What makes inflation tricky, both in terms of calculating easily but also in terms of being easily fudged are substitutional products.
Inflation is measured by the price of a representative basket of products. And what’s reasonable to put in that basket today, might not be reasonable tomorrow.
If beef explode in price, people aren’t going to buy steaks, so maybe it makes more sense to change the index away from steaks to pork chops. It’s both a cop-out and the only reasonable thing to do.
The national isn’t poorer just because caviar went from almost free to extremely priced over a century.
At least for the European Central Bank, housing is the single largest item in the inflation basket - entered as something called "imputed rent" - how much would it cost to rent an equivalent dwelling. This item alone accounts for 7.5% of the overall index.
Adding housing maintenance, heating, water supply, etc. - the entire housing category climbs up to 17.8%. Which sounds like a totally reasonable estimate to me - young people and urbanites pay more, older folks and people in rural or provincial towns pay much less. From my personal experience - housing and related expenses were ~50% of my income while paying down mortgage, down to ~7% after the loan was repaid
Oh, but there is. Move in with roommates in a bad part of the town. See the dentist only to pull out excruciatingly painful rotten teeth. Leave small kids home alone, perhaps pull their older sibling from school to babysit for free.
I'm talking about pre 2019 numbers. Housing costs were usually around 3% but remember, you're not spending your entire paycheck on housing. Cheap Asian widgets are going down in price and drag the index down. Expensive housing is dragging the index up and we then end up in some limbo between 1.5% and 2%.
But still, something needs to be said about worse housing/medical treatment/child care vs better chinese widgets. Seems like in the whole quality of life is getting worse for most people and money is actually losing it's value when it comes to the things that actually matter. Or am I not seeing this right?
The CPI doesn’t reflect your personal preferences. It’s an average across the entire country. Have you ever known the entire country to agree on anything?
Inflation is measured by the price of a representative basket of products. And what’s reasonable to put in that basket today, might not be reasonable tomorrow.
If beef explode in price, people aren’t going to buy steaks, so maybe it makes more sense to change the index away from steaks to pork chops. It’s both a cop-out and the only reasonable thing to do.
The national isn’t poorer just because caviar went from almost free to extremely priced over a century.