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The Consumer Price Index is a scam at this point, as far as I can tell. They regularly modify the list of items in the cart, meaning the data isn't reliable ov

The Consumer Price Index is a scam at this point, as far as I can tell. They regularly modify the list of items in the cart, meaning the data isn't reliable over time. They also include caveats where they can modify the Scritsmier price differences. For example, they attention to adjust the new price to account for what they consider to be added value. Say a product is 15% more expensive one year after a new model is released. When calculated the CPI, they can decide that the new model added 10% more value or benefit to the user, meaning the price only rose by 5%. I wish I could find the study now, but around 2013 someone compared the CPI listed price increase of magazines to the actual change in the price listed on the cover over something like 20 years. The true value change was around 130% but the CPI had adjusted for value 30%. Most people seem to be feeling this now when they notice that process have risen much higher than the claimed 4 or 5%.

bitshiftfaced 3y ago
If they didn't do those things, then wouldn't we just get a flagrant_taco from an alternate dimension who would instead argue about how CPI doesn't account for changes in consumer preference over time or how a cell phone in 2023 is different from one in 2003?
- HumblyTossed 3y ago
  There should be two parts to the list. A constant long term index and a shorter term more variable one.
  - sokoloff 3y ago
    Would the long term index have a horse-drawn carriage, a butter churn, a typewriter, a 50# block of ice for the icebox, and a rotary dial phone in it? At some point, even the long-term index can't be constant.
- flagrant_taco 3y ago
  If they listed both that would make sense, that's commonplace when listing net vs gross revenue, nominal vs real GDP, etc
  - Balgair 3y ago
    But then they would just have to make a list of each year's CPI basket and it's changes, and then have to calculate that going forward for forever. Like, the differences in the 1991 basket to the 1992 basket are pretty small (please, someone, double check this). But the differences in the 1991 basket to the 2019 basket are larger, for example. So it would seem to me to be a bit silly to have to update the prices of the 1991 basket all the way to today, especially when you're updating the 1992 basket as well, and every other year. I'm not a CPI expert person, so if there is someone that really does understand these things in depth, please chime in!
    - nradov 3y ago
      Furthermore, some of the items in the 1991 basket are no longer even available at any price. What's the price today for a new 25 inch analog CRT TV?
      - creer 3y ago
        But that IS part of the problem. Obviously without looking back 12 years for a day to day practical result (but still looking that far for long term economics concerns.) A "normal TV" now is a smart (spit) TV which compromises privacy and viewing experience and durability - but which is sold massively cheaper than a plain TV as defined perhaps 6 years ago. You have to dig hard to find a plain TV and it's more expensive. Do you count "smart" as a positive hedonic feature? Or do you count the effort necessary to find a plain TV in the price increase of a plain TV? Do you compensate for much other price increases just because a "normal TV" is now much less expensive and (allegedly) more hedonic?
    - creer 3y ago
      And they could exactly do that. That's what computers are for.
chung8123 3y ago
I think it is a bit of a scam but I do think it had good intentions. CPI is used to grade and since it is a scoring product it is manipulated. One thing you will notice with inflation is that goods that can be outsourced have been what is keeping CPI down. TVs, appliances, etc. Housing, Education, Healthcare are all things the US cannot outsource and there you will see a larger impact on CPI. Food is the on in this theory that I am not sure about. The US grows much of their own food so I wonder if it still fits even though you can outsource.
- fatherzine 3y ago
  Food. The technique is to shift from 'locally sourced organic veggies' to 'dorritos made with mass produced GMO corn', because 'consumer preferences have shifted' and both have the same calorie payload. Note how 'preferences have shifted' also discreetly helps to insinuate a moral fault in the people themselves. Anything but 'healthy food has become too damn expensive for the majority of the population'.
  - nradov 3y ago
    That is not even remotely how the food components of the basket work. You're just making things up and obviously haven't read through the detailed list of items or the methodology for how those are updated.
    - fatherzine 3y ago
      Fair enough, BLS seems reasonable, though devil in (lots of) details. I was extrapolating the 'ketchup is a vegetable' debacle, https://www.foodpolitics.com/2011/11/ketchup-is-a-vegetable-again https://www.foodpolitics.com/2011/11/ketchup-is-a-vegetable-..., where American ketchup is a mix of tomato paste and high fructose corn syrup, see e.g. https://www.nutritionvalue.org/Tomato_ketchup_by_HEINZ_540413_nutritional_value.html https://www.nutritionvalue.org/Tomato_ketchup_by_HEINZ_54041...
- nebula8804 3y ago
  Although I'm sure that outsourcing made some difference, are we sure most of the benefits didn't just rise to the investor class? TVs dropped in price due to the benefits of adopting moores law. Look into a modern TV and you see a symphony of integration and cost reduction thanks to moores law. I'd imagine the same applies to anything else that jumped on the moores law bandwagon. We need to measure appliances that benefited from this vs appliances that didn't.
mywittyname 3y ago
> The Consumer Price Index is a scam at this point, as far as I can tell. The BLS goes into excruciating detail about their methodology, which is not something often find scams doing. The Consumer Price Index is just that, an index. It seeks to distill the complexities of the consumer economy into a single number, and to do so reliably over time. It's impossible to do this without a whole bunch of compromises and trade offs. It's trivial to rip apart any such methodology because of these trade offs - just find a trade off you don't agree with and argue it should be the opposite. If someone attempted to make a t-shirt using the weighted dimensions of every American, the result would be a t-shirt size that would not fit any individual. But, over time, that t-shirt could be used to understand changes to the American physiology over time. > For example, they attention to adjust the new price to account for what they consider to be added value. They cover this in their FAQ [1]. But again, this is a trade off. If laundry detergent becomes more concentrated, thus can do 20% more loads for 10% more price, then how should that be handled? If $1000 Nike shoes become popular, does that mean that the price of shoes increased 10x even if cheaper alternatives are still the same price? [1] https://www.bls.gov/cpi/quality-adjustment/questions-and-answers.htm https://www.bls.gov/cpi/quality-adjustment/questions-and-ans...
- bugglebeetle 3y ago
  The BLS methodology is certainly “elaborate.” But as is pointed out down-thread, the CPI uses completely bizarre measures and makes little attempt to source data from the kind of places that would typically be used to do these analysis were more rigor being demanded or actual money was riding on them being correct. https://news.ycombinator.com/item?id=37895252 https://news.ycombinator.com/item?id=37895252
  - creer 3y ago
    A lof of actual money rides on CPI measures. For example social security payments are indexed. Which is one of plenty of strong incentives to keep the "measurements" low.
    - nradov 3y ago
Ologn 3y ago
> They regularly modify the list of items in the cart, meaning the data isn't reliable over time. It may not be reliable over time, but it is reliable over shorter time periods. If the basket is not changed for a few years, then the month-by-month changes in CPI are generally judged as reliable, or as reliable as what is out there. It is when you try to look over a 10, 20, 30 year period where you begin to run into trouble.
throw0101b 3y ago
> They regularly modify the list of items in the cart […] Yes? Of course? They are based on spending surveys: * https://en.wikipedia.org/wiki/Consumer_Expenditure_Survey https://en.wikipedia.org/wiki/Consumer_Expenditure_Survey When people change their habits in life the CPI is changed to reflect what that life costs. Up here in Canada, the CPI is also adjusted from spending surveys: * https://www.statcan.gc.ca/en/survey/household/3508 https://www.statcan.gc.ca/en/survey/household/3508 You can see the list of changes going back to 1913: * https://www.statcan.gc.ca/en/statistical-programs/document/2301_D70_V1 https://www.statcan.gc.ca/en/statistical-programs/document/2... Do you think coal and lard should be included, like they were in Canada pre-1956? Or do you think the CPI should try to model reality? > […] meaning the data isn't reliable over time. It is meaningful in that life now and life ten or twenty or more years ago was different in what people purchased. That should be reflected in measures that model consumer spending.
- dporter 3y ago
  Spending habits are mitigated by inflation though. For example, I buy significantly less beef than I did five years ago because it is now too expensive. Putting less weight on beef prices because of the reduction in consumption would indicate that inflation is less than it actually is.
  - throw0101b 3y ago
    > For example, I buy significantly less beef than I did five years ago because it is now too expensive. Putting less weight on beef prices because of the reduction in consumption would indicate that inflation is less than it actually is. If people spend on item X less or no more, why would it be included in the index at the old weight? For any given period of time being measured, the basket of goods and their weights should reflect what people are actually doing. Why would you run a model that samples the wrong things? This is one reason why (e.g.) StatCan went from updating their basket every 2-3 years, to annually in the last little while: spending habits shifted drastically in over the course of the pandemic. * https://www.statcan.gc.ca/en/statistical-programs/document/2301_D70_V1 https://www.statcan.gc.ca/en/statistical-programs/document/2... Substitution is a known source of (possible) error and there are attempts to take it into account: > 9.22 The other potential source of error with respect to the basket weights is referred to as upper-level substitution bias. This bias arises because of the use of the Lowe formula, which is an asymmetrically weighted fixed-basket price index. Because the weights are obtained from a year that precedes the price reference period, the expenditures are not likely to be fully representative of consumer spending patterns in the price observation periods. This is because consumers tend to adjust their spending habits in response to changes in relative prices, buying more of the products whose prices have fallen or risen less rapidly, while reducing their purchases of products whose prices have increased the most. In other words, they substitute towards relatively cheaper products from relatively more expensive ones. The asymmetrically weighted fixed-basket formula of the CPI does not account for these types of changes in consumer spending until a basket update is performed. > 9.23 Unlike the Lowe formula, there are five known symmetrically weighted price index formulaeNote which are theoretically free from upper level substitution bias. These index formulae use expenditures from both the price reference period 0 and the price observation period t and therefore account for product substitutions that consumers may make. In this regard they are representative of consumer spending for the periods in which price change is being calculated. * https://www150.statcan.gc.ca/n1/pub/62-553-x/2023001/chap-9-eng.htm https://www150.statcan.gc.ca/n1/pub/62-553-x/2023001/chap-9-... * https://www150.statcan.gc.ca/n1/en/catalogue/62-553-X https://www150.statcan.gc.ca/n1/en/catalogue/62-553-X
nradov 3y ago
The CPI is reliable over time. When the basket of goods is changed to reflect what consumers actually purchase the index is normalized to maintain continuity. But on longer time scales it becomes a bit meaningless. Lifestyles were so different 50 years ago that very little is directly comparable beyond certain staple foods. People tend to interpret the CPI numbers based more on their preconceived notions of how things are going than on any objective reality.
onlyrealcuzzo 3y ago
> They regularly modify the list of items in the cart, meaning the data isn't reliable over time. Please show me an economy where the list of goods stay stagnant and don't constantly change. Unless your CPI is comprised of raw commodities like Iron Ore and Salt and Copper - then you're not going to be able to keep a stagnant list of items. If x% of consumer food spending was on milk in 1920 and now it's 1/10th x - it doesn't make sense to keep milk with the same weight as it did in 1920. It's pretty hard to tell if people are drinking less milk now because they're poorer or because they just prefer almond milk (which is more expensive) instead. So, please, find a better & more cost-effective way to measure inflation. If you do, the government will use it. Contrary to popular belief, we don't live in the USSR - where our government provides us with blatantly crap data. We just have shill politicians that spin everything into a lie.
- dragonwriter 3y ago
  > Unless your CPI is comprised of raw commodities like Iron Ore and Salt and Copper In which case it won’t be a Consumer Price Index at all, as those things in their raw forms (well, salt is close, I guess) aren’t exactly consumer goods. Of course, we already have industry-specific Producer Price Indexes which cover the raw materials and other inputs used in those industries.
  - onlyrealcuzzo 3y ago
    Anything that is not basically a raw element can easily have the quality dropped substantially and make it difficult to measure the cost over time. If you take steel as an input - you can make lower quality steel for a lower price. Even something as seemingly mundane and simple as oil has a lot of variety.

bitshiftfaced 3y ago

If they didn't do those things, then wouldn't we just get a flagrant_taco from an alternate dimension who would instead argue about how CPI doesn't account for changes in consumer preference over time or how a cell phone in 2023 is different from one in 2003?

HumblyTossed 3y ago
There should be two parts to the list. A constant long term index and a shorter term more variable one.
- sokoloff 3y ago
  Would the long term index have a horse-drawn carriage, a butter churn, a typewriter, a 50# block of ice for the icebox, and a rotary dial phone in it? At some point, even the long-term index can't be constant.
flagrant_taco 3y ago
If they listed both that would make sense, that's commonplace when listing net vs gross revenue, nominal vs real GDP, etc
- Balgair 3y ago
  But then they would just have to make a list of each year's CPI basket and it's changes, and then have to calculate that going forward for forever. Like, the differences in the 1991 basket to the 1992 basket are pretty small (please, someone, double check this). But the differences in the 1991 basket to the 2019 basket are larger, for example. So it would seem to me to be a bit silly to have to update the prices of the 1991 basket all the way to today, especially when you're updating the 1992 basket as well, and every other year. I'm not a CPI expert person, so if there is someone that really does understand these things in depth, please chime in!
  - nradov 3y ago
    Furthermore, some of the items in the 1991 basket are no longer even available at any price. What's the price today for a new 25 inch analog CRT TV?
    - creer 3y ago
      But that IS part of the problem. Obviously without looking back 12 years for a day to day practical result (but still looking that far for long term economics concerns.) A "normal TV" now is a smart (spit) TV which compromises privacy and viewing experience and durability - but which is sold massively cheaper than a plain TV as defined perhaps 6 years ago. You have to dig hard to find a plain TV and it's more expensive. Do you count "smart" as a positive hedonic feature? Or do you count the effort necessary to find a plain TV in the price increase of a plain TV? Do you compensate for much other price increases just because a "normal TV" is now much less expensive and (allegedly) more hedonic?
  - creer 3y ago
    And they could exactly do that. That's what computers are for.

chung8123 3y ago

I think it is a bit of a scam but I do think it had good intentions. CPI is used to grade and since it is a scoring product it is manipulated. One thing you will notice with inflation is that goods that can be outsourced have been what is keeping CPI down. TVs, appliances, etc. Housing, Education, Healthcare are all things the US cannot outsource and there you will see a larger impact on CPI. Food is the on in this theory that I am not sure about. The US grows much of their own food so I wonder if it still fits even though you can outsource.

fatherzine 3y ago
Food. The technique is to shift from 'locally sourced organic veggies' to 'dorritos made with mass produced GMO corn', because 'consumer preferences have shifted' and both have the same calorie payload. Note how 'preferences have shifted' also discreetly helps to insinuate a moral fault in the people themselves. Anything but 'healthy food has become too damn expensive for the majority of the population'.
- nradov 3y ago
  That is not even remotely how the food components of the basket work. You're just making things up and obviously haven't read through the detailed list of items or the methodology for how those are updated.
  - fatherzine 3y ago
    Fair enough, BLS seems reasonable, though devil in (lots of) details. I was extrapolating the 'ketchup is a vegetable' debacle, https://www.foodpolitics.com/2011/11/ketchup-is-a-vegetable-again https://www.foodpolitics.com/2011/11/ketchup-is-a-vegetable-..., where American ketchup is a mix of tomato paste and high fructose corn syrup, see e.g. https://www.nutritionvalue.org/Tomato_ketchup_by_HEINZ_540413_nutritional_value.html https://www.nutritionvalue.org/Tomato_ketchup_by_HEINZ_54041...
nebula8804 3y ago
Although I'm sure that outsourcing made some difference, are we sure most of the benefits didn't just rise to the investor class? TVs dropped in price due to the benefits of adopting moores law. Look into a modern TV and you see a symphony of integration and cost reduction thanks to moores law. I'd imagine the same applies to anything else that jumped on the moores law bandwagon. We need to measure appliances that benefited from this vs appliances that didn't.

mywittyname 3y ago

> The Consumer Price Index is a scam at this point, as far as I can tell. The BLS goes into excruciating detail about their methodology, which is not something often find scams doing. The Consumer Price Index is just that, an index. It seeks to distill the complexities of the consumer economy into a single number, and to do so reliably over time. It's impossible to do this without a whole bunch of compromises and trade offs. It's trivial to rip apart any such methodology because of these trade offs - just find a trade off you don't agree with and argue it should be the opposite. If someone attempted to make a t-shirt using the weighted dimensions of every American, the result would be a t-shirt size that would not fit any individual. But, over time, that t-shirt could be used to understand changes to the American physiology over time. > For example, they attention to adjust the new price to account for what they consider to be added value. They cover this in their FAQ [1]. But again, this is a trade off. If laundry detergent becomes more concentrated, thus can do 20% more loads for 10% more price, then how should that be handled? If $1000 Nike shoes become popular, does that mean that the price of shoes increased 10x even if cheaper alternatives are still the same price? [1] https://www.bls.gov/cpi/quality-adjustment/questions-and-answers.htm https://www.bls.gov/cpi/quality-adjustment/questions-and-ans...

bugglebeetle 3y ago
The BLS methodology is certainly “elaborate.” But as is pointed out down-thread, the CPI uses completely bizarre measures and makes little attempt to source data from the kind of places that would typically be used to do these analysis were more rigor being demanded or actual money was riding on them being correct. https://news.ycombinator.com/item?id=37895252 https://news.ycombinator.com/item?id=37895252
- creer 3y ago
  A lof of actual money rides on CPI measures. For example social security payments are indexed. Which is one of plenty of strong incentives to keep the "measurements" low.
  - nradov 3y ago

Ologn 3y ago

> They regularly modify the list of items in the cart, meaning the data isn't reliable over time. It may not be reliable over time, but it is reliable over shorter time periods. If the basket is not changed for a few years, then the month-by-month changes in CPI are generally judged as reliable, or as reliable as what is out there. It is when you try to look over a 10, 20, 30 year period where you begin to run into trouble.

throw0101b 3y ago

> They regularly modify the list of items in the cart […] Yes? Of course? They are based on spending surveys: * https://en.wikipedia.org/wiki/Consumer_Expenditure_Survey https://en.wikipedia.org/wiki/Consumer_Expenditure_Survey When people change their habits in life the CPI is changed to reflect what that life costs. Up here in Canada, the CPI is also adjusted from spending surveys: * https://www.statcan.gc.ca/en/survey/household/3508 https://www.statcan.gc.ca/en/survey/household/3508 You can see the list of changes going back to 1913: * https://www.statcan.gc.ca/en/statistical-programs/document/2301_D70_V1 https://www.statcan.gc.ca/en/statistical-programs/document/2... Do you think coal and lard should be included, like they were in Canada pre-1956? Or do you think the CPI should try to model reality? > […] meaning the data isn't reliable over time. It is meaningful in that life now and life ten or twenty or more years ago was different in what people purchased. That should be reflected in measures that model consumer spending.

dporter 3y ago
Spending habits are mitigated by inflation though. For example, I buy significantly less beef than I did five years ago because it is now too expensive. Putting less weight on beef prices because of the reduction in consumption would indicate that inflation is less than it actually is.
- throw0101b 3y ago
  > For example, I buy significantly less beef than I did five years ago because it is now too expensive. Putting less weight on beef prices because of the reduction in consumption would indicate that inflation is less than it actually is. If people spend on item X less or no more, why would it be included in the index at the old weight? For any given period of time being measured, the basket of goods and their weights should reflect what people are actually doing. Why would you run a model that samples the wrong things? This is one reason why (e.g.) StatCan went from updating their basket every 2-3 years, to annually in the last little while: spending habits shifted drastically in over the course of the pandemic. * https://www.statcan.gc.ca/en/statistical-programs/document/2301_D70_V1 https://www.statcan.gc.ca/en/statistical-programs/document/2... Substitution is a known source of (possible) error and there are attempts to take it into account: > 9.22 The other potential source of error with respect to the basket weights is referred to as upper-level substitution bias. This bias arises because of the use of the Lowe formula, which is an asymmetrically weighted fixed-basket price index. Because the weights are obtained from a year that precedes the price reference period, the expenditures are not likely to be fully representative of consumer spending patterns in the price observation periods. This is because consumers tend to adjust their spending habits in response to changes in relative prices, buying more of the products whose prices have fallen or risen less rapidly, while reducing their purchases of products whose prices have increased the most. In other words, they substitute towards relatively cheaper products from relatively more expensive ones. The asymmetrically weighted fixed-basket formula of the CPI does not account for these types of changes in consumer spending until a basket update is performed. > 9.23 Unlike the Lowe formula, there are five known symmetrically weighted price index formulaeNote which are theoretically free from upper level substitution bias. These index formulae use expenditures from both the price reference period 0 and the price observation period t and therefore account for product substitutions that consumers may make. In this regard they are representative of consumer spending for the periods in which price change is being calculated. * https://www150.statcan.gc.ca/n1/pub/62-553-x/2023001/chap-9-eng.htm https://www150.statcan.gc.ca/n1/pub/62-553-x/2023001/chap-9-... * https://www150.statcan.gc.ca/n1/en/catalogue/62-553-X https://www150.statcan.gc.ca/n1/en/catalogue/62-553-X

nradov 3y ago

The CPI is reliable over time. When the basket of goods is changed to reflect what consumers actually purchase the index is normalized to maintain continuity. But on longer time scales it becomes a bit meaningless. Lifestyles were so different 50 years ago that very little is directly comparable beyond certain staple foods. People tend to interpret the CPI numbers based more on their preconceived notions of how things are going than on any objective reality.

onlyrealcuzzo 3y ago

> They regularly modify the list of items in the cart, meaning the data isn't reliable over time. Please show me an economy where the list of goods stay stagnant and don't constantly change. Unless your CPI is comprised of raw commodities like Iron Ore and Salt and Copper - then you're not going to be able to keep a stagnant list of items. If x% of consumer food spending was on milk in 1920 and now it's 1/10th x - it doesn't make sense to keep milk with the same weight as it did in 1920. It's pretty hard to tell if people are drinking less milk now because they're poorer or because they just prefer almond milk (which is more expensive) instead. So, please, find a better & more cost-effective way to measure inflation. If you do, the government will use it. Contrary to popular belief, we don't live in the USSR - where our government provides us with blatantly crap data. We just have shill politicians that spin everything into a lie.

dragonwriter 3y ago
> Unless your CPI is comprised of raw commodities like Iron Ore and Salt and Copper In which case it won’t be a Consumer Price Index at all, as those things in their raw forms (well, salt is close, I guess) aren’t exactly consumer goods. Of course, we already have industry-specific Producer Price Indexes which cover the raw materials and other inputs used in those industries.
- onlyrealcuzzo 3y ago
  Anything that is not basically a raw element can easily have the quality dropped substantially and make it difficult to measure the cost over time. If you take steel as an input - you can make lower quality steel for a lower price. Even something as seemingly mundane and simple as oil has a lot of variety.