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Politics : Foreign Affairs Discussion Group -- Ignore unavailable to you. Want to Upgrade?

To: Sun Tzu who wrote (264178)	5/14/2008 10:19:06 PM
From: Sun Tzu	Read Replies (2) \| Respond to of 281500

As a follow up, and since Tim is so keen on accepting the "improved quality" argument that the government uses to arbitrarily lower the CPI number I'd like to pose the same "quality' argument but from a different perspective. As far as I know, many (most?) people would rather be eating organic food rather than what they get off the regular supermarket, just as they would have had 100 years ago. They'd also would rather to have a property large enough to hold a few horses, just as they would have had 100 years ago. And I suspect many, if not most, would rather be able to afford life on earnings of just one of the spouses so that they can have more quality time with their kids and look after them better. What would the current CPI look like if used these metrics to raise its numbers (i.e. calculate food CPI based on organic food only; choose the rent/mortgage for a property large enough to hold horses as the housing component; and compensate the parents for the loss in quality of life for not having enough time to spend it with their kids)? How come the CPI goes lower because cars now come with CD players instead of radio, but they do not go higher because we cannot afford organic food or spend more time with our kids?

To: Sun Tzu who wrote (264178)	5/20/2008 10:49:24 PM
From: TimF	Read Replies (1) \| Respond to of 281500

CPI should be based on the average price of one's driving* from home to work.* Your not buying a trip, or 10000 trips to work and back. Your buying a car. The car you buy today is not the same as the car you bought 20 years ago, and the change is for the better. The key here is that should be dealing with averages for the commute (rather than actual distances) The real key here is my last paragraph in that post. You aren't buying a commute. But to address your point, if your commute is further, you are paying for something that is inherently more expensive. If you pay 50% more (in incremental costs) to go 6 miles, than you used to pay to go 4, that isn't inflation. 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. That's neither my logic nor the CPI's logic. If gas consumption drops by 67% a lot of it is still being consumed. You would still factor in a 300% increase, you would just apply that increase to a reduced percentage of the CPI. Overall the effect would be to increase the CPI (and that's only counting the direct effect, the indirect effect would increase other prices, so the CPI would increase to an even greater extent)