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The US government claims it's 6.0%. What does the US government gain by reporting a higher inflation rate?

by 0xDEF 4y ago

arcticbull 4y ago
There's a lot of different ways to measure inflation. This is based on their own methodology and white paper (https://truflation.com/methodology/ https://truflation.com/methodology/) which I have yet to review. It's almost certainly not "something to gain" but instead just different weights, different sources, different approach.
- ghayes 4y ago
  Theoretically isn’t the 2% target based on the BLS numbers for inflation? Thus, if we wanted to compare, the “Truflation target” might be more like 1% then? It’s weird to change the method but keep the arbitrary target.
  - jfengel 4y ago
    The 2% target is rather arbitrary, and is independent of the measurement method. Both the target and all of the metrics are trying to capture the intuitive, handwavey notion of "a healthy economy". So they don't put too much stress on that 2% number. If the number were at 1.9% or 2.1%, they'd assume it's all in the margin of error. If it gets below 1% or above 4% for a while, they apply some tools in the direction of 2%, but not trying to overshoot.
    - arcticbull 4y ago
      Yeah, something something Philips Curve. [1] [1] https://www.stlouisfed.org/open-vault/2020/january/what-is-phillips-curve-why-flattened https://www.stlouisfed.org/open-vault/2020/january/what-is-p...
jfengel 4y ago
The government's goal is to use the same metric repeatedly. It doesn't matter whether it's higher or lower than some other metric. They only care about how it is compared to last month and last year, so they can make decisions about next month and next year. They know that 6% is too high, so they'll keep trying to push inflation down. They'd do roughly the same if it were 4%; the margins of error are too large to distinguish. If the number were 1% that would raise eyebrows, and you'd wonder if one metric or the other was a failure. Same if the number were 15%. But no economist is worrying too much about somebody else going "... but it's really 4%". Especially if they don't have a track record for that number.

The US government claims it's 6.0%. What does the US government gain by reporting a higher inflation rate?

by 0xDEF 4y ago

The US government claims it's 6.0%. What does the US government gain by reporting a higher inflation rate?

There's a lot of different ways to measure inflation. This is based on their own methodology and white paper (https://truflation.com/methodology/ https://truflation.com/methodology/) which I have yet to review. It's almost certainly not "something to gain" but instead just different weights, different sources, different approach.

ghayes 4y ago
Theoretically isn’t the 2% target based on the BLS numbers for inflation? Thus, if we wanted to compare, the “Truflation target” might be more like 1% then? It’s weird to change the method but keep the arbitrary target.
- jfengel 4y ago
  The 2% target is rather arbitrary, and is independent of the measurement method. Both the target and all of the metrics are trying to capture the intuitive, handwavey notion of "a healthy economy". So they don't put too much stress on that 2% number. If the number were at 1.9% or 2.1%, they'd assume it's all in the margin of error. If it gets below 1% or above 4% for a while, they apply some tools in the direction of 2%, but not trying to overshoot.
  - arcticbull 4y ago
    Yeah, something something Philips Curve. [1] [1] https://www.stlouisfed.org/open-vault/2020/january/what-is-phillips-curve-why-flattened https://www.stlouisfed.org/open-vault/2020/january/what-is-p...

jfengel 4y ago

The government's goal is to use the same metric repeatedly. It doesn't matter whether it's higher or lower than some other metric. They only care about how it is compared to last month and last year, so they can make decisions about next month and next year. They know that 6% is too high, so they'll keep trying to push inflation down. They'd do roughly the same if it were 4%; the margins of error are too large to distinguish. If the number were 1% that would raise eyebrows, and you'd wonder if one metric or the other was a failure. Same if the number were 15%. But no economist is worrying too much about somebody else going "... but it's really 4%". Especially if they don't have a track record for that number.