9 ms·

The BLS has a very well-documented method [1] of measuring core consumer inflation. The basket of goods they track likely does not reflect your personal consump

by boc 5y ago

The BLS has a very well-documented method [1] of measuring core consumer inflation. The basket of goods they track likely does not reflect your personal consumption patterns. [1] https://www.bls.gov/opub/hom/cpi/ https://www.bls.gov/opub/hom/cpi/

msandford 5y ago
Core inflation excludes food and energy. So as long as you're dead, you only experience core inflation! Everyone else who is alive is exposed to core inflation and also the one that takes food and fuel into account. Perhaps that's why people don't "buy" the numbers. Because the numbers aren't representative of the reality that alive human beings experience.
- dragontamer 5y ago
  Core inflation is a different measure because food and gasoline prices vary so much. Its not about withholding information. Its about aggregating the important bits together. With a 60% rise in gasoline prices in the past year, it makes sense why you'd want to track gasoline separately from everything else. ------- If you want to just track "everything", then quote "CPI", not "core CPI" (a different number entirely).
- jdavis703 5y ago
  I don’t drive, I’m mostly on a plant-based diet, and I’ve been on 100% renewable energy for years. I’m very much alive, and also am willing to believe we’re not close to double digit inflation based on my costs. And I live in one of those high-priced metros, so I actually experienced a rent cut since everyone fled to Miami and Austin (thereby increasing prices there). Obviously your experience may be different, but remember econometrics tracks the entire economy, not just your budget.
  - vntok 5y ago
    > I’m mostly on a plant-based diet, and I’ve been on 100% renewable energy for years Do you believe that your way of living is representative of the average American's?
    - deleted 5y ago
      [deleted]
    - seoaeu 5y ago
      That's the thing, there is no one "average" American that this inflation number applies to! It aggregates over all of them, including the ones living on plant-based diets and using 100% renewable energy
    - stephencanon 5y ago
      It's exactly as representative as any other American's is. That's the nature of an average--everyone's contribution factors equally.
    - iso1631 5y ago
      The average american has 1 breast and 1 testicle. The term "Average American" tend to be used by people claiming to talk on behalf of them, without actually doing so (given that the "Average American" is as different from the "Average American" as everyone else)
      - dgfitz 5y ago
        If we’re being pedantic, less than one breast and less than one testicle. As well as less then 2 arms and less than 2 legs.
  - newbamboo 5y ago
    “ experienced a rent cut since everyone fled to Miami and Austin ” Obviously not in a California metro where the state decided to subsidize rents to compensate for preventing evictions resulting in a windfall for landlords and massive rent increases throughout the state.
    - dpe82 5y ago
      I experienced a significant rent reduction in San Francisco this year.
      - klipklop 5y ago
        Check the rent for the places that SF'ers fled to. Your rent went down because a bunch of affluent people left and opened up a bunch of units.
        dpe82 5y ago
        Right; the point is that rent did not universally increase.
- ravenstine 5y ago
  Ding ding ding! What we need is tools that help individuals plug in their budget and track how inflation affects them. These overall inflation figures are pretty much useless because they have to exclude information in order to not be too highly amplified in either direction. Creating a budget of how much I typically spend on food, gas, utilities, and such and being able to backtest that budget would be really helpful, and perhaps that data could be used to crowdsource inflation figures that are more representative of what the average person is actually experiencing.
  - alisonkisk 5y ago
    Thats a job for your bank or accounting software.
  - lottin 5y ago
    Inflation is not the same thing as cost of living. Inflation measures changes in the price level, while cost of living is the expenditure that is needed to sustain a particular standard of living.
- bee_rider 5y ago
  Which is crazy -- you could track my food intake and lack of energy expenditure to easily derive my core inflation.
- deltree7 5y ago
  Core Inflation is needed so that they can apply the right monetary policy. If you want your 'personal' inflation, they have data for that too. Fed releases all kinds of data (unemployment and monetary) and is pretty transparent. It is disingenuous of you (and contributing to the erosion of institutional trust of Federal institution) by falsely accusing them. Federal agencies aren't perfect, but at least educated people in HN should take the responsibility of giving constructive criticism based on facts rather than being brainwashed by random YouTuber/Blogger who is generally clueless about economics
  - d4mi3n 5y ago
    Still waking up and it's possible I misread GP, but their comments didn't seem disingenuous on my reading. It's healthy to be skeptical of something that varies that much from one's personal experience. Your reply about data available for personal inflation was exactly the kind of information they needed to verify if the underlying data matches their personal experience. I understand the sensitivity to folks spouting "fake news", but let's not discourage critical thinking in a time where there is precious little to go around.
    - RC_ITR 5y ago
      It's NOT healthy to assume you're the 'average' when you are not. Almost no one on HN is reflective of the 'average' American and that lack of understanding is part of the reason the poor suffer so much in policy decisioning.
      - d4mi3n 5y ago
        I don't know enough to comment on "healthiness" of assumptions about ones' self and where they fit into analysis like in the OP's link. My commentary is purely on how we communicate with each other in a time where divisiveness, misinformation, and polarization are common and pervasive. It's hard, but if we want to have productive discussions we need to treat each other with empathy and talk to the best possible interpretation of each other's arguments. This assumes people are coming to a dialog in good faith, but everything needs to start with a little trust somewhere. Trolls are also not too hard to spot.
- martingoodson 5y ago
  The consumer price index does include food and energy. It's in the main table of the post we are discussing. It's not clear why you are not 'buying' them. Food...................... .4 .8 .7 .4 .9 .9 .7 6.1 Energy.................... .0 1.5 1.6 2.0 1.3 4.8 3.5 33.3
user3939382 5y ago
The basket of goods it tracks may not reflect popular consumption patterns and it’s possible the measurement severely minimizes the inflation most people observe.
- wonderwonder 5y ago
  If that's the case and I tend to agree that it is, then it should essentially render this report useless as a means of gauging how the economy is affecting most people and should be rebuilt with very different measurements.
  - boc 5y ago
    They update CPI regularly to reflect what people are currently buying. The economists and professionals who work in this industry aren't idiots. The CPI index has been running continuously for decades and yet you've decided based on one uninformed HN comment that we need to scrap it and rebuild it with different measurements? Peak hubris.
    - user3939382 5y ago
      > one uninformed HN comment I spent ten years building and maintaining one of the most important economics time-series databases in the world (tracking the US chain store sales index), if that's a credential. I would say that criticism of the CPI isn't something I invented: https://www.investopedia.com/articles/07/consumerpriceindex.asp https://www.investopedia.com/articles/07/consumerpriceindex.... https://www.forbes.com/sites/perianneboring/2014/02/03/if-you-want-to-know-the-real-rate-of-inflation-dont-bother-with-the-cpi/?sh=38d6d023200b https://www.forbes.com/sites/perianneboring/2014/02/03/if-yo... You can search around for plenty of criticism of the CPI if you're interested. The former is reviewed by a guy with a doctorate in economics from Harvard. Is he "uninformed"?
      - mcguire 5y ago
        Are he, and you, arguing that the CPI report is useless?
BitwiseFool 5y ago
Given how much is at stake when it comes to government spending and the economy at large, I highly suspect CPI has been a victim of Goodhart's Law for quite some time. "When a measure becomes a target, it ceases to be a good measure" https://en.wikipedia.org/wiki/Goodhart%27s_law https://en.wikipedia.org/wiki/Goodhart%27s_law
MrPowers 5y ago
Some notable "adjustments" that are made when computing the CPI: * using "owners equivalent rent" rather than house prices: https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an... * factoring in technology as deflationary. yea, your phone is 20% more expensive, but it has twice the computation power, so it's actually a deflationary component * substituting goods to account for substitution bias (https://www.frbsf.org/economic-research/publications/economic-letter/1999/february/a-better-cpi/#:~:text=Substitution%20bias%20occurs%20because%20the,changes%20of%20goods%20and%20services https://www.frbsf.org/economic-research/publications/economi....). Substituting chicken for beef was heavily criticized.
- alisonkisk 5y ago
  1 is correct because your house will sell for more later. 2 is incorrect and an obvious scam that uses societal progress to cover up inflating the money supply. (A virtual tax on progress). 3 is 2 but sort of in reverse.
- spaetzleesser 5y ago
  “ factoring in technology as deflationary. yea, your phone is 20% more expensive, but it has twice the computation power, so it's actually a deflationary component” I guess you could also make increases in health care costs go away with this approach. It’s way more expensive than 20 years ago but the tech is way better so it’s actually cheaper.
  - mcguire 5y ago
    You could, but you would be better off by quantifying health care quality by life expectancy.
- gruez 5y ago
  >* using "owners equivalent rent" rather than house prices: https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an... makes sense, considering that most people own their homes, aren't exposed to the housing market, and aren't buying houses every month. >* factoring in technology as deflationary. yea, your phone is 20% more expensive, but it has twice the computation power, so it's actually a deflationary component Why do you have to get the flagship phone? Why not get a low end phone today, that has about the same capabilities/speed as the phone you had 5 years ago?
RC_ITR 5y ago
"I am a coastal urban renter with a unique (some would argue extravagant) diet that spends >10% of my income on a specific hobby that gotten very popular since the pandemic. This report that intentionally tries to reflect the average American doesn't match my experience. SOMETHING is up" ^90% of the comments^
gigatexal 5y ago
That doesn’t mean that the OP’s anecdotal assessment of nominal inflation is wrong. Food, housing, energy etc are very real expenses faced every day.
bko 5y ago
Its not about the documentation, its about the complexity and subjectivity (e.g. substitute goods, weighting of regions, remove outliers, and quality adjustments). I'd much prefer a simpler "less accurate" measure like the change of a fixed basket of goods from two periods within a short time period and an updated basket to be used for the next period. That way you're not stuck w/ buggy whips on your CPI index. Instead we have an indiscernible mess that doesn't reflect reality and that no one trusts. https://www.bls.gov/opub/hom/cpi/calculation.htm https://www.bls.gov/opub/hom/cpi/calculation.htm
mandelbrotwurst 5y ago
The BLS includes rent in the CPI basket. https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...
dnautics 5y ago
> The basket of goods they track likely does not reflect your personal consumption patterns. Or anyone's, really. It's not really consistent either, because hedonic adjustments are effectively "arbitrary". BUT at least they are published, so you can, if you had the time, look at all of the fudge factors they drop in and decide for yourself how much skepticism to apply.
bufferoverflow 5y ago
What a generic and useless comment, considering the parent asked how the housing is only up 3.8% in that basket of goods. Look at their data under "Rent of primary residence". They claim it's only 3% Nov 2020 to Nov 2021. https://www.bls.gov/news.release/pdf/cpi.pdf https://www.bls.gov/news.release/pdf/cpi.pdf That's an obvious lie.

by boc 5y ago

msandford 5y ago

Core inflation excludes food and energy. So as long as you're dead, you only experience core inflation! Everyone else who is alive is exposed to core inflation and also the one that takes food and fuel into account. Perhaps that's why people don't "buy" the numbers. Because the numbers aren't representative of the reality that alive human beings experience.

dragontamer 5y ago
Core inflation is a different measure because food and gasoline prices vary so much. Its not about withholding information. Its about aggregating the important bits together. With a 60% rise in gasoline prices in the past year, it makes sense why you'd want to track gasoline separately from everything else. ------- If you want to just track "everything", then quote "CPI", not "core CPI" (a different number entirely).
jdavis703 5y ago
I don’t drive, I’m mostly on a plant-based diet, and I’ve been on 100% renewable energy for years. I’m very much alive, and also am willing to believe we’re not close to double digit inflation based on my costs. And I live in one of those high-priced metros, so I actually experienced a rent cut since everyone fled to Miami and Austin (thereby increasing prices there). Obviously your experience may be different, but remember econometrics tracks the entire economy, not just your budget.
- vntok 5y ago
  > I’m mostly on a plant-based diet, and I’ve been on 100% renewable energy for years Do you believe that your way of living is representative of the average American's?
  - deleted 5y ago
    [deleted]
  - seoaeu 5y ago
    That's the thing, there is no one "average" American that this inflation number applies to! It aggregates over all of them, including the ones living on plant-based diets and using 100% renewable energy
  - stephencanon 5y ago
    It's exactly as representative as any other American's is. That's the nature of an average--everyone's contribution factors equally.
  - iso1631 5y ago
    The average american has 1 breast and 1 testicle. The term "Average American" tend to be used by people claiming to talk on behalf of them, without actually doing so (given that the "Average American" is as different from the "Average American" as everyone else)
    - dgfitz 5y ago
      If we’re being pedantic, less than one breast and less than one testicle. As well as less then 2 arms and less than 2 legs.
- newbamboo 5y ago
  “ experienced a rent cut since everyone fled to Miami and Austin ” Obviously not in a California metro where the state decided to subsidize rents to compensate for preventing evictions resulting in a windfall for landlords and massive rent increases throughout the state.
  - dpe82 5y ago
    I experienced a significant rent reduction in San Francisco this year.
    - klipklop 5y ago
      Check the rent for the places that SF'ers fled to. Your rent went down because a bunch of affluent people left and opened up a bunch of units.
      - dpe82 5y ago
        Right; the point is that rent did not universally increase.
ravenstine 5y ago
Ding ding ding! What we need is tools that help individuals plug in their budget and track how inflation affects them. These overall inflation figures are pretty much useless because they have to exclude information in order to not be too highly amplified in either direction. Creating a budget of how much I typically spend on food, gas, utilities, and such and being able to backtest that budget would be really helpful, and perhaps that data could be used to crowdsource inflation figures that are more representative of what the average person is actually experiencing.
- alisonkisk 5y ago
  Thats a job for your bank or accounting software.
- lottin 5y ago
  Inflation is not the same thing as cost of living. Inflation measures changes in the price level, while cost of living is the expenditure that is needed to sustain a particular standard of living.
bee_rider 5y ago
Which is crazy -- you could track my food intake and lack of energy expenditure to easily derive my core inflation.
deltree7 5y ago
Core Inflation is needed so that they can apply the right monetary policy. If you want your 'personal' inflation, they have data for that too. Fed releases all kinds of data (unemployment and monetary) and is pretty transparent. It is disingenuous of you (and contributing to the erosion of institutional trust of Federal institution) by falsely accusing them. Federal agencies aren't perfect, but at least educated people in HN should take the responsibility of giving constructive criticism based on facts rather than being brainwashed by random YouTuber/Blogger who is generally clueless about economics
- d4mi3n 5y ago
  Still waking up and it's possible I misread GP, but their comments didn't seem disingenuous on my reading. It's healthy to be skeptical of something that varies that much from one's personal experience. Your reply about data available for personal inflation was exactly the kind of information they needed to verify if the underlying data matches their personal experience. I understand the sensitivity to folks spouting "fake news", but let's not discourage critical thinking in a time where there is precious little to go around.
  - RC_ITR 5y ago
    It's NOT healthy to assume you're the 'average' when you are not. Almost no one on HN is reflective of the 'average' American and that lack of understanding is part of the reason the poor suffer so much in policy decisioning.
    - d4mi3n 5y ago
      I don't know enough to comment on "healthiness" of assumptions about ones' self and where they fit into analysis like in the OP's link. My commentary is purely on how we communicate with each other in a time where divisiveness, misinformation, and polarization are common and pervasive. It's hard, but if we want to have productive discussions we need to treat each other with empathy and talk to the best possible interpretation of each other's arguments. This assumes people are coming to a dialog in good faith, but everything needs to start with a little trust somewhere. Trolls are also not too hard to spot.
martingoodson 5y ago
The consumer price index does include food and energy. It's in the main table of the post we are discussing. It's not clear why you are not 'buying' them. Food...................... .4 .8 .7 .4 .9 .9 .7 6.1 Energy.................... .0 1.5 1.6 2.0 1.3 4.8 3.5 33.3

user3939382 5y ago

The basket of goods it tracks may not reflect popular consumption patterns and it’s possible the measurement severely minimizes the inflation most people observe.

wonderwonder 5y ago
If that's the case and I tend to agree that it is, then it should essentially render this report useless as a means of gauging how the economy is affecting most people and should be rebuilt with very different measurements.
- boc 5y ago
  They update CPI regularly to reflect what people are currently buying. The economists and professionals who work in this industry aren't idiots. The CPI index has been running continuously for decades and yet you've decided based on one uninformed HN comment that we need to scrap it and rebuild it with different measurements? Peak hubris.
  - user3939382 5y ago
    > one uninformed HN comment I spent ten years building and maintaining one of the most important economics time-series databases in the world (tracking the US chain store sales index), if that's a credential. I would say that criticism of the CPI isn't something I invented: https://www.investopedia.com/articles/07/consumerpriceindex.asp https://www.investopedia.com/articles/07/consumerpriceindex.... https://www.forbes.com/sites/perianneboring/2014/02/03/if-you-want-to-know-the-real-rate-of-inflation-dont-bother-with-the-cpi/?sh=38d6d023200b https://www.forbes.com/sites/perianneboring/2014/02/03/if-yo... You can search around for plenty of criticism of the CPI if you're interested. The former is reviewed by a guy with a doctorate in economics from Harvard. Is he "uninformed"?
    - mcguire 5y ago
      Are he, and you, arguing that the CPI report is useless?

BitwiseFool 5y ago

Given how much is at stake when it comes to government spending and the economy at large, I highly suspect CPI has been a victim of Goodhart's Law for quite some time. "When a measure becomes a target, it ceases to be a good measure" https://en.wikipedia.org/wiki/Goodhart%27s_law https://en.wikipedia.org/wiki/Goodhart%27s_law

MrPowers 5y ago

Some notable "adjustments" that are made when computing the CPI: * using "owners equivalent rent" rather than house prices: https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an... * factoring in technology as deflationary. yea, your phone is 20% more expensive, but it has twice the computation power, so it's actually a deflationary component * substituting goods to account for substitution bias (https://www.frbsf.org/economic-research/publications/economic-letter/1999/february/a-better-cpi/#:~:text=Substitution%20bias%20occurs%20because%20the,changes%20of%20goods%20and%20services https://www.frbsf.org/economic-research/publications/economi....). Substituting chicken for beef was heavily criticized.

alisonkisk 5y ago
1 is correct because your house will sell for more later. 2 is incorrect and an obvious scam that uses societal progress to cover up inflating the money supply. (A virtual tax on progress). 3 is 2 but sort of in reverse.
spaetzleesser 5y ago
“ factoring in technology as deflationary. yea, your phone is 20% more expensive, but it has twice the computation power, so it's actually a deflationary component” I guess you could also make increases in health care costs go away with this approach. It’s way more expensive than 20 years ago but the tech is way better so it’s actually cheaper.
- mcguire 5y ago
  You could, but you would be better off by quantifying health care quality by life expectancy.
gruez 5y ago
>* using "owners equivalent rent" rather than house prices: https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an... makes sense, considering that most people own their homes, aren't exposed to the housing market, and aren't buying houses every month. >* factoring in technology as deflationary. yea, your phone is 20% more expensive, but it has twice the computation power, so it's actually a deflationary component Why do you have to get the flagship phone? Why not get a low end phone today, that has about the same capabilities/speed as the phone you had 5 years ago?

RC_ITR 5y ago

"I am a coastal urban renter with a unique (some would argue extravagant) diet that spends >10% of my income on a specific hobby that gotten very popular since the pandemic. This report that intentionally tries to reflect the average American doesn't match my experience. SOMETHING is up" ^90% of the comments^

gigatexal 5y ago

That doesn’t mean that the OP’s anecdotal assessment of nominal inflation is wrong. Food, housing, energy etc are very real expenses faced every day.

bko 5y ago

Its not about the documentation, its about the complexity and subjectivity (e.g. substitute goods, weighting of regions, remove outliers, and quality adjustments). I'd much prefer a simpler "less accurate" measure like the change of a fixed basket of goods from two periods within a short time period and an updated basket to be used for the next period. That way you're not stuck w/ buggy whips on your CPI index. Instead we have an indiscernible mess that doesn't reflect reality and that no one trusts. https://www.bls.gov/opub/hom/cpi/calculation.htm https://www.bls.gov/opub/hom/cpi/calculation.htm

mandelbrotwurst 5y ago

The BLS includes rent in the CPI basket. https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...

dnautics 5y ago

> The basket of goods they track likely does not reflect your personal consumption patterns. Or anyone's, really. It's not really consistent either, because hedonic adjustments are effectively "arbitrary". BUT at least they are published, so you can, if you had the time, look at all of the fudge factors they drop in and decide for yourself how much skepticism to apply.

bufferoverflow 5y ago

What a generic and useless comment, considering the parent asked how the housing is only up 3.8% in that basket of goods. Look at their data under "Rent of primary residence". They claim it's only 3% Nov 2020 to Nov 2021. https://www.bls.gov/news.release/pdf/cpi.pdf https://www.bls.gov/news.release/pdf/cpi.pdf That's an obvious lie.