7 ms·

Inflation measures aren’t stupid, they measure this too. If you sell a 15oz box for the same price you sold a 16oz box that will show up in the inflation number

by ls612 5y ago

Inflation measures aren’t stupid, they measure this too. If you sell a 15oz box for the same price you sold a 16oz box that will show up in the inflation numbers

amrcnimgrnt 5y ago
They kinda measure it, through heuristics. But it's like the heuristics for the price of a house (which is considered an investment and not included directly in CPI): you can't capture it very well. For example, lets say a chocolate bar contains 80% chocolate and 20% food wax. A year later it contains 70% chocolate and 30% food wax. No inflation measure in the world accurately measures that. You can't measure for it because there's too many judgement calls if you do. Also, there are goods/services whose quantities are not well measured. Another commenter wrote about his soccer league lowering the amount of pitch time a "session" takes while increasing the players - both diminishing his play time. That's not getting captured at all.
- thaumasiotes 5y ago
  > say a chocolate bar contains 80% chocolate and 20% food wax. A year later it contains 70% chocolate and 30% food wax. No inflation measure in the world accurately measures that. You can't measure for it because there's too many judgement calls if you do. I think the bigger problem is that it's difficult to tell when this happens. There are judgment calls you need to make to adjust for this, but it's not an intractable problem. Official data sources have to make more subjective judgment calls than this constantly.
  - amrcnimgrnt 5y ago
    This is a huge problem, thank you for writing it down. Grab a Hershey chocolate bar. How much chocolate is in there? Who knows?
    - def_true_false 5y ago
      It's somewhat easier to measure if you ignore brands and look at commodity prices instead. Whole chicken (price per kg) instead of Big Mac, 100% cocoa instead of some random chocolate bar, etc. Of course, for many (most?) people, that will be even less relevant than the current consumer basket.
      - amrcnimgrnt 5y ago
        But that skips all the processing steps whose price can increase before it makes it to my plate. For example, tracking bulk beef prices won't capture the labor costs of the would-be-butcher COSTCO can't hire.
        def_true_false 5y ago
        I don't see why not? It just has to be more specific -- chicken breast requires processing, but one is pretty much like another, unlike say, some morning cereal from TV ads. Actually that might be a good heuristic, I don't remember the last time I bought food that even has ads. The store itself does have some ads that feature some of the items, I guess.
- canadianfella 5y ago
  Food wax? What kind of chocolate are you buying?
- NavinF 5y ago
  > lets say a chocolate bar contains 80% chocolate and 20% food wax. A year later it contains 70% chocolate and 30% food wax Is there any evidence that this happens often enough to affect CPI? btw in the few cases where I've seen the concentration of tasty ingredients go down, it was clearly done so they could advertise the new version as "low-calorie" or "healthy". Consumers get what they demand.
  - KozmoNau7 5y ago
    The most blatant example I've seen of this was canned coconut milk. The standard product was 70% coconut and 30% water, the "light" and "calorie reduced" version right next to it was literally just 50/50 coconut/water, at the same price. Why yes, please sell me water at coconut prices! /s
  - yodelshady 5y ago
    > Is there any evidence that this happens often enough to affect CPI? Systematised evidence? No, but that's the complaint. It's a reasonable enough idea, so it's reasonable to expect a professional, funded body to do the accounting.
  - simonh 5y ago
    There are several known flaws in CPI calculation like this, but not all of the ones being touted in this discussion: First of all CPI only tracks basic commodity goods like bread, milk, coffee, etc as a proxy for the basic cost of living. It doesn't track complex or premium products like frozen burritos. It tracks the quantity of these products people actually buy and their cost per quantity, so reductions in the size of chocolate bars or amount of cereal in packets will not fool the CPI. It does not take into account the quality of these products. If people start buying less premium coffee and more store brand coffee, or if manufacturers start putting less cocoa and more fat in chocolate this will not show up in the CPI. The CPI is just one statistic, and should be considered alongside other measures such as consumer buying power and cost of living calculations.
    - amrcnimgrnt 5y ago
      Thank you for your comment. I have a follow up question, if you don't mind. I'm not an expert, so is my comment mostly correct? I only brought up CPI to illustrate an example of a widely purchased thing not being included in that particular metric. The rest of the comment, I think, was agnostic to the particular metric used. The point being that what the economic situation an individual or family faces is far more complex than any one metric and the people of a country can become less well off than the metrics reflect.
- mellavora 5y ago
  Let's say a chocolate bar is shaped like a row of mountains. And then in 2016, some of the mountains are removed. And/or made shorter. Also not captured in inflation, though the press seemed to pick up on it (hint: toblerone)
  - simonh 5y ago
    That would be picked up because the weight of the bar would be less. CPI is susceptible to changes in the quality of products but not their quantity which is accounted for.
- IfOnlyYouKnew 5y ago
  For chocolate, I’m fairly certain the consumer basket specifies a specific chocolate content. It’s the one product where that’s a widely known attribute. Well, maybe juices, as well.
  - amrcnimgrnt 5y ago
    Sure, mine was an example of a product I despise that Americans cherish (Hershey's) to point out the difficulty in getting a good measure of inflation. Whether or not chocolate, in particular, is tracked more closely is not my point. My point is that quality, not just quantity, is very difficult to track. I could have said that lawnmowers' decks are getting thinner using the same steel, but that more removed for most people.
- LightG 5y ago
  -- (which is considered an investment and not included directly in CPI That's really weird ... because it's an investment, yes, but not for the renter paying the increasing price. I don't understand how they allow for that.
  - amrcnimgrnt 5y ago
    There are (very) good arguments for it, too long for me to type right now (HN search it, they're there). But I disagree with the arguments, I think it should be included. That being said I think there is also a measure called "asset inflation" that I think tries to measure things like the cost of investment goods where you'd find houses included. The idea being that inflation is a tide that rises all costs, including stocks. You can't really say the market or a security is doing well or not if the underlying unit of measure (the dollar) is being debased.
    - mgkimsal 5y ago
      AFAIR, "cost of housing" is something that is included as a factor in CPI. From what I recall, renters are surveyed for their actual rents, and homeowners are asked to estimate what their house might rent for, and those numbers are taken in to account in CPI. It's included, just perhaps not as much as might be expected by some folks. This was my understanding from a recent episode of https://moneyfortherestofus.com/episodes/ https://moneyfortherestofus.com/episodes/ (not affiliated, just a regular listener).
      - imtringued 5y ago
        Housing costs are dragging up the CPI inflation rate while consumer goods are dragging it down. I don't know why people keep voicing this complaint. CPI is what consumers spend their money on, not what your bank spends money on. When people keep taking on longer and longer mortgages their cost per month stays the same but the cost of the house itself is going up. Spending hasn't increased as quickly as the price of the house, leverage has.
      - amrcnimgrnt 5y ago
function_seven 5y ago
For straight-up size changes, sure. Here's one that got me recently. The El Monterey frozen burrito, Steak & 3-Cheese version. It used to be just steak and cheese as the filling. And some chilies. https://i.imgur.com/os3RK8y.png https://i.imgur.com/os3RK8y.png They swapped that out for one with rice included. It tastes worse, has less protein, almost certainly less cheese, but still sells for the same price. https://i.imgur.com/hgGTNVI.png https://i.imgur.com/hgGTNVI.png No mention on their website of this at all. If it were an improvement, I'd expect the marketing department to tout it. But it's not. Instead of raising the frozen burrito price from $1 to $1.19 or whatever, they replaced expensive ingredients with rice. It's still the same SKU, weighs the same, and sells for the same price. I'm sure the CPI impact is 0.
- shoemakersteve 5y ago
  I've noticed over the last couple of years that frozen meals, especially pasta or anything with sauce, has had their sauce slowly replaced with water. Now there's usually not even enough sauce to cover all the noodles. I went through a phase where I basically wasn't cooking ever so I ate a lot of them. I'm actually thankful though, the fact that they became pretty gross made me finally decide that I needed to start cooking again.
snarf21 5y ago
Because we use inflation (and unemployment) numbers as bellwethers and markers for policy, we have changed how they are calculated over time. If you look at the formulas used in the 70s, 80s and now you'll find that they are not the same. As Goodhart's Law says, “When a measure becomes a target, it ceases to be a good measure.” Note: we do this with all kinds of statistics, just look at police reporting on felonies. Too many? Just charge misdemeanors for the least violent crimes and all of a sudden you have reduced violent felonies by 20% in just one year!!!! We've been having inflation for years but we just don't measure it in a way to see it. Take average household spend on healthcare, education, housing, food in 2010 and in 2020 and there will it is pretty hard to argue inflation wasn't already here. Now, we've dumped trillions to prop up the markets and inflation is starting to "officially" appear despite the new calculations. What's worse, is that the trillions aren't even being used to increase GDP or build infrastructure for future growth. It is only gone to create even bigger asset bubbles in housing and equities. I don't think the Fed can unroll this money and actually I think they have decided that they won't even bother to try. We are living in a monetary experiment and we'll find out in the next few years if MMT can really save us or not.
- imtringued 5y ago
  We are going to have another 10 boring years with low inflation and low interest rates because people are getting old and inequality going up. The only people who think that inflation is higher than the official statistics don't know the impact of inflation. Most of the time inflation is reality giving you a punch in the face. If inflation really happened between 2010 and 2020 where is the punch? If anything I feel we spent that time running away from reality and no, the problem isn't whatever the central bank is doing because it is acting as the last line of defense. Most of the time it is responding to political failures, which is why central banks are independent in the first place. If the central bank were democratized it would be unable to perform its function as people will abuse it to refuse reality even more. Just read up on what Erdogan did.
  - amrcnimgrnt 5y ago
    "If inflation really happened between 2010 and 2020 where is the punch? " Housing Health care College Decreased quality of goods (aka, fake stuff on Amazon)
throwawayboise 5y ago
I was pretty sure that food was not included in official inflation statistics.
SilasX 5y ago
Cool. Now how do they catch reformulations of the product to have more filler or lower quality ingredients?

by ls612 5y ago

Inflation measures aren’t stupid, they measure this too. If you sell a 15oz box for the same price you sold a 16oz box that will show up in the inflation numbers

amrcnimgrnt 5y ago

They kinda measure it, through heuristics. But it's like the heuristics for the price of a house (which is considered an investment and not included directly in CPI): you can't capture it very well. For example, lets say a chocolate bar contains 80% chocolate and 20% food wax. A year later it contains 70% chocolate and 30% food wax. No inflation measure in the world accurately measures that. You can't measure for it because there's too many judgement calls if you do. Also, there are goods/services whose quantities are not well measured. Another commenter wrote about his soccer league lowering the amount of pitch time a "session" takes while increasing the players - both diminishing his play time. That's not getting captured at all.

thaumasiotes 5y ago
> say a chocolate bar contains 80% chocolate and 20% food wax. A year later it contains 70% chocolate and 30% food wax. No inflation measure in the world accurately measures that. You can't measure for it because there's too many judgement calls if you do. I think the bigger problem is that it's difficult to tell when this happens. There are judgment calls you need to make to adjust for this, but it's not an intractable problem. Official data sources have to make more subjective judgment calls than this constantly.
- amrcnimgrnt 5y ago
  This is a huge problem, thank you for writing it down. Grab a Hershey chocolate bar. How much chocolate is in there? Who knows?
  - def_true_false 5y ago
    It's somewhat easier to measure if you ignore brands and look at commodity prices instead. Whole chicken (price per kg) instead of Big Mac, 100% cocoa instead of some random chocolate bar, etc. Of course, for many (most?) people, that will be even less relevant than the current consumer basket.
    - amrcnimgrnt 5y ago
      But that skips all the processing steps whose price can increase before it makes it to my plate. For example, tracking bulk beef prices won't capture the labor costs of the would-be-butcher COSTCO can't hire.
      - def_true_false 5y ago
        I don't see why not? It just has to be more specific -- chicken breast requires processing, but one is pretty much like another, unlike say, some morning cereal from TV ads. Actually that might be a good heuristic, I don't remember the last time I bought food that even has ads. The store itself does have some ads that feature some of the items, I guess.
canadianfella 5y ago
Food wax? What kind of chocolate are you buying?
NavinF 5y ago
> lets say a chocolate bar contains 80% chocolate and 20% food wax. A year later it contains 70% chocolate and 30% food wax Is there any evidence that this happens often enough to affect CPI? btw in the few cases where I've seen the concentration of tasty ingredients go down, it was clearly done so they could advertise the new version as "low-calorie" or "healthy". Consumers get what they demand.
- KozmoNau7 5y ago
  The most blatant example I've seen of this was canned coconut milk. The standard product was 70% coconut and 30% water, the "light" and "calorie reduced" version right next to it was literally just 50/50 coconut/water, at the same price. Why yes, please sell me water at coconut prices! /s
- yodelshady 5y ago
  > Is there any evidence that this happens often enough to affect CPI? Systematised evidence? No, but that's the complaint. It's a reasonable enough idea, so it's reasonable to expect a professional, funded body to do the accounting.
- simonh 5y ago
  There are several known flaws in CPI calculation like this, but not all of the ones being touted in this discussion: First of all CPI only tracks basic commodity goods like bread, milk, coffee, etc as a proxy for the basic cost of living. It doesn't track complex or premium products like frozen burritos. It tracks the quantity of these products people actually buy and their cost per quantity, so reductions in the size of chocolate bars or amount of cereal in packets will not fool the CPI. It does not take into account the quality of these products. If people start buying less premium coffee and more store brand coffee, or if manufacturers start putting less cocoa and more fat in chocolate this will not show up in the CPI. The CPI is just one statistic, and should be considered alongside other measures such as consumer buying power and cost of living calculations.
  - amrcnimgrnt 5y ago
    Thank you for your comment. I have a follow up question, if you don't mind. I'm not an expert, so is my comment mostly correct? I only brought up CPI to illustrate an example of a widely purchased thing not being included in that particular metric. The rest of the comment, I think, was agnostic to the particular metric used. The point being that what the economic situation an individual or family faces is far more complex than any one metric and the people of a country can become less well off than the metrics reflect.
mellavora 5y ago
Let's say a chocolate bar is shaped like a row of mountains. And then in 2016, some of the mountains are removed. And/or made shorter. Also not captured in inflation, though the press seemed to pick up on it (hint: toblerone)
- simonh 5y ago
  That would be picked up because the weight of the bar would be less. CPI is susceptible to changes in the quality of products but not their quantity which is accounted for.
IfOnlyYouKnew 5y ago
For chocolate, I’m fairly certain the consumer basket specifies a specific chocolate content. It’s the one product where that’s a widely known attribute. Well, maybe juices, as well.
- amrcnimgrnt 5y ago
  Sure, mine was an example of a product I despise that Americans cherish (Hershey's) to point out the difficulty in getting a good measure of inflation. Whether or not chocolate, in particular, is tracked more closely is not my point. My point is that quality, not just quantity, is very difficult to track. I could have said that lawnmowers' decks are getting thinner using the same steel, but that more removed for most people.
LightG 5y ago
-- (which is considered an investment and not included directly in CPI That's really weird ... because it's an investment, yes, but not for the renter paying the increasing price. I don't understand how they allow for that.
- amrcnimgrnt 5y ago
  There are (very) good arguments for it, too long for me to type right now (HN search it, they're there). But I disagree with the arguments, I think it should be included. That being said I think there is also a measure called "asset inflation" that I think tries to measure things like the cost of investment goods where you'd find houses included. The idea being that inflation is a tide that rises all costs, including stocks. You can't really say the market or a security is doing well or not if the underlying unit of measure (the dollar) is being debased.
  - mgkimsal 5y ago
    AFAIR, "cost of housing" is something that is included as a factor in CPI. From what I recall, renters are surveyed for their actual rents, and homeowners are asked to estimate what their house might rent for, and those numbers are taken in to account in CPI. It's included, just perhaps not as much as might be expected by some folks. This was my understanding from a recent episode of https://moneyfortherestofus.com/episodes/ https://moneyfortherestofus.com/episodes/ (not affiliated, just a regular listener).
    - imtringued 5y ago
      Housing costs are dragging up the CPI inflation rate while consumer goods are dragging it down. I don't know why people keep voicing this complaint. CPI is what consumers spend their money on, not what your bank spends money on. When people keep taking on longer and longer mortgages their cost per month stays the same but the cost of the house itself is going up. Spending hasn't increased as quickly as the price of the house, leverage has.
    - amrcnimgrnt 5y ago

function_seven 5y ago

For straight-up size changes, sure. Here's one that got me recently. The El Monterey frozen burrito, Steak & 3-Cheese version. It used to be just steak and cheese as the filling. And some chilies. https://i.imgur.com/os3RK8y.png https://i.imgur.com/os3RK8y.png They swapped that out for one with rice included. It tastes worse, has less protein, almost certainly less cheese, but still sells for the same price. https://i.imgur.com/hgGTNVI.png https://i.imgur.com/hgGTNVI.png No mention on their website of this at all. If it were an improvement, I'd expect the marketing department to tout it. But it's not. Instead of raising the frozen burrito price from $1 to $1.19 or whatever, they replaced expensive ingredients with rice. It's still the same SKU, weighs the same, and sells for the same price. I'm sure the CPI impact is 0.

shoemakersteve 5y ago
I've noticed over the last couple of years that frozen meals, especially pasta or anything with sauce, has had their sauce slowly replaced with water. Now there's usually not even enough sauce to cover all the noodles. I went through a phase where I basically wasn't cooking ever so I ate a lot of them. I'm actually thankful though, the fact that they became pretty gross made me finally decide that I needed to start cooking again.

snarf21 5y ago

Because we use inflation (and unemployment) numbers as bellwethers and markers for policy, we have changed how they are calculated over time. If you look at the formulas used in the 70s, 80s and now you'll find that they are not the same. As Goodhart's Law says, “When a measure becomes a target, it ceases to be a good measure.” Note: we do this with all kinds of statistics, just look at police reporting on felonies. Too many? Just charge misdemeanors for the least violent crimes and all of a sudden you have reduced violent felonies by 20% in just one year!!!! We've been having inflation for years but we just don't measure it in a way to see it. Take average household spend on healthcare, education, housing, food in 2010 and in 2020 and there will it is pretty hard to argue inflation wasn't already here. Now, we've dumped trillions to prop up the markets and inflation is starting to "officially" appear despite the new calculations. What's worse, is that the trillions aren't even being used to increase GDP or build infrastructure for future growth. It is only gone to create even bigger asset bubbles in housing and equities. I don't think the Fed can unroll this money and actually I think they have decided that they won't even bother to try. We are living in a monetary experiment and we'll find out in the next few years if MMT can really save us or not.

imtringued 5y ago
We are going to have another 10 boring years with low inflation and low interest rates because people are getting old and inequality going up. The only people who think that inflation is higher than the official statistics don't know the impact of inflation. Most of the time inflation is reality giving you a punch in the face. If inflation really happened between 2010 and 2020 where is the punch? If anything I feel we spent that time running away from reality and no, the problem isn't whatever the central bank is doing because it is acting as the last line of defense. Most of the time it is responding to political failures, which is why central banks are independent in the first place. If the central bank were democratized it would be unable to perform its function as people will abuse it to refuse reality even more. Just read up on what Erdogan did.
- amrcnimgrnt 5y ago
  "If inflation really happened between 2010 and 2020 where is the punch? " Housing Health care College Decreased quality of goods (aka, fake stuff on Amazon)

throwawayboise 5y ago

I was pretty sure that food was not included in official inflation statistics.

SilasX 5y ago

Cool. Now how do they catch reformulations of the product to have more filler or lower quality ingredients?