Have you ever noticed how inflation metrics are always finding ways to ignore how housing and rent has gone up much faster than wages?
Pretty much all the important things in life have gone up more than stated inflation.
I don't care that I can get a cheap very environmentally unsustainable cardigan for less than ever before. Likewise for a watery nutrition-less tomato.
Meanwhile education, housing and healthcare are the least affordable they've ever been.
Inflation isn't a cost of living metric, it is an attempt to determine change in value of the currency. A change in value of, say, housing is independent to a change in value of the currency. And housing is undeniably more valuable than it once was for a long list of factors.
If you want to understand cost of living, just look at your personal bookkeeping. It will paint the most accurate picture. There isn't much to be gained in reporting cost of living in the news – unless you think aliens on some far away planet will take interest a thousand years from now when the signal arrives at their location.
CPI is the most commonly cited inflation metric, and it is actually a cost of living metric. We could also use the velocity of money plus money supply stats, but that is very hard to relate to.
Housing might be somewhat more valuable than it used to be, but the extreme valuation swings we've seen in the last 20 years were due to monetary policy and macroeconomic conditions, and not actual demand. Or I should say, demand for housing is always proportional to population. It's not like when people can't afford a house, that demand disappears. It just can't be acted on.
It is not. A CPI measures the change in cost of a fixed basket of goods. A COLI measures a change in cost of a fixed level of "well-being".
> It's not like when people can't afford a house, that demand disappears.
It is like that. That's literally what defines demand. Perhaps you have confused "demand" with "desire"? They do share the same first couple of letters.
Like I swear to god I see variants of this thread almost every other day where someone is like 'i think that this economic thing is broken' and someone else comes along and is like 'no,no, you're just holding it wrong -- The thing you want to use to do this is...'.
And despite witnessing this kind of encounter regularly I'm no more informed about economics. I've taken two first year econ courses and I still don't feel informed about it.
Why is it that all too often economics discussions get further and further away from some objective measurement of reality and turn into semantics arguments over what obscurely named things like M1 and M2 or CPI actually even mean to me anyway?
Is there like an authoritative source that defines all of these things and has a recent dataset of verified data to work work?
Like what's the lib-economy or python package for economic stuff?
part of why it's so hard is that modern economics grew out of "political economy" by pretending to divorce itself from politics and ideology, which of course it never really did. so you end up studying something whitewashed to pretend it isn't intimately linked with political goals and nothing really makes sense without also figuring out the real questions being asked. like you want to optimize the allocation of resources? great, optimize which resources for who, and how do you define the real cost functions etc? a lot of that stuff gets assumed a priori and you'll probably be going into an economics discussion or study with totally different starting assumptions than the economics math is using and get stuck when the math doesn't make sense
The basics aren't hard. But also not particularly useful outside of the work of economists. That is no doubt the problem you keep seeing: 'i think that this economic thing is broken [because I cannot find any applicability in my daily life]'.
Economics can become hard as it is ultimately a study of human (possibly animal) behaviour, and these creatures seem erratic to our limited understanding.
> Why is it that all too often economics discussions get further and further away from some objective measurement of reality
Like physics, or biology, or math, economics is not getting further from the object of study - terminology needs defined precisely to prevent people from making wrong conclusions from misunderstanding or bad reasoning. Learning not only terminology, but the problems the terminology was created to avoid, takes time and study. But due to the complexity in each field this is needed. One cannot get proper conclusions using sloppy hand waving or touchy-feely ideas with little solid foundation.
I am going to sound like a luddite, I know, but I find that we underestimate the touchy-feely ideas when economics is so much squishier than physics or biology.
collecting data about atoms from spectrometers just doesn't have the same subjectivity and political interests as various economic data and definitions do.
As an outsider there is so much orthodoxy to economics it feels more like the church of pythagoras and we look to burn the Hippasus of our times. In physics MOND seems more entertained than some of the people who dare to question economics...
> just doesn't have the same subjectivity and political interests as various economic data and definitions do
I find nothing in this page is about political definitions. Politicians like to conflate and mix things up since laymen have all sorts of ideas about economics, mostly because they understand so little of it.
What economic definitions are political?
BTW, I've done grad work in math, physics, and computer science, have degrees in all three, PhD math, and have taught graduate level mathematical economics. I went to grad school to do superstring theory, ended up doing algebraic geometry, but have still done all three professionally since (with publications in each). So I do have some decent understanding of hard science and econ. I find econ to be vastly closer to hard science than the pop beliefs and the ones above.
There's a reason phd econ programs recruit math majors, not econ majors. It takes some high level math aptitude and tooling these days.
> As an outsider there is so much orthodoxy to economics
Then read more. Pretty much everything defensible under the sun is open season to analyze in econ, overlapping lots of fields to address problems. I think no modern academic discipline is very orthodox when you get into it, because everyone is trying to make a name for themselves, and you don't get that without breaking current ideas. Econ is definitley a field where everyone is trying to break anything previous, which is also how it got good (again, despite pop nonsense).
If you measure physics by how well the weather is predicted for a month ahead, you'll claim physics is crap. Similarly, if you follow pop nonsense about "econ" you will miss the power of actual economics, which, like physics, will take you a decade of reading and improving to get to a deep understanding.
Thanks for replying - appreciate you taking the time to engage.
I have no doubt that there is a lot of hardcore maths in economics - I remember learning Koopmans Theorem only to discover he moved over to economics.
Just as there is a lot of deep and niche physics which requires a lot of abstract theory (string theory maybe?) we also have benefited from a lot of applied physics - hopefully I don't need to list all the ways mankind has benefited from applied physics.
Applied economics impacts billions of lives, arguably all of our lives. To the casual outsider, what are some modern economic practices that have fallen out from the maths that is driving the needle today? All the more given your point that despite all our advances in maths computing and physics, we still can't predict the weather.
Pretty much every single one of them actually. And that should be no surprise, no academic field is free from its social background, and economics being the heir of what used to be political philosophy, there's really no surprise that it's affected a lot by it.
You want concrete example: “GDP” it used to count only legal economy, now in most OECD countries it also counts stuff like drug dealing and other clandestine activities, but it does not count lots on activities, like community work or even housework. How is the limit drawn? It's entirely arbitrary is actually open to political debate.
The fact that we use GDP as an indicator at all, is also political: we could use Net Domestic Product, which takes depreciation of capital into account (that would be useful when it comes to ageing infrastructures), or even use other tools.
“Unemployement” it is not, in fact, the number of people that aren't working, it's the number of people who are actively looking for a job. And as such, during the 2010-2020 era, the US had low unemployment, despite having less working people than comparable countries, because many people weren't actually included in statistics (“Disguised Unemployment”). Students are considered “inactive” by the way.
In fact, you can take the entire economic lexicon and do the same exercise: all the definition here are arbitrary and the way they have been defined is subject to political debate. And for sociological reason in the field, most of them has been defined from a conservative mindset. Likewise, sociology has been mostly shaped by leftist views, and the definitions are a reflection of that. That doesn't mean economy or sociology are useless, but ignoring this bias is very problematic.
> There's a reason phd econ programs recruit math majors, not econ majors. It takes some high level math aptitude and tooling these days.
The reason why they do so is that Math is not science, so they go well around each other.
Don't get me wrong, I've a Math degree and I love it, but it's not science: assuming your reasoning is logically correct, then it's true, you don't have to confront it to the real world to see if it matches and if it's actually descriptive of real phenomenon. And that's the problem of mathematical economy: people do reasoning in a vacuum, it is “true” is the mathematical sense of things, but its descriptive power is close to zero.
In that regard, my favorite mathematical economics paper that I've read this year is one[1] that mathematically proves that “agents are infinitely-lived” is a poor hypothesis (among others). This isn't about studying the economy at all, it's just proving random theorems and it has no more scientific value than the theorems software developers unknowingly prove every day thanks to Curry–Howard.
Actual economics looks like this[2], but it's actually much more work to get a single paper, and the selective pressure is really going in disfavor of such research, and in favor of cheap intellectual masturbation.
The reason you aren't more informed is because we are trained to not see the truth of what is in front of us. If you pay attention to what you actually see in your own life, and remember the idiotic claims of economists and other forecasters about how well things are doing that later prove terribly wrong, you will start to get a sense for when you're being lied to. Don't just accept what the mainstream says. They will tell you that avoidable or engineered disasters were unforeseen, and that you're wasting your time trying to understand what experts publicly claim to not understand.
How do you think they pick the basket? Many categories are included in CPI, such as housing. Regardless of whatever fudging they do, it is intended to measure the price increases that consumers experience.
>It is like that. That's literally what defines demand.
It is not. You have confused the essence of demand with the actual capability to pay. We could get nuanced about it and say that people who can't pay are not market participants, but they could be. If I can afford to pay $X for a house and the price is higher than that, my inability to buy does not mean my demand went anywhere.
>Perhaps you have confused "demand" with "desire"? They do share the same first couple of letters.
Perhaps you have confused yourself with the kind of person who can make this kind of bold statement without getting laughed at. Go sniff your own farts some more and leave me alone.
By looking for consumables that people pay for regularly. Coincidentally, the things people pay for regularly are generally the things they need to live. But that doesn't make it a cost of living index. It is literally a consumer price index. That's what CPI stands for.
> Many categories are included in CPI, such as housing.
Indeed. The consumable portion of housing (rent, interest payments, etc.) is something most people pay for regularly, so it is ripe for inclusion. On the flip side, ignoring that a house isn't normally considered a consumable, most people will buy approximately one in their lifetime so it wouldn't be a great comparator for seeing how an individual perceives a change in value over time.
> it is intended to measure the price increases that consumers experience.
Yes, exactly, a general increase across a wide variety of goods and services comes as the result of a decline in value of the currency. There is no way to determine currency value in a vacuum, but it can be inferred this way. Which, as it happens, is what CPI gives us. Of course, there are other ways to measure inflation. Someone doing economics work will not use just a single measure of inflation as there are pros and cons to different inference methods, but CPI is the method we have settled on for the "official" rate.
> We could get nuanced about it and say that people who can't pay are not market participants, but they could be.
Demand is defined by desire and willingness. It is impossible for someone who cannot pay to have willingness, but anyone could gain the willingness at some point in the future, sure, and should that happen their demand would return. It's not a state forever set in stone. It's a dynamic state where people can come and go as conditions change. But as far as any single point in time goes...
Pretty much all the important things in life have gone up more than stated inflation.
I don't care that I can get a cheap very environmentally unsustainable cardigan for less than ever before. Likewise for a watery nutrition-less tomato.
Meanwhile education, housing and healthcare are the least affordable they've ever been.
https://en.m.wikipedia.org/wiki/Baumol_effect