4 ms·

A few things. 1. Are the smaller package sizes reflected in any of the inflation numbers you cite? I am asking an honest question here. http://finance.yahoo.

A few things. 1. Are the smaller package sizes reflected in any of the inflation numbers you cite? I am asking an honest question here. http://finance.yahoo.com/news/looking-for-inflation--it%E2%80%99s-hiding-in-smaller-package-sizes.html http://finance.yahoo.com/news/looking-for-inflation--it%E2%8... 2. What do you think about this website? Is he a crank? If so, why? It's common knowledge that the CPI definitions change regularly. http://www.shadowstats.org/ http://www.shadowstats.org/ 3. How do you feel about geometric weighting? It tends to underestimate inflation. I've done some math here: https://news.ycombinator.com/item?id=4781794 https://news.ycombinator.com/item?id=4781794 4. Economics is the study of human action, because without humans making decisions and acting there would be no money, no industry, no nothing. People tend to estimate inflation at a higher rate than economists calculate it. Who is more likely to be wrong? https://news.ycombinator.com/item?id=4777899 https://news.ycombinator.com/item?id=4777899 5. What do you think about the "hedonic" adjustments in the CPI? If you look at the BLS' website they try and say "this stuff is all perfectly legitimate" but inadvertently acknowledge that the definition of inflation is changing. If there were no hedonic adjustments in the 60s and inflation was 0-5% range let's say that was "baseline" inflation. Now there are hedonic adjustments and inflation is in the same range. If those adjustments can reduce inflation then we might be experiencing more price increases now than they did in the 60's but it's simply under-reported. http://www.bls.gov/cpi/cpiqa.htm http://www.bls.gov/cpi/cpiqa.htm Ultimately I believe strongly in some of what Nassim Nicholas Taleb talks about in his writings when it comes to what can be known and not-known. If a coin toss comes up heads 99 times in a row any person capable of exercising some thought would realize that there's something wrong. I can't put my finger on the exact problem with CPI calculations but I can tell you that where my dad was able to support a family on a single income, and his dad was able to do so as well, I can say with confidence that it would be very difficult for me to do that today. We all had/have engineering degrees and in fact I'm the most educated; I've got a masters degree and they only had bachelors. And I'm in electrical and computer engineering; arguably quite a good business to be in. Why is there such disparity there? How can the official numbers not reflect the difference?

PeterisP 13y ago
One big issue is that people misremember the past, and it's not a random error but a heavily biased one; The second is that CPI tracks the price of a fixed size basket of goods&services; but there has been a big change in how much goods&services does 'support a family' means. For example, if you measure x% increase for cost of housing&utilities, then I'd feel a much, much higher increase simply because "need for space" in my family rising kids is much higher than in my parents' family and the tolerance of living with relatives is less - so we're buying much more "housing space"+heating+stuff for the same number of people and 'social level', and we're obviously paying more for that. In fact, if I think about the goods&services my parents bought when they were young and how much it'd cost if I lived that way, then it would be extremely cheap now, as many of the things that I spend money on simply didn't exist back then and people were happy without them; also many of the habits (how food and trips were done) were done in much cheaper ways - no plane flights for vacations, ever, for example. We're a dual-income family, but I'd say we could live in that 1970'ies style on a single income easily - but, of course, we don't want that.
- msandford 13y ago
  Today for one or two people flying is often cheaper than driving unless you're marathon drivers. Once you roll a whole family in it still might be cheaper once you consider the food, hotel/motel, lost time due to infinite bathroom breaks, etc in addition to gas and miles on the car. But you've made a good point; people made do with less back then and that should be factored in. I think part of the problem is that the artificially low interest rates are turning "conventional wisdom" or "traditional values" on their head. At 6-8% interest rate and 1-3% inflation saving money makes sense as you get a real interest rate that's positive enough to make saving money smart. Putting away money for future expenses is a good thing as future expenses are discounted today via the interest rate. Living within your means is actually wise. Today only a fool isn't indebted because with interest rates below 1% and inflation at several percent people are effectively paying you to take loans. Saving money for future expenses actually makes them more expensive; better to wait til you need the money and then borrow it so that you can reap the benefit of negative real interest rates, rather than pay it. Because it doesn't make sense to save money, people don't and that means spending. Good for the GDP numbers today, bad for conventional wisdom about money and especially bad for society's ability to withstand credit shocks or employment shocks as nobody has a cash buffer to see them through the hard times.

PeterisP 13y ago

One big issue is that people misremember the past, and it's not a random error but a heavily biased one; The second is that CPI tracks the price of a fixed size basket of goods&services; but there has been a big change in how much goods&services does 'support a family' means. For example, if you measure x% increase for cost of housing&utilities, then I'd feel a much, much higher increase simply because "need for space" in my family rising kids is much higher than in my parents' family and the tolerance of living with relatives is less - so we're buying much more "housing space"+heating+stuff for the same number of people and 'social level', and we're obviously paying more for that. In fact, if I think about the goods&services my parents bought when they were young and how much it'd cost if I lived that way, then it would be extremely cheap now, as many of the things that I spend money on simply didn't exist back then and people were happy without them; also many of the habits (how food and trips were done) were done in much cheaper ways - no plane flights for vacations, ever, for example. We're a dual-income family, but I'd say we could live in that 1970'ies style on a single income easily - but, of course, we don't want that.

msandford 13y ago
Today for one or two people flying is often cheaper than driving unless you're marathon drivers. Once you roll a whole family in it still might be cheaper once you consider the food, hotel/motel, lost time due to infinite bathroom breaks, etc in addition to gas and miles on the car. But you've made a good point; people made do with less back then and that should be factored in. I think part of the problem is that the artificially low interest rates are turning "conventional wisdom" or "traditional values" on their head. At 6-8% interest rate and 1-3% inflation saving money makes sense as you get a real interest rate that's positive enough to make saving money smart. Putting away money for future expenses is a good thing as future expenses are discounted today via the interest rate. Living within your means is actually wise. Today only a fool isn't indebted because with interest rates below 1% and inflation at several percent people are effectively paying you to take loans. Saving money for future expenses actually makes them more expensive; better to wait til you need the money and then borrow it so that you can reap the benefit of negative real interest rates, rather than pay it. Because it doesn't make sense to save money, people don't and that means spending. Good for the GDP numbers today, bad for conventional wisdom about money and especially bad for society's ability to withstand credit shocks or employment shocks as nobody has a cash buffer to see them through the hard times.