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It's because they measure the item to an equivalent item from 1970. Take a car for example. Modern cars have various electronic contraptions that didn't exist i

It's because they measure the item to an equivalent item from 1970. Take a car for example. Modern cars have various electronic contraptions that didn't exist in cars in 1970. A car today will have electronic control of windows, rather than the mechanical control from 1970. So, the BLS considers inflation by replacing a modern car's electronic control of windows and replaces it with what you can buy with a mechanical window today. It does this for all parts of the modern car to make it an equivalent product of 1970. Only when all parts are equal, they will calculate inflation. It is an incredibly flawed metric.

deleted 5y ago
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jonnycomputer 5y ago
Its also just a gnarly problem to solve. PCE might be the better measure.
- Canada 5y ago
  Yes, I thought that CPI series were bullshit and to prove it I decided to start looking at ads in newspapers from many decades in the past. I thought that while technology has advanced, some things are the same as we've always had so I could just compare real advertised prices over the years. Turns out that is not the case. Somehow a quality men's overcoat used be comperable in cost to a piece of land on the west coast that is now worth tens of millions of dollars ( and has been for decades now) When you consider where that coat came from then and what it took to get it to where it was offered vs what the practical value of that land was at that location and time... trying to compare prices of things over 50 years is like trying to compare the minutia of two different worlds you don't understand. It's impossible to cleanly bucket like for like over time when the price depends so much on "this level of thing, at this place and at this time" just as it's impossible to centrally replace the "invisible hand" in setting prices now. It's super complex to reverse engineer in hindsight why the relative prices of things were as they were at some point in the past. Not saying that government stats don't cheat. I think they do because they have motive to do so. But I fully agree that the task of creating a useful price index over a long period of time, even a short few decades, is far from a simple problem. Anyone who doesn't agree: please go try to make one.

deleted 5y ago

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jonnycomputer 5y ago

Its also just a gnarly problem to solve. PCE might be the better measure.

Canada 5y ago
Yes, I thought that CPI series were bullshit and to prove it I decided to start looking at ads in newspapers from many decades in the past. I thought that while technology has advanced, some things are the same as we've always had so I could just compare real advertised prices over the years. Turns out that is not the case. Somehow a quality men's overcoat used be comperable in cost to a piece of land on the west coast that is now worth tens of millions of dollars ( and has been for decades now) When you consider where that coat came from then and what it took to get it to where it was offered vs what the practical value of that land was at that location and time... trying to compare prices of things over 50 years is like trying to compare the minutia of two different worlds you don't understand. It's impossible to cleanly bucket like for like over time when the price depends so much on "this level of thing, at this place and at this time" just as it's impossible to centrally replace the "invisible hand" in setting prices now. It's super complex to reverse engineer in hindsight why the relative prices of things were as they were at some point in the past. Not saying that government stats don't cheat. I think they do because they have motive to do so. But I fully agree that the task of creating a useful price index over a long period of time, even a short few decades, is far from a simple problem. Anyone who doesn't agree: please go try to make one.