[Centurnion]

Certainly chosing a basket is difficult, but substitution makes no sense because it is changing the basket midstream, and besides, you have to make assumptions about what the switch to is anyways.

As for chosing the basket, obviously the main goods in it should be those goods that are currently not in it, mainly food and energy, because consumers need to buy those things regardless of anything else. I don;t need to buy consumer electronics regularly, but I sure need to buy groceries every few weeks and people who drive have no choice but to buy gasoline.

If the basket is wide enough fluctuations in one item do to outside events (say the price of orange juice due to bad weather) would be minimized.

[JakilSong]

Originally posted by Dauphin
What about rent control? How does that work over there? Most cities don't have it. A few (New York, San Francisco) do have it as a hold over from WW2 price controls but most cities don't.

[irridgita]

There's no rent control in San Francisco anymore.

[DiBellaBam]

Originally posted by DanS


It's not a law of nature that fuel prices will rise in the coming years. They can fall quickly too. I don't think I will ever forget 1986. You are far more optimistic than I if you think fuel prices are going anywhere but up in the coming years. This isn't 1986.

[ljq0AYOV]

I would like to think that the author of the original article is uninformed, but on rereading it I think that he is trying to argue a case (poorly) rather than engaging in objective journalism.

The Consumer Price Index measures the costs of hundreds of goods bought by “an urban wage earning family of four” and combines them into a one index number. It does this by weighting each price change by the share of consumers budgets spent on each item. The fact each price is weighted by its budget share immediately explains why some prices have gone up by much more than the CPI. None of this is mentioned in the article.

The budget shares change over time, which reflects the ability, or inability, of consumers to substitute other goods. This is a basic economic concept known as elasticity of demand. Originally the budget shares were updated every 10 years, so that the CPI reflected price changes based on what consumers bought up to 10 years ago. This procedure is known as fixed weighting. In the changed methodology the article refers to, the budget shares are updated every year, which is known as chained weighting. In this way the CPI reflects price changes based on what consumers bought one year ago. It should be plain that this change in methodology improved the accuracy of the CPI. These important details are not mentioned in the article.

There are numerous factual errors in the article. For example, government contracts are tied not to the CPI, which measures the cost of goods bought by “an urban wage-earning family of four”, but to the Producer Price Index (PPI), which measures the price of commercial goods and services that businesses and the government buy.

There is also no mention of the Boskin Commission, a panel of independent economists, which found that the CPI overstates consumer prices by about one percent per year.

edits: fix url

[finasteridonline]

Things that are inflating at moment: Energy, food, drugs,

Things that are deflating at moment: Electronics, housing, apparels, furnitures, toys

Things that have just stopped inflating: College tuition.

[JoZertekAdv]

Adam Smith;

I thought about writing the exact same post that you just wrote; I thought it was... common knowledge to know these thing before writing about it.

But since I mainly speak french, I had difficulty to write a good post about the subject.
Anyway;

good post