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The effective purpose of CPI is to be the rationale for credit and monetary expansion. Without that, the housing and stock markets would be left to drift freely
by yobbo 5y ago
The effective purpose of CPI is to be the rationale for credit and monetary expansion. Without that, the housing and stock markets would be left to drift freely.
The exact mechanisms behind something like CPI are probably secret to prevent manipulation by outsiders, but I also suspect it's difficult to even confirm that.
- nradov 5y agoNonsense. The BLS is completely transparent about the exact mechanisms behind the CPI. https://www.bls.gov/cpi/methods-overview.htm https://www.bls.gov/cpi/methods-overview.htm
- missedthecue 5y agoThey're transparent about the mechanisms in general, but plenty of the mechanisms are arbitrary by nature. The article discusses hedonic adjustment for instance. That isn't a scientific or mathematical change. That's people at the fed making personal judgement calls about how good the iphone 12 is vs the iphone 11, and adjusting the price increases on the basis of that personal judgement call. If you open the link you shared, you can see they make hedonic adjustments for men's suits, the first item in the list. Are suits today really much higher quality than they were 10 years ago, necessitating a decrease in the actual price inflation of a man's suit? The fed thinks so, but they don't share the details of why or how much hedonic adjustment men's suits deserve.
- nradov 5y agoYou're over simplifying it. The hedonic adjustments involve very little personal judgment. https://www.bls.gov/cpi/quality-adjustment/questions-and-answers.htm https://www.bls.gov/cpi/quality-adjustment/questions-and-ans...
- yobbo 5y agoThe published numbers are opaque. There is no way of confirming what mechanisms are used since the data is secret. See the paragraphs on data confidentiality.