I don't think the overstatement or understatement of inflation is entirely a deliberate thing. Its not all a matter of responding to different incentives, its largely a matter of poor data and faulty methodology. Perhaps the incentives bias the result to an extent towards a lower result for the CPI, but if the way the CPI is calculated leads to an overstatement that could more than overcome the biased incentives. Also the incentives don't all work in one direction.
The way inflation is calculated gives a built in tendency to overstate inflation.
pittsburghlive.com
Can I convince you? Who knows what will do the job, but I find the increase in what people have net of debt being noticeably greater than the reported increases in real wages, or even real income rather compelling.
pittsburghlive.com
cafehayek.typepad.com
reason.com
reason.com
reason.com
reason.com
ssa.gov
" Tuesday, January 02, 2007
THE WEIRDNESS OF THE CPI
Suppose that a Wal-Mart or a Costco moves into your area. Groceries are now available for prices that may be 10-20% lower than the equivalent items at traditional grocery stores. How is this reflected in the Consumer Price Index?
Most thoughtful people would probably approach the problem using a weighted average of prices, based on how many people choose to buy which items at which stores. That's not, however, how the Bureau of Labor Statistics apparently chose to do it. According to this analysis, the BLS calculates the CPI in a manner resulting in an impact of zero for the shift to superdiscount retailers. Thus, the author suggests, the official inflation estimates for food may be overstated--ie, actual prices paid by real people may be increasing less rapidly than the CPI would lead one to believe..."
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