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That is the problem, the ONS office for national statistics was tasked to come up with a new inflation index that did have some element of housing costs CPIH.

That is the problem, the ONS office for national statistics was tasked to come up with a new inflation index that did have some element of housing costs CPIH. Unfortunately the last government didn't like the results and the ONS was to to go away and try again. Another problem if the basket of goods used has formerly expensive items like DVD players and Computers that over time experience massive price deflation - it skews the figures

stegosaurus 11y ago
The core issue is using irrelevant items. Any luxuries in the inflation basket immediately means that it is only relevant for the top 50% of the population. If you are rich then inflation is just annoying. If you are poor then it is catastrophic. So it makes sense to focus on the latter.
- mauricemir 11y ago
  These days a dvd player and a computer are not luxury items (in the UK) But when they where added to the index they where a lot more expensive than now - which is one sneaky way you can fiddle the inflation figure.
  - retube 11y ago
    If the vast majority of people, rich and poor, buy consumer electronics, why is it "sneaky" to include them in the inflation basket?
    - mauricemir 11y ago
      Think about it for a while: So you deliberately add to the basket of goods a device (that you know will deflate) at say £200 10 years later its now £25. Makes inflation seem less than it really is.
      - retube 11y ago
        Whether or not you know it will deflate is irrelevant. The point is these things, which almost all people buy, get cheaper. In fact I'd argue that inflation is grossly over-stated: it doesn't take into account the quality of goods. E.g think computers. Thanks to price drops of many orders of magnitude we have enormous computing resources at our disposal right in the palm of our hands that makes things possible barely imaginable 20 years ago.
        stegosaurus 11y ago
        Essentially the argument here is that trinkets can make up for a lack of basics. I think that is fundamentally wrong aside from the few digital nomads that wander internet cafes with their laptops. DVDs and cell phones and bicycles and such are very cool. No doubt about it. But they are toys. Productivity boosting toys perhaps; but housing is essential... housing isn't just productivity boosting. Without it you cannot own anything you cannot carry on your back. I would choose a country home with a few books and a log fire over a city flat with a supercomputer. Wouldn't you? (Hell, if we believe in the market, the fact they are more expensive is a statement that they are indeed more valuable!)
        icebraining 11y ago
        Essentially the argument here is that trinkets can make up for a lack of basics. No, the argument is that the inflation rate is not the same as the cost of living index.
        stegosaurus 11y ago
        Sure. I think that using 'cost of toys' index for inflation and 'cost of living' index not at all is a ridiculous way to go about things. If the majority of people are at income / wealth levels that mean their personal inflation rate is the cost of living index, then the general rate of inflation should be equal to that. It is literally an expression of what money is worth to the people for whom money is anything more than a metagame token. (Compare with median vs mean income. Mean income really doesn't mean much, especially if you exclude the unemployed.) Either that or we really need to reconsider what inflation is used for. The idea of it being used as a sort of way to determine 'real returns' is broken if most of the things people care about are left out of the index or demoted in weighting. Even a wealthy person does not have 0% inflation in the UK. They are probably buying flats in London or similar, which are going up in price all the time. How is that not inflation? Your money buys less... inflation is (should be) a measure of that. Toys really do not make up vast proportions of the expenditure of, well, anyone.

stegosaurus 11y ago

The core issue is using irrelevant items. Any luxuries in the inflation basket immediately means that it is only relevant for the top 50% of the population. If you are rich then inflation is just annoying. If you are poor then it is catastrophic. So it makes sense to focus on the latter.

mauricemir 11y ago
These days a dvd player and a computer are not luxury items (in the UK) But when they where added to the index they where a lot more expensive than now - which is one sneaky way you can fiddle the inflation figure.
- retube 11y ago
  If the vast majority of people, rich and poor, buy consumer electronics, why is it "sneaky" to include them in the inflation basket?
  - mauricemir 11y ago
    Think about it for a while: So you deliberately add to the basket of goods a device (that you know will deflate) at say £200 10 years later its now £25. Makes inflation seem less than it really is.
    - retube 11y ago
      Whether or not you know it will deflate is irrelevant. The point is these things, which almost all people buy, get cheaper. In fact I'd argue that inflation is grossly over-stated: it doesn't take into account the quality of goods. E.g think computers. Thanks to price drops of many orders of magnitude we have enormous computing resources at our disposal right in the palm of our hands that makes things possible barely imaginable 20 years ago.
      - stegosaurus 11y ago
        Essentially the argument here is that trinkets can make up for a lack of basics. I think that is fundamentally wrong aside from the few digital nomads that wander internet cafes with their laptops. DVDs and cell phones and bicycles and such are very cool. No doubt about it. But they are toys. Productivity boosting toys perhaps; but housing is essential... housing isn't just productivity boosting. Without it you cannot own anything you cannot carry on your back. I would choose a country home with a few books and a log fire over a city flat with a supercomputer. Wouldn't you? (Hell, if we believe in the market, the fact they are more expensive is a statement that they are indeed more valuable!)
        icebraining 11y ago
        Essentially the argument here is that trinkets can make up for a lack of basics. No, the argument is that the inflation rate is not the same as the cost of living index.
        stegosaurus 11y ago
        Sure. I think that using 'cost of toys' index for inflation and 'cost of living' index not at all is a ridiculous way to go about things. If the majority of people are at income / wealth levels that mean their personal inflation rate is the cost of living index, then the general rate of inflation should be equal to that. It is literally an expression of what money is worth to the people for whom money is anything more than a metagame token. (Compare with median vs mean income. Mean income really doesn't mean much, especially if you exclude the unemployed.) Either that or we really need to reconsider what inflation is used for. The idea of it being used as a sort of way to determine 'real returns' is broken if most of the things people care about are left out of the index or demoted in weighting. Even a wealthy person does not have 0% inflation in the UK. They are probably buying flats in London or similar, which are going up in price all the time. How is that not inflation? Your money buys less... inflation is (should be) a measure of that. Toys really do not make up vast proportions of the expenditure of, well, anyone.