5 ms·

Sure. For example, healthcare is included in CPI. Let's say a new surgical technique is invented that reduces the chance of dying during a kidney transplant b

Sure. For example, healthcare is included in CPI. Let's say a new surgical technique is invented that reduces the chance of dying during a kidney transplant by 20%, and is adopted as a standard practice. The price of kidney transplant surgery does not change. By how much has the price of a kidney transplant deflated, since you are now getting better bang for your buck?

rowanajmarshall 5y ago
That isn't what inflation measures. That's what life expectancy measures.
- tharne 5y ago
  No, this has to do with prices and values. If you're getting a higher quality of surgery for the same price as before, the cost of a surgery has effectively gone down.
  - rubyn00bie 5y ago
    You’re 100% wrong here and very loud about how wrong you are. Why? Why are you so vocal about something you’re not educated about (economics)?
    - ajnin 5y ago
      Here's another example that you might be more familiar with : let's say that year N there is a specific laptop available for sale for $1200. Year N+3 you can still find for sale that laptop which still costs $1200 but which has improved guts and is twice as fast as before. Has the price of laptops stayed the same or gone down ? From the point of view of CPI calculation, it has gone down.
tharne 5y ago
And then there's the behavioral shifts that take place too. If the price of socks goes up by 40%, some folks put off buying new socks or start mending the old socks they have, taking pressure off the price of socks through lower demand. So in reality, the inflation in the price of socks would be/is more than 40% save for the fact that people are now wearing older socks on average. There's also shadow inflation, where you pay the same as before, but get less, or pay in other ways. You can see this with hotels for instance. The price of a room hasn't changed, but many hotels have reduced the number of services that are included like the frequency of cleaning, free breakfast, etc. So you're paying the same amount for your room, but you're getting less value in return. How does this get reflected in the CPI?
- gruez 5y ago
  > So in reality, the inflation in the price of socks would be/is more than 40% save for the fact that people are now wearing older socks on average. And this is bad... how? I'm not sure how presuming the opposite (ie. demand stays the same) makes more sense. For instance, during the 1973 oil crisis, supply was literally lower than demand. If we expected demand to stay the same (for whatever reason), wouldn't the price of oil go to infinity? >How does this get reflected in the CPI? hedonic and/or quality adjustments are done for certain CPI categories.
- dghlsakjg 5y ago
  Go read the methodology for CPI calculation. They tell you exactly what they are buying and do, in fact, adjust for qualitative differences like reduced service at a hotel. The entire point of the CPI is that it is an exact representation of what buying the exact same set of things exactly one year of part will cost. The socks are irrelevant as far as CPI is concerned since it concerns itself with pricing only, and not the knock on effects of reductions in demand due to pricing. There are teams of PHDs in every major country in the world that only work on this one number, their methodology is then picked apart by more teams of phds in academia who produce alternate methodologies and slightly different numbers. Do you really think that in the past 100 years of doing this work that they haven’t come up with ways of adjusting for the fact that Motel 8 stopped serving waffles?
  - tharne 5y ago
    > They tell you exactly what they are buying and do, in fact, adjust for qualitative differences like reduced service at a hotel. The original point in this thread was that it's laughable to do this to tenth of percent or more, when as you and others freely point out that a lot of this is qualitative and not quantitative.
    - dghlsakjg 5y ago
      Again, go read the methodology. If I buy figure out the cost to obtain 100 grams of Cheetos at ten convenience stores in urban areas I can very much tell you the price change with two significant digits. We get it, you don’t like the way they measure inflation. But the CPI is not some hand wavy number, and your comments across this thread indicate that you also don’t understand what it is and how it is derived.
snowwrestler 5y ago
Inflation does not measure value. It only measures price.
- DSMan195276 5y ago
  The two are linked though, because the value of a particular item is not a constant. If the quality of an item changes then you would not expect the price to stay the same, but that does not mean inflation is taking place. With that, the price may stay the same but the quality drops, which is functionally the same thing as inflation but the price itself did not change. FWIW the CPI does attempt to measure this: https://www.bls.gov/cpi/quality-adjustment/questions-and-answers.htm https://www.bls.gov/cpi/quality-adjustment/questions-and-ans... > To measure price change accurately, the CPI must be able to distinguish the portion of price change due to this quality change.

rowanajmarshall 5y ago

That isn't what inflation measures. That's what life expectancy measures.

tharne 5y ago
No, this has to do with prices and values. If you're getting a higher quality of surgery for the same price as before, the cost of a surgery has effectively gone down.
- rubyn00bie 5y ago
  You’re 100% wrong here and very loud about how wrong you are. Why? Why are you so vocal about something you’re not educated about (economics)?
  - ajnin 5y ago
    Here's another example that you might be more familiar with : let's say that year N there is a specific laptop available for sale for $1200. Year N+3 you can still find for sale that laptop which still costs $1200 but which has improved guts and is twice as fast as before. Has the price of laptops stayed the same or gone down ? From the point of view of CPI calculation, it has gone down.

tharne 5y ago

And then there's the behavioral shifts that take place too. If the price of socks goes up by 40%, some folks put off buying new socks or start mending the old socks they have, taking pressure off the price of socks through lower demand. So in reality, the inflation in the price of socks would be/is more than 40% save for the fact that people are now wearing older socks on average. There's also shadow inflation, where you pay the same as before, but get less, or pay in other ways. You can see this with hotels for instance. The price of a room hasn't changed, but many hotels have reduced the number of services that are included like the frequency of cleaning, free breakfast, etc. So you're paying the same amount for your room, but you're getting less value in return. How does this get reflected in the CPI?

gruez 5y ago
> So in reality, the inflation in the price of socks would be/is more than 40% save for the fact that people are now wearing older socks on average. And this is bad... how? I'm not sure how presuming the opposite (ie. demand stays the same) makes more sense. For instance, during the 1973 oil crisis, supply was literally lower than demand. If we expected demand to stay the same (for whatever reason), wouldn't the price of oil go to infinity? >How does this get reflected in the CPI? hedonic and/or quality adjustments are done for certain CPI categories.
dghlsakjg 5y ago
Go read the methodology for CPI calculation. They tell you exactly what they are buying and do, in fact, adjust for qualitative differences like reduced service at a hotel. The entire point of the CPI is that it is an exact representation of what buying the exact same set of things exactly one year of part will cost. The socks are irrelevant as far as CPI is concerned since it concerns itself with pricing only, and not the knock on effects of reductions in demand due to pricing. There are teams of PHDs in every major country in the world that only work on this one number, their methodology is then picked apart by more teams of phds in academia who produce alternate methodologies and slightly different numbers. Do you really think that in the past 100 years of doing this work that they haven’t come up with ways of adjusting for the fact that Motel 8 stopped serving waffles?
- tharne 5y ago
  > They tell you exactly what they are buying and do, in fact, adjust for qualitative differences like reduced service at a hotel. The original point in this thread was that it's laughable to do this to tenth of percent or more, when as you and others freely point out that a lot of this is qualitative and not quantitative.
  - dghlsakjg 5y ago
    Again, go read the methodology. If I buy figure out the cost to obtain 100 grams of Cheetos at ten convenience stores in urban areas I can very much tell you the price change with two significant digits. We get it, you don’t like the way they measure inflation. But the CPI is not some hand wavy number, and your comments across this thread indicate that you also don’t understand what it is and how it is derived.

snowwrestler 5y ago

Inflation does not measure value. It only measures price.

DSMan195276 5y ago
The two are linked though, because the value of a particular item is not a constant. If the quality of an item changes then you would not expect the price to stay the same, but that does not mean inflation is taking place. With that, the price may stay the same but the quality drops, which is functionally the same thing as inflation but the price itself did not change. FWIW the CPI does attempt to measure this: https://www.bls.gov/cpi/quality-adjustment/questions-and-answers.htm https://www.bls.gov/cpi/quality-adjustment/questions-and-ans... > To measure price change accurately, the CPI must be able to distinguish the portion of price change due to this quality change.