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I’m not an economist, but it’s hard to shake the feeling that the CPI is gamed somehow, or at least the official government numbers do not reflect the bubble of

I’m not an economist, but it’s hard to shake the feeling that the CPI is gamed somehow, or at least the official government numbers do not reflect the bubble of the US I live in. My friends and family are seeing record wages and investment growth, but when my generation cohort looks at housing and all the numbers there are proportionally even higher, and people are selling 3 year old cars for nearly the nominal price they paid for it 3 years ago.

hogFeast 5y ago
There was an article the other week from Canada about their CPI (I can't find it right now). Their CPI calculation was using prices that were half those available in stores (butter was one product, there are large variations in prices for some primary products in Canada because of producer's co-operatives particularly in dairy), and used sizes for some products that haven't existed for decades. CPI calculations are very tricky. Deflation in telecoms, for example, has been very understated because how do you compare a data plan with a voice plan (in the UK, they had to adjust two decades of CPI numbers because of this calculation error). Imo, we place far too much reliance on CPI which is, after all, only one measure of inflation. Everyone seems to believe that prices are rising faster than CPI, and they would probably be right (I am in the UK, food prices in Canada particularly are...out of this world...particularly for meat, which seems to cost at least 3x the price here).
- clavicat 5y ago
  Is [this](https://www.thestar.com/business/2021/10/23/experts-say-statcan-doesnt-capture-the-high-food-prices-we-see-in-stores-and-it-could-be-because-the-big-grocers-supply-the-data.html https://www.thestar.com/business/2021/10/23/experts-say-stat...) the article?
  - hogFeast 5y ago
    Yes.
    - b112 5y ago
      So, two things. First? I think this is an ad. Newspapers are paid for placement articles like this all of the time. Now, how much oversight is placed upon such ads-articles, depends upon the publication. The Star is well respected, so I suspect there's some strong oversight on opt-ads by them. EG "Please write about us", more than "Here's an article we've written for you." However, I'd be surprised if some cash didn't change hands. Second? This doesn't mean the premise is wrong. Part of the problem is how vast Canada is. Local production in Canada, crossing 4+ timezones and 10000km, is going to result in local shortages of products, and thus, local price spikes in produces. For example, if you have a local butter shortage one year, shipping from 5k away will raise the price. Again, my above comments aren't meant to debunk this article, just provide some additional data. Oh, also.. pricing is indeed different in the UK and Canada. I visited... 5? years ago, during a particularly rain free, heat wave summer. Was nice, btw. :) But during my visit I did see those massive pricing differences in some things. Of course, UK pricing for wood and fuel was outrageous for me (just things I noticed, and these are things plentiful in Canada). But you're right about market controls in Canada, which are designed to ensure supply, and keep farmers in a profitable state. The US, for example, does this in a different manner, for example, they don't limit production, they buy excess. On the dairy side for example, they buy excess milk and make "government cheese", which can be stored longer than milk (years), and is often given to the poor.
billylindeman 5y ago
CPI is almost certainly gamed. http://www.shadowstats.com/alternate_data/inflation-charts http://www.shadowstats.com/alternate_data/inflation-charts
- fddhjjj 5y ago
  Shadows stats has faced some criticism https://econbrowser.com/archives/2008/09/shadowstats_deb https://econbrowser.com/archives/2008/09/shadowstats_deb Some wags have pointed out the price has been constant for many years https://web.archive.org/web/20080512223437/http://www.shadowstats.com/subscriptions https://web.archive.org/web/20080512223437/http://www.shadow... The billion prices project independently collects prices and matches CPI well https://www.businessinsider.com/million-prices-project-vs-the-cpi-2012-3 https://www.businessinsider.com/million-prices-project-vs-th... Note that the inflation stats in Argentina *were* manipulated and official numbers differed from billion prices. https://en.wikipedia.org/wiki/MIT_Billion_Prices_project https://en.wikipedia.org/wiki/MIT_Billion_Prices_project
- Robotbeat 5y ago
  Is it? Can’t game it much or for long without being obvious because it’s compounding. Let’s say inflation is understated by 4% absolute per year. Over 40 years, that’s a factor of 4. https://inflationdata.com/articles/inflation-adjusted-prices/inflation-adjusted-gasoline-prices/ https://inflationdata.com/articles/inflation-adjusted-prices... Is the fuel cost per mile traveled 4 times higher than it was in 1981? No. Fuel prices adjusted for CPI are about identical with what they were in 1981 ($3.80/gallon): https://inflationdata.com/articles/inflation-adjusted-prices/inflation-adjusted-gasoline-prices/ https://inflationdata.com/articles/inflation-adjusted-prices... And fuel efficiency has improved by about 40% in that time: https://www.epa.gov/automotive-trends/highlights-automotive-trends-report https://www.epa.gov/automotive-trends/highlights-automotive-... (Even as vehicle reliability and safety and comfort have also gone up.)
  - clavicat 5y ago
    Fuel would be hard to game. It’s just fuel. Other components are trickier to calculate, like aggregate food prices or things involving hedonic regression. If there is gaming, you’d have to look at the tricky parts.
skybrian 5y ago
Keep in mind that CPI is an average based on what people actually pay, which often lags market rate. For housing, you might not pay market rate due to having bought a house long ago, or rent control, or some other way of getting a sweetheart deal.
- hammock 5y ago
  Housing is not in CPI. They use "owners' equivalent rent" which is a subjective (cooked) metric.
  - yokem55 5y ago
    So what housing cost metric should be looked at? The cost for a retiree living in their paid off home? The mortgage payment for brand new homeowner with minimal down? The cost to split an apartment for 2 people? What objective measure should be used?
    - human 5y ago
      CPI will never been perfect. They could even break it down into 3 categories: 1. Poor man’s CPI: ramen, rent & public transit 2. Middle class’s CPI: house, beef & cars 3. Rich man’s CPI: penthouse, luxury goods & sports teams
    - asdff 5y ago
      All of them? The government has this data already it just needs to be aggregated by someone motivated.
      - gruez 5y ago
        How do you combine them into one number, in a way that isn't "cooked"? Proposing we mash up all data ever into one figure, without detailing how, is useless
        asdff 5y ago
cronix 5y ago
If they used the real inflation numbers, this problem would be even more astronomical than it is: https://crsreports.congress.gov/product/pdf/IF/IF10522 https://crsreports.congress.gov/product/pdf/IF/IF10522 because > Mandatory expenditures, such as Social Security, Medicare, and the Supplemental Nutrition Assistance Program account for about 65% of the budget. The budget is about 6 Trillion US dollars (FY22). Take 65% of 6 Trillion and start multiplying it by CPI and you'll see why it's in their best interest to understate it, and understate it greatly. If it were calculated higher, they'd have to borrow more than the $1.9 Trillion that they already are. To pay for a single year. https://www.thebalance.com/u-s-federal-budget-breakdown-3305789 https://www.thebalance.com/u-s-federal-budget-breakdown-3305... If you look at the debt chart, you'll notice it basically starts growing, and growing exponentially, around 1970, when Nixon took the US off the gold standard and going to a fiat currency with no real backing other than the gov'ts word, and the people believing in it. That's waning. https://fred.stlouisfed.org/series/GFDEBTN/ https://fred.stlouisfed.org/series/GFDEBTN/
rtoway 5y ago
Housing in your area might get vastly more expensive, but housing somewhere else might not see the same price increase. The CPI is for the entire country

hogFeast 5y ago

There was an article the other week from Canada about their CPI (I can't find it right now). Their CPI calculation was using prices that were half those available in stores (butter was one product, there are large variations in prices for some primary products in Canada because of producer's co-operatives particularly in dairy), and used sizes for some products that haven't existed for decades. CPI calculations are very tricky. Deflation in telecoms, for example, has been very understated because how do you compare a data plan with a voice plan (in the UK, they had to adjust two decades of CPI numbers because of this calculation error). Imo, we place far too much reliance on CPI which is, after all, only one measure of inflation. Everyone seems to believe that prices are rising faster than CPI, and they would probably be right (I am in the UK, food prices in Canada particularly are...out of this world...particularly for meat, which seems to cost at least 3x the price here).

clavicat 5y ago
Is [this](https://www.thestar.com/business/2021/10/23/experts-say-statcan-doesnt-capture-the-high-food-prices-we-see-in-stores-and-it-could-be-because-the-big-grocers-supply-the-data.html https://www.thestar.com/business/2021/10/23/experts-say-stat...) the article?
- hogFeast 5y ago
  Yes.
  - b112 5y ago
    So, two things. First? I think this is an ad. Newspapers are paid for placement articles like this all of the time. Now, how much oversight is placed upon such ads-articles, depends upon the publication. The Star is well respected, so I suspect there's some strong oversight on opt-ads by them. EG "Please write about us", more than "Here's an article we've written for you." However, I'd be surprised if some cash didn't change hands. Second? This doesn't mean the premise is wrong. Part of the problem is how vast Canada is. Local production in Canada, crossing 4+ timezones and 10000km, is going to result in local shortages of products, and thus, local price spikes in produces. For example, if you have a local butter shortage one year, shipping from 5k away will raise the price. Again, my above comments aren't meant to debunk this article, just provide some additional data. Oh, also.. pricing is indeed different in the UK and Canada. I visited... 5? years ago, during a particularly rain free, heat wave summer. Was nice, btw. :) But during my visit I did see those massive pricing differences in some things. Of course, UK pricing for wood and fuel was outrageous for me (just things I noticed, and these are things plentiful in Canada). But you're right about market controls in Canada, which are designed to ensure supply, and keep farmers in a profitable state. The US, for example, does this in a different manner, for example, they don't limit production, they buy excess. On the dairy side for example, they buy excess milk and make "government cheese", which can be stored longer than milk (years), and is often given to the poor.

billylindeman 5y ago

CPI is almost certainly gamed. http://www.shadowstats.com/alternate_data/inflation-charts http://www.shadowstats.com/alternate_data/inflation-charts

fddhjjj 5y ago
Shadows stats has faced some criticism https://econbrowser.com/archives/2008/09/shadowstats_deb https://econbrowser.com/archives/2008/09/shadowstats_deb Some wags have pointed out the price has been constant for many years https://web.archive.org/web/20080512223437/http://www.shadowstats.com/subscriptions https://web.archive.org/web/20080512223437/http://www.shadow... The billion prices project independently collects prices and matches CPI well https://www.businessinsider.com/million-prices-project-vs-the-cpi-2012-3 https://www.businessinsider.com/million-prices-project-vs-th... Note that the inflation stats in Argentina *were* manipulated and official numbers differed from billion prices. https://en.wikipedia.org/wiki/MIT_Billion_Prices_project https://en.wikipedia.org/wiki/MIT_Billion_Prices_project
Robotbeat 5y ago
Is it? Can’t game it much or for long without being obvious because it’s compounding. Let’s say inflation is understated by 4% absolute per year. Over 40 years, that’s a factor of 4. https://inflationdata.com/articles/inflation-adjusted-prices/inflation-adjusted-gasoline-prices/ https://inflationdata.com/articles/inflation-adjusted-prices... Is the fuel cost per mile traveled 4 times higher than it was in 1981? No. Fuel prices adjusted for CPI are about identical with what they were in 1981 ($3.80/gallon): https://inflationdata.com/articles/inflation-adjusted-prices/inflation-adjusted-gasoline-prices/ https://inflationdata.com/articles/inflation-adjusted-prices... And fuel efficiency has improved by about 40% in that time: https://www.epa.gov/automotive-trends/highlights-automotive-trends-report https://www.epa.gov/automotive-trends/highlights-automotive-... (Even as vehicle reliability and safety and comfort have also gone up.)
- clavicat 5y ago
  Fuel would be hard to game. It’s just fuel. Other components are trickier to calculate, like aggregate food prices or things involving hedonic regression. If there is gaming, you’d have to look at the tricky parts.

skybrian 5y ago

Keep in mind that CPI is an average based on what people actually pay, which often lags market rate. For housing, you might not pay market rate due to having bought a house long ago, or rent control, or some other way of getting a sweetheart deal.

hammock 5y ago
Housing is not in CPI. They use "owners' equivalent rent" which is a subjective (cooked) metric.
- yokem55 5y ago
  So what housing cost metric should be looked at? The cost for a retiree living in their paid off home? The mortgage payment for brand new homeowner with minimal down? The cost to split an apartment for 2 people? What objective measure should be used?
  - human 5y ago
    CPI will never been perfect. They could even break it down into 3 categories: 1. Poor man’s CPI: ramen, rent & public transit 2. Middle class’s CPI: house, beef & cars 3. Rich man’s CPI: penthouse, luxury goods & sports teams
  - asdff 5y ago
    All of them? The government has this data already it just needs to be aggregated by someone motivated.
    - gruez 5y ago
      How do you combine them into one number, in a way that isn't "cooked"? Proposing we mash up all data ever into one figure, without detailing how, is useless
      - asdff 5y ago

cronix 5y ago

If they used the real inflation numbers, this problem would be even more astronomical than it is: https://crsreports.congress.gov/product/pdf/IF/IF10522 https://crsreports.congress.gov/product/pdf/IF/IF10522 because > Mandatory expenditures, such as Social Security, Medicare, and the Supplemental Nutrition Assistance Program account for about 65% of the budget. The budget is about 6 Trillion US dollars (FY22). Take 65% of 6 Trillion and start multiplying it by CPI and you'll see why it's in their best interest to understate it, and understate it greatly. If it were calculated higher, they'd have to borrow more than the $1.9 Trillion that they already are. To pay for a single year. https://www.thebalance.com/u-s-federal-budget-breakdown-3305789 https://www.thebalance.com/u-s-federal-budget-breakdown-3305... If you look at the debt chart, you'll notice it basically starts growing, and growing exponentially, around 1970, when Nixon took the US off the gold standard and going to a fiat currency with no real backing other than the gov'ts word, and the people believing in it. That's waning. https://fred.stlouisfed.org/series/GFDEBTN/ https://fred.stlouisfed.org/series/GFDEBTN/

rtoway 5y ago

Housing in your area might get vastly more expensive, but housing somewhere else might not see the same price increase. The CPI is for the entire country