7 ms·

Real inflation is very hard to measure, because it's not only prices that change - more often the product loses quality while price stays the same. Either way,

by Geee 5y ago

Real inflation is very hard to measure, because it's not only prices that change - more often the product loses quality while price stays the same. Either way, you are getting less for what you pay for, but only the price change is measured as inflation. In addition, people switch over to cheaper alternatives when products get more expensive - meat is replaced with vegetables for example. This changes the average basket of goods, and again doesn't affect inflation. There are also government programs and subsidies which are designed to alter the basket of goods or the prices of those goods. Taking everything into account it seems that real inflation is higher than reported, and it might not be possible to measure it correctly by just tracking prices.

RobRivera 5y ago
yup, a great starting point would be commodity based. Even then those can be controlled, ie. public transport cost can be subsidized to keep that price point low for consumers, but subsidy is indirectly reflected by increased taxes...
deleted 5y ago
[deleted]
rhacker 5y ago
You measure it with things that are identical. Futures markets are a good example, steel, lumber, cattle, etc...
- voakbasda 5y ago
  As someone that raises grass-fed beef, I can tell you with certainty that not all cattle are identical. Commodity prices give you commodity quality.
- cdiddy2 5y ago
  even lumber isnt identical. old lumber was made from older trees that were generally more dense and a harder wood. http://www.historicdoors.co.uk/blog/old-growth-wood-better-new-growth-wood/ http://www.historicdoors.co.uk/blog/old-growth-wood-better-n...
trts 5y ago
Many things have also gained in quality substantially, such as vehicles, electronics, and durable goods. A new car not only lasts longer and requires less maintenance, is more fuel efficient, safer, but is often loaded with amenities like navigation, entertainment, self-driving. How do you make an equivalency to something from the 90s? Meanwhile digital content and communication services have become free and ubiquitous. Free goods don't get priced at all. This means some categories may have lower than headline inflation. Can you imagine what a pre-internet era company would have been able to charge for an Amazon Echo style device that played any song you asked it to, controlled your home and estimated your drive time? Amazon practically gives them away for free. You don't even have to pay for Prime. Moreover, the healthcare plan that many people's employers buy on their behalf has accounted for a growing portion of overall compensation. Healthcare in US is so distorted that it barely has a measurable signal for price/service, and yet in the US it consumes 1/6 of GDP. Since many people's employers pay for this, it doesn't factor into the consumer price index. College tuition? It's up 2-5X in the past 20 years. Fine, we can measure the cost of tuition increases, but does it take into account the interest payments on the student loan debt that, for some, exceed the original loan by a factor of 5-10X? (I don't actually know). This is just to agree that measuring inflation is really tricky, especially in an age of accelerating technological advancement and institutional failure.
- missedthecue 5y ago
  The music point is very true. Used to be that a CD had 10 songs on it and sold for between ten and twenty dollars. Now for $10 a month for Spotify or YouTube music you can stream literally thousands of songs a month. Another one is mobile phone service. Does any remember pay-per-text plans? My phone bill has been more or less than same for a decade, but I now have unlimited call, text, and data.
- machinhermitter 5y ago
  Cars are really the best example but hard to tell because the change over time is so not so sudden. My first car was 1988 Pontiac Sunbird from my parents. Inflation adjusted price is 26,000 in 2021 dollars. I had one of the cooler cars in high school. If you look up a picture of it now, it is such a piece of shit I literally would not get in one. Everyone complains about education cost but I take whatever classes I want online for free from some of the best Universities to have ever existed. There is always someone that says this obviously ludicrously over simplistic statement that inflation is money printing and then cherry picks data that backs that up. Even though it is just as easy to cherry pick data that shows that point is stupid. We can't measure "inflation" in the general sense because we have no definition of what that even really means.
human 5y ago
Loss of quality is totally missed in the CPI. Take this example. A restaurant hires rookie waiters because they can’t pay the more experienced staff. Your meal still costs $50. But is it worth this same? Not at all.
- sellyme 5y ago
  Where I live it's been about a decade since waiters were anything except glorified conveyer belts that serve no purpose except to move my food from the kitchen to my table, and if anything that has drastically increased the quality of my meals. I'm not really sure what value an experienced waiter would provide.
  - lotsofpulp 5y ago
    I prefer restaurants where I pick up the food at the counter and bus my own dishes. Saves me time and hopefully some of the money saved by not having waiters goes towards reducing prices, better quality ingredients, and better paid cooks.
  - human 5y ago
    I recommend you try some well-rated restaurants where the waiter explains the food carefully, tells you where it’s sourced and with which wine to pair it all. Maybe that’s not your thing but I’ve been to many restaurants lately where the staff doesn’t even know the menu.
    - sellyme 5y ago
      > where the waiter explains the food carefully, tells you where it’s sourced and with which wine to pair it all. These are all functions that can be served equally well by an inanimate object. Why pay someone $25/hr every night to say where a dish was sourced when you can just add a couple of lines to the description of that item on your website? I'd definitely have a much better experience if that money was spent on better ingredients, or just not spent and reducing the cost of my meal. > Maybe that’s not your thing There's no maybe about it, but I don't think it affects my point.
didntknowya 5y ago
yes I've seen a lot of groceries item stay the same price but in smaller packaging
- greenburger 5y ago
  NPR recently covered [0] this phenomena which is also know as 'shrinkflation' [0] https://www.npr.org/sections/money/2021/07/06/1012409112/beware-of-shrinkflation-inflations-devious-cousin https://www.npr.org/sections/money/2021/07/06/1012409112/bew...

by Geee 5y ago

RobRivera 5y ago

yup, a great starting point would be commodity based. Even then those can be controlled, ie. public transport cost can be subsidized to keep that price point low for consumers, but subsidy is indirectly reflected by increased taxes...

deleted 5y ago

[deleted]

rhacker 5y ago

You measure it with things that are identical. Futures markets are a good example, steel, lumber, cattle, etc...

voakbasda 5y ago
As someone that raises grass-fed beef, I can tell you with certainty that not all cattle are identical. Commodity prices give you commodity quality.
cdiddy2 5y ago
even lumber isnt identical. old lumber was made from older trees that were generally more dense and a harder wood. http://www.historicdoors.co.uk/blog/old-growth-wood-better-new-growth-wood/ http://www.historicdoors.co.uk/blog/old-growth-wood-better-n...

trts 5y ago

Many things have also gained in quality substantially, such as vehicles, electronics, and durable goods. A new car not only lasts longer and requires less maintenance, is more fuel efficient, safer, but is often loaded with amenities like navigation, entertainment, self-driving. How do you make an equivalency to something from the 90s? Meanwhile digital content and communication services have become free and ubiquitous. Free goods don't get priced at all. This means some categories may have lower than headline inflation. Can you imagine what a pre-internet era company would have been able to charge for an Amazon Echo style device that played any song you asked it to, controlled your home and estimated your drive time? Amazon practically gives them away for free. You don't even have to pay for Prime. Moreover, the healthcare plan that many people's employers buy on their behalf has accounted for a growing portion of overall compensation. Healthcare in US is so distorted that it barely has a measurable signal for price/service, and yet in the US it consumes 1/6 of GDP. Since many people's employers pay for this, it doesn't factor into the consumer price index. College tuition? It's up 2-5X in the past 20 years. Fine, we can measure the cost of tuition increases, but does it take into account the interest payments on the student loan debt that, for some, exceed the original loan by a factor of 5-10X? (I don't actually know). This is just to agree that measuring inflation is really tricky, especially in an age of accelerating technological advancement and institutional failure.

missedthecue 5y ago
The music point is very true. Used to be that a CD had 10 songs on it and sold for between ten and twenty dollars. Now for $10 a month for Spotify or YouTube music you can stream literally thousands of songs a month. Another one is mobile phone service. Does any remember pay-per-text plans? My phone bill has been more or less than same for a decade, but I now have unlimited call, text, and data.
machinhermitter 5y ago
Cars are really the best example but hard to tell because the change over time is so not so sudden. My first car was 1988 Pontiac Sunbird from my parents. Inflation adjusted price is 26,000 in 2021 dollars. I had one of the cooler cars in high school. If you look up a picture of it now, it is such a piece of shit I literally would not get in one. Everyone complains about education cost but I take whatever classes I want online for free from some of the best Universities to have ever existed. There is always someone that says this obviously ludicrously over simplistic statement that inflation is money printing and then cherry picks data that backs that up. Even though it is just as easy to cherry pick data that shows that point is stupid. We can't measure "inflation" in the general sense because we have no definition of what that even really means.

human 5y ago

Loss of quality is totally missed in the CPI. Take this example. A restaurant hires rookie waiters because they can’t pay the more experienced staff. Your meal still costs $50. But is it worth this same? Not at all.

sellyme 5y ago
Where I live it's been about a decade since waiters were anything except glorified conveyer belts that serve no purpose except to move my food from the kitchen to my table, and if anything that has drastically increased the quality of my meals. I'm not really sure what value an experienced waiter would provide.
- lotsofpulp 5y ago
  I prefer restaurants where I pick up the food at the counter and bus my own dishes. Saves me time and hopefully some of the money saved by not having waiters goes towards reducing prices, better quality ingredients, and better paid cooks.
- human 5y ago
  I recommend you try some well-rated restaurants where the waiter explains the food carefully, tells you where it’s sourced and with which wine to pair it all. Maybe that’s not your thing but I’ve been to many restaurants lately where the staff doesn’t even know the menu.
  - sellyme 5y ago
    > where the waiter explains the food carefully, tells you where it’s sourced and with which wine to pair it all. These are all functions that can be served equally well by an inanimate object. Why pay someone $25/hr every night to say where a dish was sourced when you can just add a couple of lines to the description of that item on your website? I'd definitely have a much better experience if that money was spent on better ingredients, or just not spent and reducing the cost of my meal. > Maybe that’s not your thing There's no maybe about it, but I don't think it affects my point.

didntknowya 5y ago

yes I've seen a lot of groceries item stay the same price but in smaller packaging

greenburger 5y ago
NPR recently covered [0] this phenomena which is also know as 'shrinkflation' [0] https://www.npr.org/sections/money/2021/07/06/1012409112/beware-of-shrinkflation-inflations-devious-cousin https://www.npr.org/sections/money/2021/07/06/1012409112/bew...