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0 pointsvdqtp32mo ago0 comments

I'm really frustrated by inflation numbers because there doesn't seem to be a metric that makes sense.

CPI ignores the reality people feel (and swaps in cheaper items that aren't necessarily on par with the original to keep the number lower), gold isn't really a 1:1 with purchasing power...there must be some sort of useful composite metric that merges multiple data points over time like rental/house prices, CPI market basket, dollar vs hard assets like gold to come up with a more accurate number.

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5 comments · 3 top-level

libartsreader2mo ago· 2 in thread

The CPI doesn’t arbitrarily “swap in” items. It changes based on consumer behavior. That’s why it now tracks streaming services but not VCRs. Similarly, if the price of Gala apples triples and everyone switches to Fuji, a fixed index would overstate the actual cost of living.

Insofar as gold impacts the cost of things people buy, it’s already included. Adding it directly to the CPI makes no more sense than adding Bitcoin or soybean futures.

The cost of housing is already is a massive component of the CPI.

dualvariable2mo ago

But if you used to be able to afford steak and now all you can afford is ground turkey, readjusting the basket of goods for that shift in "preference" is just hiding the fact that nobody can afford steak anymore.

And similarly, the hedonic adjustments to smartphones sort of implicitly claim that the $100 cheap smartphone you can buy today is worth $8000 back in 2009 because of how much better processors and memory have gotten. But you can't buy an iPhone 1.0 for $1 to satisfy the need to have a phone that you can install apps onto (and the upgrade cost every few years as cheap phones can no longer run an O/S version that your banking app requires).

libartsreader2mo ago

The assertion that the CPI simultaneously overlooks downward product substitution and prices in product improvements in order to paint an overly-rosy picture is belied by the fact that most stuff is cheaper than it’s ever been.

Thirty years ago, internet service was $2.95/hour (in 1996 dollars!), long-distance phone calls were 10 cents/minute, and a low-res 28” color TV with 5 channels cost a fortune.

2 more replies

Aunche2mo ago

You're only going to hear from people who think that the CPI underestimates inflation. If the CPI overestimates inflation for an given individual, they have no reason to comment on it.

a2dam2mo ago

I'd argue that "the reality people feel" isn't a good aspect of any metric other than one that measure sentiment itself.

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