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Politics : Foreign Affairs Discussion Group

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To: TimF who wrote (264173)	5/14/2008 9:57:24 PM
From: Sun Tzu	Read Replies (2) of 281500

>> Should the CPI be based on changes in prices of horse drawn carriages, petticoats, and mechanical pocket watches? In the particular example of horse and buggy (which in actuality is not part of CPI), CPI should be based on the average price of one's driving from home to work. The key here is that should be dealing with averages for the commute (rather than actual distances) and that we should be keeping the key experience (in this driving) fixed. To claim that somehow I am getting more from the car because I am commuting further to work or to claim that because I have radio in the car and I could not have one in the carriage and therefore I should pay more for this (whether or not I want the radio and whether or not it is practical to say everyone should be working within a mile or two of their home as they did 200 years ago) is silly. Suppose that next year due to War in the Persian Gulf the price of gasoline shoots up to $10/gl. This is a 300% price inflation (at least as far as gas is concerned). Now suppose that due to this big jump in the price of gas, most people stop driving to work and either take the public transportation or carpool. As a result, let's say that gas consumption drops by 67%. Using your logic then (and that of the government's) the increase in price of gas should have zero effect on CPI because although the price went up 3-fold, the consumption dropped to a third. IMO, such a CPI would be plainly wrong. The fact that dynamic negative-feedback systems such as price-demand interaction are inherently stable is being abused by the government to mask real inflation. Just because one cannot afford to drive to work anymore due to price inflation is not the same as "people don't want to drive to work just like they don't want to ride a horse to work". ST

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