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http://krugman.blogs.nytimes.com/2011/09/24/a-quick-note-on-inflation/ http://krugman.blogs.nytimes.com/2011/09/24/a-quick-note-on-... Is the BPP index faked a

by jshen 15y ago

http://krugman.blogs.nytimes.com/2011/09/24/a-quick-note-on-inflation/ http://krugman.blogs.nytimes.com/2011/09/24/a-quick-note-on-... Is the BPP index faked as well? Is krugman dishonest or mislead, or maybe incompetent? This can also be a difference of opinion, that we can settle with lot's time. But I still dislike your original implication that people asserting a different number for inflation are dishonest.

beagle3 15y ago
I cannot decide whether Krugman is dishonest or incompetent, but way too many of his assertions and op-eds can be factually contradicted; deninger used to do that weekly until he got tired of it. Did you notice that between 1-Jul-2010 and 31-dec-2010 the BPP was >=2.3 (closer to 3% most of the time) while the official CPI was at <1.3% (closer to 1% most of the time)? The BPP was constructed to be similar to the CPI. If you constructed it to be close to the CPI of 30 years ago, it would have been higher. > But I still dislike your original implication that people asserting a different number for inflation are dishonest. It's not arbitrary people. The number of people who decide the CPI formula is ridiculously small - there might be 20 economists working on it, but ultimately it is a political decision by a handful of politically motivated people at the BLS to switch to a new computation, and the entire economic profession just accepts it as gospel. And I stand by my assertion that these politically motivated decisions do not have any "scientific purity" (whatever that might mean) or the people's well being in mind -- it has specific goals in mind, which end up harmful (through no direct malice)
- jshen 15y ago
  so the BPP people are part of this conspiracy too?
  - beagle3 15y ago
    >> The BPP was constructed to be similar to the CPI. If you constructed it to be close to the CPI of 30 years ago, it would have been higher. > so the BPP people are part of this conspiracy too? You insist on not reading what you are replying to. I see no point in this discussion.
    - jshen 15y ago
      I read it, the problem is that you imply things rather than stating them directly. I can't read your mind, so I don't always get what you are implying. Example: You assert that the CPI is essentially fraudulent, and chosen for political gains and that their is a conspiracy afoot. I point out that the BPP shows numbers much closer to the CPI than to shadowstats. You reply that it's constructed to be similar to CPI. This implies something, right? It either implies that it's part of the conspiracy, or the people are incompetent, or something ... but I don't know what your point is. Also, your point doesn't mean that it's wrong. Also, can you please show some evidence that the BPP was constructed to be similar to CPI. Right now we have 3 sets of numbers, two of them roughly agree. I'm inclined to believe that the BPP and CPI are more likely right than shadowstats given their agreement and the fact that they use different data sources. Also, this http://www.bogleheads.org/forum/viewtopic.php?f=10&t=88460&p=1272041#p1271387 http://www.bogleheads.org/forum/viewtopic.php?f=10&t=884...
      - beagle3 15y ago
        > I can't read your mind, so I don't always get what you are implying. I try not to imply anything, but I do assume that you have some background, formal or informal, in statistics and economics (if you don't, I'm surprised by how strong your opinions are given that you would be missing the tools to evaluate them). For example: > can you please show some evidence that the BPP was constructed to be similar to CPI CPI and BPP are both a weighted average over a list of prices (several thousands or millions of them, with CPI averaging only a few carefully selected hundreds, and BPP supposedly averaging a few tens of thousands or millions). Statistically, it is impossible for these two averages to be in such close correlation as they are, unless: a) essentially _all_ billion numbers sampled from have the same exponential evolution (that is, they all increase by 0.1%+/-0.01% per month, every single month) -- which is demonstrably false (oil prices have gone up and down several times last years, food prices have only gone up), or b) these averages were constructed to track each other (or a common underlying, but the CPI is defined to track some abstract underlying which is often revised and not perfectly documented or repeatable, so it has to be that BPP tracks CPI). The probability that the BPP index was independently constructed and yet tracks the CPI so low that one would need evidence to believe it. That's how statistics works, and you're welcome to consult a stats person if you don't believe me. What I'm saying is not that they are trying to do the same thing that CPI is doing. What I'm saying is that they did a regression of the prices they collect against the CPI officially published CPI, and as a result, they have a good approximation to the officially published CPI, without ever having to have an opinion of whether the official CPI is a good way to gauge customer expenditures. > You assert that the CPI is essentially fraudulent Yes, I assert that, as a measure of the growth of consumer expenditures, it is wrong (in the sense that it is inaccurate), and that it is fraudulent (in the sense that it is underestimating the price increases, and that it is intentional). > their is a conspiracy afoot These are your words, not mine. The thing is, your belief that there needs to be a large number of conspiring people in order to mislead others (intentionally or unintentionally) is not supported by evidence. Take medicine for example - for tens of years, long after the "evidence based medicine" came around, 99.9% of doctors (scientists! with diplomas!) believed stomach ulcers were caused by stress. Warren's claim that it is caused by a virus was considered craziness to the point that he had to infect and heal himself for others to take him seriously (later earning him a nobel prize in medicine). A recent survey showed that 40% of US doctors still believe the ulcers are caused by stress, despite never seeing any evidence for that and having evidence that it is caused by a virus. Now, how do you explain that? Were all those doctors, 99% of practitioners in the US and elsewhere, dishonest? No. Just misled. And I can assure you it didn't take more than 5 people a century or two ago to establish that "ulcers come from stress" for that to be accepted. Do you see the analogy? [And if you find that interesting, you're welcome to ask doctors, and then look for evidence, that salt intake increases your blood pressure, or that cholesterol intake increases your serum cholesterol, or that serum cholesterol is bad for you for that matter. You'd be amazed at what doctors believe without any evidence, and often evidence to the contrary. And they are not dishonest, they are just misled] > This implies something, right? It either implies that it's part of the conspiracy, or the people are incompetent, or something ... but I don't know what your point is. Also, your point doesn't mean that it's wrong. No. It does not imply anything other than what I said: it was constructed to track the CPI (the officially published number called "CPI", not anything else). It is not wrong in that sense that it IS a good approximation to the CPI, derived from independent other sources. And it does not make anyone who works on it part of a conspiracy, or incompetent. But it does mean they accept the CPI as gospel (which I explicitly claimed). Is there any reason to believe the BPP tracks the average growth of consumer expenditures? (averaged over consumers, of course)? > I'm inclined to believe that the BPP and CPI are more likely right than shadowstats given their agreement and the fact that they use different data sources. As I mentioned, from a statistical point of view, these can only agree if they are constructed to agree, so they shouldn't be considered independent. If you want the economic reasoning for that: The CPI switched in 1983 from including real estate home prices to using "owner equivalent rent". While one may argue whether this is justified, it definitely changes the meaning of CPI in many more ways than you'd expect (e.g. home prices were based on sales, OER is completely speculative). If you kept the old computation for just this component, this is how 2000-2010 would have looked: http://seekingalpha.com/article/45720-how-owner-s-equivalent-rent-duped-the-fed http://seekingalpha.com/article/45720-how-owner-s-equivalent... (which is much closer to shadowstats - and remember, this is just reverting one component back to 1983 computation, everything else the same); If you look at the BLS faq http://www.bls.gov/cpi/cpiqa.htm#Question_2 http://www.bls.gov/cpi/cpiqa.htm#Question_2 , they quote NAR data to show the BLS are saints. If you actually follow the NAR data, you'd be laughing at using it as reference. If the BPP used house prices, things would look very different. They cannot use speculative OER at all because only the BLS have that data. The fact that BPP agrees with CPI indicates that they try to track it, rather than figure out a true "basket". Furthermore, even if you take CPI as gospel, the BPP has 1% difference over 3.7 years it exists. Assuming that this difference remains, in 50 years, your government adjustment benefits will buy 15% less than what they officially should be able to buy. If you are really interested in challenging your world view, read Karl Deninger's blog for a month (the market ticker). Stuff you'll never see in the New York Times, CNN or CNBC.

by jshen 15y ago

beagle3 15y ago

I cannot decide whether Krugman is dishonest or incompetent, but way too many of his assertions and op-eds can be factually contradicted; deninger used to do that weekly until he got tired of it. Did you notice that between 1-Jul-2010 and 31-dec-2010 the BPP was >=2.3 (closer to 3% most of the time) while the official CPI was at <1.3% (closer to 1% most of the time)? The BPP was constructed to be similar to the CPI. If you constructed it to be close to the CPI of 30 years ago, it would have been higher. > But I still dislike your original implication that people asserting a different number for inflation are dishonest. It's not arbitrary people. The number of people who decide the CPI formula is ridiculously small - there might be 20 economists working on it, but ultimately it is a political decision by a handful of politically motivated people at the BLS to switch to a new computation, and the entire economic profession just accepts it as gospel. And I stand by my assertion that these politically motivated decisions do not have any "scientific purity" (whatever that might mean) or the people's well being in mind -- it has specific goals in mind, which end up harmful (through no direct malice)

jshen 15y ago
so the BPP people are part of this conspiracy too?
- beagle3 15y ago
  >> The BPP was constructed to be similar to the CPI. If you constructed it to be close to the CPI of 30 years ago, it would have been higher. > so the BPP people are part of this conspiracy too? You insist on not reading what you are replying to. I see no point in this discussion.
  - jshen 15y ago
    I read it, the problem is that you imply things rather than stating them directly. I can't read your mind, so I don't always get what you are implying. Example: You assert that the CPI is essentially fraudulent, and chosen for political gains and that their is a conspiracy afoot. I point out that the BPP shows numbers much closer to the CPI than to shadowstats. You reply that it's constructed to be similar to CPI. This implies something, right? It either implies that it's part of the conspiracy, or the people are incompetent, or something ... but I don't know what your point is. Also, your point doesn't mean that it's wrong. Also, can you please show some evidence that the BPP was constructed to be similar to CPI. Right now we have 3 sets of numbers, two of them roughly agree. I'm inclined to believe that the BPP and CPI are more likely right than shadowstats given their agreement and the fact that they use different data sources. Also, this http://www.bogleheads.org/forum/viewtopic.php?f=10&t=88460&p=1272041#p1271387 http://www.bogleheads.org/forum/viewtopic.php?f=10&t=884...
    - beagle3 15y ago
      > I can't read your mind, so I don't always get what you are implying. I try not to imply anything, but I do assume that you have some background, formal or informal, in statistics and economics (if you don't, I'm surprised by how strong your opinions are given that you would be missing the tools to evaluate them). For example: > can you please show some evidence that the BPP was constructed to be similar to CPI CPI and BPP are both a weighted average over a list of prices (several thousands or millions of them, with CPI averaging only a few carefully selected hundreds, and BPP supposedly averaging a few tens of thousands or millions). Statistically, it is impossible for these two averages to be in such close correlation as they are, unless: a) essentially _all_ billion numbers sampled from have the same exponential evolution (that is, they all increase by 0.1%+/-0.01% per month, every single month) -- which is demonstrably false (oil prices have gone up and down several times last years, food prices have only gone up), or b) these averages were constructed to track each other (or a common underlying, but the CPI is defined to track some abstract underlying which is often revised and not perfectly documented or repeatable, so it has to be that BPP tracks CPI). The probability that the BPP index was independently constructed and yet tracks the CPI so low that one would need evidence to believe it. That's how statistics works, and you're welcome to consult a stats person if you don't believe me. What I'm saying is not that they are trying to do the same thing that CPI is doing. What I'm saying is that they did a regression of the prices they collect against the CPI officially published CPI, and as a result, they have a good approximation to the officially published CPI, without ever having to have an opinion of whether the official CPI is a good way to gauge customer expenditures. > You assert that the CPI is essentially fraudulent Yes, I assert that, as a measure of the growth of consumer expenditures, it is wrong (in the sense that it is inaccurate), and that it is fraudulent (in the sense that it is underestimating the price increases, and that it is intentional). > their is a conspiracy afoot These are your words, not mine. The thing is, your belief that there needs to be a large number of conspiring people in order to mislead others (intentionally or unintentionally) is not supported by evidence. Take medicine for example - for tens of years, long after the "evidence based medicine" came around, 99.9% of doctors (scientists! with diplomas!) believed stomach ulcers were caused by stress. Warren's claim that it is caused by a virus was considered craziness to the point that he had to infect and heal himself for others to take him seriously (later earning him a nobel prize in medicine). A recent survey showed that 40% of US doctors still believe the ulcers are caused by stress, despite never seeing any evidence for that and having evidence that it is caused by a virus. Now, how do you explain that? Were all those doctors, 99% of practitioners in the US and elsewhere, dishonest? No. Just misled. And I can assure you it didn't take more than 5 people a century or two ago to establish that "ulcers come from stress" for that to be accepted. Do you see the analogy? [And if you find that interesting, you're welcome to ask doctors, and then look for evidence, that salt intake increases your blood pressure, or that cholesterol intake increases your serum cholesterol, or that serum cholesterol is bad for you for that matter. You'd be amazed at what doctors believe without any evidence, and often evidence to the contrary. And they are not dishonest, they are just misled] > This implies something, right? It either implies that it's part of the conspiracy, or the people are incompetent, or something ... but I don't know what your point is. Also, your point doesn't mean that it's wrong. No. It does not imply anything other than what I said: it was constructed to track the CPI (the officially published number called "CPI", not anything else). It is not wrong in that sense that it IS a good approximation to the CPI, derived from independent other sources. And it does not make anyone who works on it part of a conspiracy, or incompetent. But it does mean they accept the CPI as gospel (which I explicitly claimed). Is there any reason to believe the BPP tracks the average growth of consumer expenditures? (averaged over consumers, of course)? > I'm inclined to believe that the BPP and CPI are more likely right than shadowstats given their agreement and the fact that they use different data sources. As I mentioned, from a statistical point of view, these can only agree if they are constructed to agree, so they shouldn't be considered independent. If you want the economic reasoning for that: The CPI switched in 1983 from including real estate home prices to using "owner equivalent rent". While one may argue whether this is justified, it definitely changes the meaning of CPI in many more ways than you'd expect (e.g. home prices were based on sales, OER is completely speculative). If you kept the old computation for just this component, this is how 2000-2010 would have looked: http://seekingalpha.com/article/45720-how-owner-s-equivalent-rent-duped-the-fed http://seekingalpha.com/article/45720-how-owner-s-equivalent... (which is much closer to shadowstats - and remember, this is just reverting one component back to 1983 computation, everything else the same); If you look at the BLS faq http://www.bls.gov/cpi/cpiqa.htm#Question_2 http://www.bls.gov/cpi/cpiqa.htm#Question_2 , they quote NAR data to show the BLS are saints. If you actually follow the NAR data, you'd be laughing at using it as reference. If the BPP used house prices, things would look very different. They cannot use speculative OER at all because only the BLS have that data. The fact that BPP agrees with CPI indicates that they try to track it, rather than figure out a true "basket". Furthermore, even if you take CPI as gospel, the BPP has 1% difference over 3.7 years it exists. Assuming that this difference remains, in 50 years, your government adjustment benefits will buy 15% less than what they officially should be able to buy. If you are really interested in challenging your world view, read Karl Deninger's blog for a month (the market ticker). Stuff you'll never see in the New York Times, CNN or CNBC.