve uses, check out https://fred.stlouisfed.org/ https://fred.stlouisfed.org/ - though I couldn't begin to recommend how to navigate that site.
mandevil 5y ago
Two points on the market basket mechanism for measuring inflation: One is that I think lots of people over-focus on specific sectors: sure houses and college education have gotten more expensive, but clothes, travel and computers have gotten much cheaper. Most of the complaints about "hidden inflation" that I've seen are basically ways of saying 'if you only look at the things that have grown much faster than the inflation average, then it looks like inflation is much greater than average.' Now the question of 'hedonic adjustments' (how do you account for the problem that no amount of 1970 money could buy you an iPhone, or a car as safe and reliable as any car made in 2021) is a tricky one. As I recall from my macro class <mumble mumble> years ago, economists basically introduce fudge factors to account for that. I recall some speculation that the fudge factors in the health care sector (of the US) were systematically wrong, because the population isn't actually getting healthy or living longer as those numbers would suggest.
- ndbfjd 5y ago
  I over-focus on those sectors because the proportion of my budget that is spent on clothes, travel, computers, iPhones, etc. is a small fraction of that spent on housing, college education, and healthcare. I'm not interested in hearing the CPI tell me how many fewer televisions I can buy this year due to inflation when those other sectors dominate my spending.
  - pwinnski 5y ago
    It seems self-evident that the anything for which the cost has gone up will take up a greater proportion of your budget than anything for which the cost has gone down, no matter what the things are. I, for one, own a house and am not currently paying for anyone's college education, so the proportion of my budget going to food and clothing is more relevant to me. Should I say that I'm not interested in hearing people tell me how many fewer students I can send to college when I don't have any students to send? CPI items were picked precisely because they apply to everyone. Raises in housing cost renters more, but increase my net worth as an owner, so it's left out of the CPI. Health care costs in the US are ridiculous, but they're also widely disparate depending on more factors than can be accounted for in a simple measurement like CPI.
lovecg 5y ago
Cost of some these things you mentioned definitely went up by a lot and is not fully explained by inflation. A good blog post on the topic: https://slatestarcodex.com/2017/02/09/considerations-on-cost-disease/ https://slatestarcodex.com/2017/02/09/considerations-on-cost...

JorgeGT 5y ago

You are right. Inflation is usually computed by tracking the price of a "basket of goods". But this only makes sense in the short term and doesn't account for profound societal changes that technology, ideology, etc. brings to that basket. Consider this quote by Agatha Christie (1890-1976): I never thought I would be so poor as to not have live-in staff, or so Rich as to have a car.

distortedsignal 5y ago

I think you're referring to the CPI (https://en.wikipedia.org/wiki/Consumer_price_index https://en.wikipedia.org/wiki/Consumer_price_index), which, as I understand it, is a pretty hotly contested tool in econ/business circles today. If you want to check out the raw data for the CPI that the US Federal Reserve uses, check out https://fred.stlouisfed.org/ https://fred.stlouisfed.org/ - though I couldn't begin to recommend how to navigate that site.

mandevil 5y ago

Two points on the market basket mechanism for measuring inflation: One is that I think lots of people over-focus on specific sectors: sure houses and college education have gotten more expensive, but clothes, travel and computers have gotten much cheaper. Most of the complaints about "hidden inflation" that I've seen are basically ways of saying 'if you only look at the things that have grown much faster than the inflation average, then it looks like inflation is much greater than average.' Now the question of 'hedonic adjustments' (how do you account for the problem that no amount of 1970 money could buy you an iPhone, or a car as safe and reliable as any car made in 2021) is a tricky one. As I recall from my macro class <mumble mumble> years ago, economists basically introduce fudge factors to account for that. I recall some speculation that the fudge factors in the health care sector (of the US) were systematically wrong, because the population isn't actually getting healthy or living longer as those numbers would suggest.

ndbfjd 5y ago
I over-focus on those sectors because the proportion of my budget that is spent on clothes, travel, computers, iPhones, etc. is a small fraction of that spent on housing, college education, and healthcare. I'm not interested in hearing the CPI tell me how many fewer televisions I can buy this year due to inflation when those other sectors dominate my spending.
- pwinnski 5y ago
  It seems self-evident that the anything for which the cost has gone up will take up a greater proportion of your budget than anything for which the cost has gone down, no matter what the things are. I, for one, own a house and am not currently paying for anyone's college education, so the proportion of my budget going to food and clothing is more relevant to me. Should I say that I'm not interested in hearing people tell me how many fewer students I can send to college when I don't have any students to send? CPI items were picked precisely because they apply to everyone. Raises in housing cost renters more, but increase my net worth as an owner, so it's left out of the CPI. Health care costs in the US are ridiculous, but they're also widely disparate depending on more factors than can be accounted for in a simple measurement like CPI.

lovecg 5y ago

Cost of some these things you mentioned definitely went up by a lot and is not fully explained by inflation. A good blog post on the topic: https://slatestarcodex.com/2017/02/09/considerations-on-cost-disease/ https://slatestarcodex.com/2017/02/09/considerations-on-cost...