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Thread: HIDDEN INFLATION - "Fewer Sheets Needed to Get the job Done"

  1. #121
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    Re: HIDDEN INFLATION - "Fewer Sheets Needed to Get the job Done"

    Quote Originally Posted by Captain Adverse
    I want to thank you for this and your prior post #115. I have never claimed to be an economist (nor would I want to be), so all I can argue from is empirical evidence garnered over the last 50 years. I knew what the economy was like prior to 1975 and how much is has changed since.

    I've always been confused by the constant refrain from economists that nothing is amiss, our money is still good...look your wages are up! But they never really address the fact that prices for everything also went up, while both product quality and the packaged amounts kept going down. Instead they argue regular inflation is good, and always quote the CPI and other razzle dazzle statistics claiming everything is fine. Yet this doesn't seem to match reality much.

    I can't argue with them because I am not a charts and figures guy, I am just a KNOW IT CUZ I SEE IT kinda guy. They appear wrong because what they say does not reflect in the consumer marketplace. I mean who cares if major items I'll buy once in a decade like washing machines or HDTV seem cheaper when everyday items and services I need use up everything I earn and more?

    So thanks for pushing back and providing those links. Kudos!
    No problem. I actually think the phenomenon you're talking about is due to a few things. Hidden inflation is one of them, but an increase in the amount of time spent working for the same money, and much higher inflation for food and energy (especially gasoline), along with hikes in insurance rates and other necessary services, and generally flat wages, has led to the entirely correct perception that something has gone wrong.

  2. #122
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    Re: HIDDEN INFLATION - "Fewer Sheets Needed to Get the job Done"

    Quote Originally Posted by ashurbanipal View Post
    You mean, size changes?
    Yes.

    What I mean is: Rather than waste the time of 200 data collectors, all they have to do is put the size changes into a database used by the BLS. That way, all the data collectors need is the UPC and the price.

    So again: Just because they didn't ask you doesn't mean they weren't getting that information via some other means.


    I agree they don't do this as much as they (by which I mean, politicians) like. However, the basket of goods is not fixed, and it does track changes in consumer buying patterns. At least some of those changes are going to be due to the old items becoming unaffordable.
    Yes. But chained CPI changes much more frequently than the standard measure, and is not the official inflation rate.

    Plus, the standard measure ought to change. Should they still be tracking prices on VCR's, floppy discs and Palm Pilots? Should they refuse to track prices on coconut water and energy bars, because they weren't tracked in 2000?


    My experience as a consumer is that prices have been increasing at a much faster rate than the official report.
    Again, some prices have gone up, others have gone down; and people notice negatives much more than positives.

    That's why the official CPI is based on data collectors reporting prices, rather than asking people on the street if they believe prices have gone up.


    I don't think this is mere bellyaching or nostalgia. It seems to be widely reported.
    Oh. Right. That's obviously conclusive, hard data. People are reporting that they don't feel economically secure... during a recovery from the worst economic downturn since the 1930's. Obviously, that proves that inflation is greater than the official rate.

    Of course, it could also be that while you were increasing their wages, your company probably had to scale back on other benefits such as employer contributions to health care; or, their 401(k)'s were tanking; or their home values were underwater; or the decline in the value of their home, while an unrealized loss, weighs heavily on their state of mind. Or, again, they're noticing the things that cost more (gas, onions) and taking for granted things that get cheaper all the time (cell phones, durable goods).

    Or, they take for granted how compared to the 2006 model, that 2013 Toyota Camry LE they're eyeing now has all-disc brakes, brake assist, 6-speed transmission, electronic stability system, lighted vanity mirrors, better airbags, 1-touch windows, an audio jack, a CD that can play MP3's, bluetooth compatibility.... And adjusted for inflation, the prices are the same.

    You really can't tell based on subjective measures, because again, the reporters are biased.


    It seems to me that the proper attitude ought to be epistemic neutrality. What you seem to be saying is that without a firm reason to doubt what government tells us, we ought to simply believe what they say.
    "Epistemic neutrality" suggests that if you're going to accuse anyone (including a government) of blatant malfeasance -- such as manipulating price data over a period of years -- you ought to have a little more evidence than "I feel like I'm not doing as well as I did when I was 22."

    And no, a flat declaration that "government lies" is not sufficient. It's about as valuable as saying "women are bad drivers, therefore my wife will be at fault if she's in an accident."


    You seem to be in a hurry to be finished with this conversation.
    The OP doesn't understand how the data is collected, he doesn't understand how it's evaluated, doesn't have a good grasp of economics, and is making a claim based on biased subjective impressions.

    The OP doesn't appear to be interested in the fact that contrary to his claims, the BLS does take changes in quantity into account.

    The crux of his argument appears to be: "I felt like I had more purchasing power in 1970 than in 2013." That's not proof. That's nostalgia.

    So really... how much more is there to discuss?

  3. #123
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    Re: HIDDEN INFLATION - "Fewer Sheets Needed to Get the job Done"

    Quote Originally Posted by Visbek
    Yes.

    What I mean is: Rather than waste the time of 200 data collectors, all they have to do is put the size changes into a database used by the BLS. That way, all the data collectors need is the UPC and the price.

    So again: Just because they didn't ask you doesn't mean they weren't getting that information via some other means.
    OK, but from the source you originally quoted, the reported procedure is that all that information came from the retailer. As a reminder, here is the relevant portion of the text you quoted:

    Each month, BLS data collectors called economic assistants visit or call thousands of retail stores, service establishments, rental units, and doctors' offices, all over the United States, to obtain information on the prices of the thousands of items used to track and measure price changes in the CPI. These economic assistants record the prices of about 80,000 items each month, representing a scientifically selected sample of the prices paid by consumers for goods and services purchased.

    During each call or visit, the economic assistant collects price data on a specific good or service that was precisely defined during an earlier visit. If the selected item is available, the economic assistant records its price. If the selected item is no longer available, or if there have been changes in the quality or quantity (for example, eggs sold in packages of ten when they previously were sold by the dozen) of the good or service since the last time prices were collected, the economic assistant selects a new item or records the quality change in the current item.
    It doesn't appear to me that they're describing the alternate procedure you're proposing. It appears, rather, that they claim to collect size information from the retailer. And where manufacturers don't employ the loophole that the UCC allows for, then I suspect they would collect size information, because the retailer would say "that UPC is discontinued" and, hopefully, that would trigger just the sort of search for a replacement that the FAQ suggests.

    Quote Originally Posted by VIsbek
    Yes. But chained CPI changes much more frequently than the standard measure, and is not the official inflation rate.
    This seems to be tantamount to admitting that I have at least something of a point.

    Quote Originally Posted by Visbek
    Plus, the standard measure ought to change. Should they still be tracking prices on VCR's, floppy discs and Palm Pilots? Should they refuse to track prices on coconut water and energy bars, because they weren't tracked in 2000?
    Those are legit reasons to change the basket of goods, sure. But I seriously doubt those are the only reasons the items change.

    Quote Originally Posted by Visbek
    Again, some prices have gone up, others have gone down; and people notice negatives much more than positives.
    I'm not sure this is correct. Fear and hope seem to have about equal power on the human psyche. Enough signals to the upside lead to general optimism.

    Quote Originally Posted by Visbek
    That's why the official CPI is based on data collectors reporting prices, rather than asking people on the street if they believe prices have gone up.
    Well, certainly, the pitfalls of mob perception are well known. But, so are the pitfalls of data manipulation. My point would be that you don't get to pick one and ignore the other. And I have a further reason to think that public perception is a more trustworthy source of information in this case. See below.

    Quote Originally Posted by Visbek
    Oh. Right. That's obviously conclusive, hard data.
    To suggest that only hard data, especially only collected hard data, is the only evidence that should count is quite overweening.

    Quote Originally Posted by Visbek
    People are reporting that they don't feel economically secure... during a recovery from the worst economic downturn since the 1930's. Obviously, that proves that inflation is greater than the official rate.
    The experiences of which I was speaking occured well before the 2008 crisis, though I think it's probably gotten worse since then.

    Quote Originally Posted by Visbek
    Of course, it could also be that while you were increasing their wages, your company probably had to scale back on other benefits such as employer contributions to health care; or, their 401(k)'s were tanking; or their home values were underwater; or the decline in the value of their home, while an unrealized loss, weighs heavily on their state of mind.
    The only thing that we did do was increase employee contribution to the health care plan, which was still fairly inexpensive. Otherwise, we didn't do any of the stuff you've pointed out. Grocery chains are relatively durable even in a soft economy--everyone has to have food.

    Quote Originally Posted by Visbek
    Or, again, they're noticing the things that cost more (gas, onions) and taking for granted things that get cheaper all the time (cell phones, durable goods).
    Let's think this through a little more. Gas and onions do definitely cost more than they did at, say, the start of this century. when the first 1GHz CPU came out, it cost about $250 (just for the CPU itself). Now, I can pick one up for $50 or so (at a guess).

    However, if I build a computer with one, it'll run windows 98, and probably won't handle any modern security suites. It won't do well with Excel 2010, and might not run Word 2010, powerpoint 2010, or other such. Current versions of windows media player would tie it up--indeed, merely surfing the internet will turn out to be ridiculously slow because of all the extra CPU-heavy processes that modern webpages implement. So, if I want a computer to be actually useful, I need to buy whatever the contemporary $250 CPU is.

    We can draw similar analogies to cell phones, televisions, DVD players, and other such goods. This is just the effect of obsolescence, and it's what keeps many of the items you mention actually roughly level, or slightly more expensive, over time.

    Quote Originally Posted by Visbek
    Or, they take for granted how compared to the 2006 model, that 2013 Toyota Camry LE they're eyeing now has all-disc brakes, brake assist, 6-speed transmission, electronic stability system, lighted vanity mirrors, better airbags, 1-touch windows, an audio jack, a CD that can play MP3's, bluetooth compatibility....
    Cars wear out. If I decide I don't want all those features, and would rather just spend the money that would have bought, say, a car with features comparable to those available in the mid 1990's, where am I going to find that car? I could get a used one, and most likely get a very short life out of it.

    Quote Originally Posted by Visbek
    And adjusted for inflation, the prices are the same.
    I'm not sure what you mean. Do you mean that, ignoring the fact that the price has increased, the price remains the same?

    Quote Originally Posted by Visbek
    You really can't tell based on subjective measures, because again, the reporters are biased.
    Running to this principle, while it has some value, is in this case rather cheap, for two reasons. First, in an economy such as ours, perception counts for quite a bit. Our currency has no intrinsic value; its guarantee as a functioning currency is simply the willingness of human beings to accept it in remuneration for skills or goods. Where that perception is damaged, the actual economy is actually damaged. In this case, perception helps determine external reality.

    Second, I'm not sure what your ultimate point is going to be: are you seriously suggesting that most people think things are peachy, economically speaking? Are you seriously suggesting that, if polled, most people would say that their money goes just as far as it used to, or nearly so?

    Quote Originally Posted by Visbek
    "Epistemic neutrality" suggests that if you're going to accuse anyone (including a government) of blatant malfeasance -- such as manipulating price data over a period of years -- you ought to have a little more evidence than "I feel like I'm not doing as well as I did when I was 22."
    I agree (I think) with the principle, but not the manner in which you're applying it, nor the conclusion you seem to be drawing from it. As I mentioned in my previous post, I agree that in matters of day-to-day testimony, the default (and therefore neutral) stance is to believe what one is told. But there are important qualifications, and even instances in which the reverse is true.

    If I am out somewhere and I ask a regular-looking fellow what time it is, and he tells me it's 3 in the afternoon, I tend to believe what he says unless I have reason to think that cannot be correct. But if it is imperative that I know the exact time, or lives will be at stake, I am much more careful about how I take his testimony.

    In this case, you seem to be simply taking what the BLS says at face value, insisting that we should as well, and concluding that a common perception that inflation is under-reported is simply to be chalked up to reporter bias. That is not epistemically neutral.

    Quote Originally Posted by Visbek
    And no, a flat declaration that "government lies" is not sufficient. It's about as valuable as saying "women are bad drivers, therefore my wife will be at fault if she's in an accident."
    This is a poor analogy. It may be a stereotype that women are bad drivers, but I think most people are aware this is probably false, in much the same way that stereotypes about the "savagery" of dark-skinned people during the age of European colonization was false. The impact of your example works on people recognizing that the stereotype of women being bad drivers is false.

    However, it's actually true, and not a stereotype, that governments lie to the people they govern. It's not merely our government. I cannot think of a government I've ever studied or read anything about that didn't lie to its people. Ours seems to be caught in one sort of lie or other on a very regular basis. We can also easily see why politicians would have a vested interest in underreporting inflation.

    It turns out that background conditions do have a great deal of impact on how we should interpret events. Consider this situation:

    Suppose there is some disease which afflicts 1/10th of 1 percent of the population. There is also a test which detects the disease with 99% accuracy.

    Suppose you get the test, and it turns out positive. What is the probability that you have the disease? Most people say 99%.

    Most people say that, but that's wrong. The actual answer is about 9%. The background information tells heavily. You can work the Bayesian calculation to see this if you want, or, you can just think of it in terms of natural frequencies.

    Out of 1000 people, 1 person has the disease (on average). But out of 1000 people, 1% will get a false positive. Thus, out of 1000 people, 11 will test positive, only one of whom has the disease. So, if you test positive, your chances of having the disease are 1 in 11. Of course, this is a huge shift from your initial probability of 1 in 1000, but it's also far from the intuitive answer.

    With this diversion out of the way, I would argue on the basis of the established principle that an entity which lies regularly is likely to be lying in this instance. Epistemic neutrality, in this instance, is to distrust what the untrustworthy entity says, especially when the entity has an interest in lying, and to require better-than-average justification before believing them.

    Quote Originally Posted by Visbek
    The OP doesn't understand how the data is collected, he doesn't understand how it's evaluated, doesn't have a good grasp of economics, and is making a claim based on biased subjective impressions.
    Well, this is an instance of begging the question, but even worse, you seem to be conversing with me, not the OP.

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