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Quite a lot of people are starting to say that measuring inflation with a single number is like measuring the temperature of the whole US with a single number -

by 323 5y ago

Quite a lot of people are starting to say that measuring inflation with a single number is like measuring the temperature of the whole US with a single number - "today the temperature in US is 81 F".

davidjgraph 5y ago
And that's wrong because the units are outdated?...
- wincy 5y ago
  It’s wrong because there’s a freak snowstorm in Seattle and it’s 39°F there right now and it’s 81°F in Kansas City. So the average temp between those two place is 60°F which tells us nothing useful about either place.
  - francisofascii 5y ago
    Sure, but prices are up everywhere for most goods. Are prices actually down for anything significant right now? So using the weather analogy, it is hot everywhere in the US.
  - sudosysgen 5y ago
    If half of the US was under a freak snowstorm that would be pretty significant.
  - kzrdude 5y ago
    Over longer time the US average temp is useful, it tells us something about the climate, not the weather. Maybe that analogy kinda works for the economy.
z2 5y ago
Which is potentially useful if the aggregate is weighted appropriately and whatever insights respect the implications of using an aggregate. It's even more useful with the additional information that temperatures in the US tend to be highly correlated between areas. Some useful insights if you have enough data points would be where in the year you are, which season it is, if it might be an El Nino or la Nina year, and over the long term if there are any secular trends like global warming...
gsk22 5y ago
It's nothing like that. People live in one place and only care about the weather at that place. Whereas consumers need products from all sectors of the economy, so an aggregate inflation indicator makes sense. Sure, it's not perfect, since every household spends their money differently, but everyone needs food, housing, energy, etc.
- helen___keller 5y ago
  I think it’s an apt metaphor. If you lived in a big city in the 2010s, you’ve probably read years worth of headlines about low inflation, all while experiencing a rapidly inflating cost of living. CPI is like climate news, not weather news, and should be understood as much.
  - long_time_gone 5y ago
    If GDP goes up 5%, but you only get a 3% raise does that make GDP a bad measure of the economy?
    - vmception 5y ago
      Assumes GDP is a good measure without this hypothetical
      - long_time_gone 5y ago
        I don't follow, can you please clarify? Edit: Reread and understand now... The point is that GDP is a measure of how much the economy in the US grows or contracts, just as CPI is a measure of how much prices in the US grow or contract. You shouldn't view GDP as a personal indicator of economic growth, just like CPI isn't an analysis of costs on your personal spending. Treating it as such feels like distorting the purpose of the measure to suit a narrative.
        vmception 5y ago
        It has limitations in its ability to measure that, it can simultaneously be the best measure that we have, in the absence of a better one, doesn't mean its good or a helpful indication, and as we both agree it’s not a good indication of any individual persons experience
long_time_gone 5y ago
> Quite a lot of people are starting to say Who? What are their credentials? What improved measure have they created?
- Kon-Peki 5y ago
  I'm wondering if these people are suggesting a completely different approach, or if they are just starting to realize that BLS publishes a huge number of inflation measures [1]: > Price indexes are available for the U.S., the four Census regions, nine Census divisions, two size of city classes, eight cross-classifications of regions and size-classes, and for 23 local areas. Indexes are available for major groups of consumer expenditures (food and beverages, housing, apparel, transportation, medical care, recreation, education and communications, and other goods and services), for items within each group, and for special categories, such as services. [1] https://www.bls.gov/cpi/overview.htm https://www.bls.gov/cpi/overview.htm
  - long_time_gone 5y ago
    Maybe it's a by-product of the broader trend towards distrust of experts?
Gareth321 5y ago
Those people don’t understand how the CPI is calculated. A basket of goods is used to project what an average person would spend on goods and services. Do people in New York spend more on the same basket? Of course! But the percentage change is fairly uniform in a connected economy like the US. The measurement is intended to calculate the macro effect of inflation; not Bob’s impact, who lives in Ohio, owns three cats, and exclusively eats tuna from a can. An analogy is the BMI. This is intended as a population metric, but is often used by the individual. It’s less useful for the individual, but still actually pretty useful. If your BMI is above 30, you’re probably unhealthy. You might be a pro wrestler with huge muscles, but you probably aren’t.

by 323 5y ago

Quite a lot of people are starting to say that measuring inflation with a single number is like measuring the temperature of the whole US with a single number - "today the temperature in US is 81 F".

davidjgraph 5y ago

And that's wrong because the units are outdated?...

wincy 5y ago
It’s wrong because there’s a freak snowstorm in Seattle and it’s 39°F there right now and it’s 81°F in Kansas City. So the average temp between those two place is 60°F which tells us nothing useful about either place.
- francisofascii 5y ago
  Sure, but prices are up everywhere for most goods. Are prices actually down for anything significant right now? So using the weather analogy, it is hot everywhere in the US.
- sudosysgen 5y ago
  If half of the US was under a freak snowstorm that would be pretty significant.
- kzrdude 5y ago
  Over longer time the US average temp is useful, it tells us something about the climate, not the weather. Maybe that analogy kinda works for the economy.

z2 5y ago

Which is potentially useful if the aggregate is weighted appropriately and whatever insights respect the implications of using an aggregate. It's even more useful with the additional information that temperatures in the US tend to be highly correlated between areas. Some useful insights if you have enough data points would be where in the year you are, which season it is, if it might be an El Nino or la Nina year, and over the long term if there are any secular trends like global warming...

gsk22 5y ago

It's nothing like that. People live in one place and only care about the weather at that place. Whereas consumers need products from all sectors of the economy, so an aggregate inflation indicator makes sense. Sure, it's not perfect, since every household spends their money differently, but everyone needs food, housing, energy, etc.

helen___keller 5y ago
I think it’s an apt metaphor. If you lived in a big city in the 2010s, you’ve probably read years worth of headlines about low inflation, all while experiencing a rapidly inflating cost of living. CPI is like climate news, not weather news, and should be understood as much.
- long_time_gone 5y ago
  If GDP goes up 5%, but you only get a 3% raise does that make GDP a bad measure of the economy?
  - vmception 5y ago
    Assumes GDP is a good measure without this hypothetical
    - long_time_gone 5y ago
      I don't follow, can you please clarify? Edit: Reread and understand now... The point is that GDP is a measure of how much the economy in the US grows or contracts, just as CPI is a measure of how much prices in the US grow or contract. You shouldn't view GDP as a personal indicator of economic growth, just like CPI isn't an analysis of costs on your personal spending. Treating it as such feels like distorting the purpose of the measure to suit a narrative.
      - vmception 5y ago
        It has limitations in its ability to measure that, it can simultaneously be the best measure that we have, in the absence of a better one, doesn't mean its good or a helpful indication, and as we both agree it’s not a good indication of any individual persons experience

long_time_gone 5y ago

> Quite a lot of people are starting to say Who? What are their credentials? What improved measure have they created?

Kon-Peki 5y ago
I'm wondering if these people are suggesting a completely different approach, or if they are just starting to realize that BLS publishes a huge number of inflation measures [1]: > Price indexes are available for the U.S., the four Census regions, nine Census divisions, two size of city classes, eight cross-classifications of regions and size-classes, and for 23 local areas. Indexes are available for major groups of consumer expenditures (food and beverages, housing, apparel, transportation, medical care, recreation, education and communications, and other goods and services), for items within each group, and for special categories, such as services. [1] https://www.bls.gov/cpi/overview.htm https://www.bls.gov/cpi/overview.htm
- long_time_gone 5y ago
  Maybe it's a by-product of the broader trend towards distrust of experts?

Gareth321 5y ago

Those people don’t understand how the CPI is calculated. A basket of goods is used to project what an average person would spend on goods and services. Do people in New York spend more on the same basket? Of course! But the percentage change is fairly uniform in a connected economy like the US. The measurement is intended to calculate the macro effect of inflation; not Bob’s impact, who lives in Ohio, owns three cats, and exclusively eats tuna from a can. An analogy is the BMI. This is intended as a population metric, but is often used by the individual. It’s less useful for the individual, but still actually pretty useful. If your BMI is above 30, you’re probably unhealthy. You might be a pro wrestler with huge muscles, but you probably aren’t.