4 ms·

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

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

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