A house isn’t. Healthcare isn’t. A lunch isn’t. A child’s daycare isn’t. Energy isn’t. Heating isn’t…
Even a car is safer and nicer but the utility is the exact same.
You're right. Healthcare is more cautious and more expensive. Housing is built to higher standards but with poorer quality materials, and uses more of the available lot area for covered square footage, but is still more expensive on a per square footage basis despite using poorer materials.
Neither are remarkably different in utility, but both have seen astronomical increases in cost.
Healthcare is somewhat different, but also many things (if not most) haven't changed at all and have seen their price increase nonetheless.
As for housing, only new housing has changed, old one mostly hasn't. Also if it's a somewhat bigger house but it's more remote from city center where people work, leading to higher commute times and expenses, is that supposed to be better or worse, how do you quantify that?
A house from 2020 is different than once from 2000, is different than one from 1980. I used to live in a house that was originally constructed in 1890: it not only had residual disconnected knob-and-tube electrical wiring, but piping for gas lamp lighting. Some homes in the neighbourhood had small doors for milk deliveries and also coal chutes.
Sure, but even today more people live in houses from the 80s than in house from 2020, so comparing the average house price in 2023 with the house standard from 2020 doesn't really make sense, because the average house is much older than this.
Imagine you need 200 of bricks to fix a wall. You may say that modern brick is 50% better, more insulating whatever. And now your inlation number is 10% instesd of 60%
But I still need the same number of bricks to fill in the hole on the wall. And I have to pay 60% more for it, not 10%. So when it comes to cost of living and surviving in the world, this argument is pure fantasy.
My upfromt cost is still higher, and the wall cannot be less than 1 brick thick so I cant use fewer bricks. Maybe I am a construction company and someone else gets the befits of better insulation, or maybe fuel costs went up, you have to isolate discussion to the item itself.
I hear you, and I am trying to grapple with this myself.
So the cost of bricks went up by X, and maybe the cost of electricity also went up by Y, and the labor costs are also higher by Z, but adding them all up, my costs are not up by X + Y + Z, but something less than that. Should that be part of CPI? Is that part of CPI? Is that part of something else? Very interesting in knowing an official economist take on this.
Can you achieve the same level of insulation for less, by using traditional insulating materials and techniques instead of insulating bricks?
Does the law mandate that your bricks have a certain R-Value?
How much heating and cooling is required in the climate where the building is located?
As usual there is no simple answer.
Bricks are OK as an analogy, but very poor as an example: as far as I'm aware modern bricks are no more insulating than old bricks, and neither are any good at the job. If there is a modern and insulating brick, then I don't think it's really caught on very much yet.
You can buy dumbphones (the old sort of bricks, in your analogy) for less than $20. They have basic cameras, small screens, and 2G connectivity. As I understand it, a similar phone would have cost $100 in, say, 2007.
No one is stopping you from buying the $20 phone with the 2007-era features. You will still be able to text and call just fine. You just want the features of the smart phone. That's why I think it's fair to say that the cost of mobile phones hasn't gone up.
This is the case across many categories, the big exception being cars - automakers simply refuse to offer basic/inexpensive cars in the North American market for whatever reason.
You can't just use old products today and claim they are adequate For example I cannot work from home with a dial-up connection. You need a few megabits to do a video interview and get a job, to work from home, etc.
So your CPI might say internet is cheaper, but that is a fantasy, because in real life I pay 2x as much for a 50 mb connection.
Likewise I cannot use a 20 year old phone - those frequencies have been shut down.
There are several sitations where I was legally required to have a smartphone - one of them was registering a birth.
So again your CPU will claim that phone got better, but in real life I have to spend more money to remain an functioning member of society.
You couldn't have used your dial-up to work from home in the 90s either. Your internet is doing more for you, so it's not fair to call it's higher price "inflation."
Companies are making new feature phones today that will connect with cell networks. And are you really required to have a smartphone to register a birth? Was there not a workaround for feature phones? State governments have to be able to let indigent people register births, so there must be a workaround.
> Your internet is doing more for you, so it's not fair to call it's higher price "inflation."
It's not really doing it for me, is it? The requirement that I pay for modern internet is forced on me against my will.
Employers require that they can see my face when conducting an interview, the government requires that I apply for a visa online and upload 300 mb of documents.
The hospital demands that I register online and work with their system.
If you don't want to be homeless, you must pay for the modern service. And if it is more expensive, then inflation went up, your budget is less today than it was before.
Everyone brings up cell phones but imho they are not that important when looking at rising prices to consumers (technology is deflationary in nature). Food, energy, and housing are what impact consumers the most.
> Food, energy, and housing are what impact consumers the most.
And both food and energy are very chaotic (especially due to geopolitical events: thanks Russia!). A couple of years ago there was much rending of garments over gas prices in the US: now, not so much.
So that is why inflation is often also looked at without those two components because they can vary so widely, even month-to-month (anyone else remember when oil went negative in 2020?).
I still hear a lot about gas prices today to be honest. They are still quite high relatively.
But I think that is the largest failure of Core CPI to the point it makes it almost worthless. Is it more stable? Sure, but stability isn't great if it doesn't measure the right thing.
> But I think that is the largest failure of Core CPI to the point it makes it almost worthless.
It's not: if policy was determined on non-Core, then one month the Fed would have to raise/lower rates, and then the very next month it would have to do the opposite.
The point of Core is to removed the gyrations of commodity (traders). See Chart 1 of:
> if policy was determined on non-Core, then one month the Fed would have to raise/lower rates, and then the very next month it would have to do the opposite.
Well, except Fed policy doesn’t really use CPI (Core or otherwise) at all. The Fed's evaluation of prices that informs monetary policy centers on the PCE, not CPI.
And while that's their key indicator, their actual analyiss underlying policy decisions isn't just applying a fixed function of current top-level indicators to get a monetary policy as output; there is considerable analysis of trends and what is going on below the top-level indicators, etc.
You don't need to board consisting of multiple Senate-confirmed officers with large supporting expert staff to apply a simple function of headline indicators from other agencies to produce an output, so the BLS not separately calculating and publishing core CPI wouldn't effect the Fed doesn't use CPI, and does a level of analysis with the indicators it does use that if it thought something like the particular aggregate used for “Core” was necessary and not in the publication, they’d just recreate it from the lower-level components.
Core CPI isn’t headline CPI. Its an additional measure that is published alongside the headline CPI; the removal of components with a high non-seasonal volatility [0] is thought to potentially make it more useful in providing early indication of changes in longer term trends; literally no one presents it as a better measure of current inflation.
[0] the components involved also have a high seasonality, but that can be addressed via seasonal adjustment, but the high non-seasonal volatility means that fluctuations in those components can drown out early trend indications in ways that seasonality adjustments can’t compensate for.
> A cell phone from 2 decades ago is an entirely different product from a cell phone today. That needs to be accounted for.
A cell phone indeed, but for personal computers, the gain we got from the technological advances isn't as clear from a consumer's perspective. Sure there are niche activities like video processing or graphic editing, where the performance improvements allows for things barely imaginable 20 years ago, but for most use case people have, there isn't that many significant difference:
- boot time: despite SSD, consumer PC still take minutes to boot when they aren't brand new with a fresh install.
- web browsing, not even faster.
- Word and Excel, barely changed over the period.
- video games: sure they have more realistic graphics, but that doesn't make them more enjoyable otherwise.
The average house computer is now a laptop that's permanently plugged to the socket (with a long dead battery) instead of a desktop. It takes less room in the house, but also has a much smaller screen, a worse keyboard and no mouse. Is that a net gain?
Let's make a 'tech CPI' separate from 'cost of living CPI'. Most people don't need the latest gadget, and we are starting to realize that most of these gadgets are downright detrimental to our mental, emotional and social health.
That should absolutely not be accounted for. Things are supposed to become cheaper and better every year, except for in situations of massive war or natural disaster. Technological progress and worker education has made the production of goods and services extremely more effective than two decades ago.
Workers for sure have not seen their wages go up, and consumers haven't seen prices go down. Who's stealing the wealth of the world?
