>The latest back-projected CPI is the CPI-U-RS, which revises all the old
>numbers to account for all the wondrous changes in the CPI over the last
>couple of years. Details at <http://www.bls.gov/pdf/cpirsqa.pdf>.
I detect irony in the word "wondrous," indicating that you don't approve of
the changes. As Dave Richardson pointed out, however, the lower inflation
rates that came out of the CPI revision is not all bad. If St. Alan sees a
smaller dragon, he's less likely to lance the economy to death.
Actually, we have to be conscious of the fact that measures of the average
consumer price level are always going to be imperfect. This means that a
different CPI should be used for different purposes. Unfortunately, since
social security benefits, tax brackets, some government employee wages, and
the like are indexed following the government's whim, the wrong index may
be used ...
I think that the CPI is miserable as a measure of the real cost of living
that people face, since people have to pay all sorts of non-market costs.
See my article in the recent URPE book that M.E Sharpe published, where I
develop a first-guess cost-of-living (COL) measure. An updated version is
supposed to show up in CHALLENGE this coming September. (This article arose
from one of my many random thoughts in a pen-l discussion, BTW.) As Dean
Baker has pointed out in articles in CHALLENGE and elsewhere, the CPI
misses the way in which the development of capitalism creates new needs
(like the Internet), though he doesn't say it exactly that way.
Because the CPI is a poor measure of the cost of living that people face,
it's not good for calculating "real" wages or standards of living. However,
it doesn't matter that much if one is interested in relative standards of
living (the rich vs. the poor). You can just take a ratio of the two
nominal incomes.
The CPI seems to be a measure of the health of the marketized part of the
economy, so we can see if the market economy is suffering from inflation or
not. That kind of thing seems relevant to the Fed's job.
In Marx's terms, my COL measure is part of an effort to measure the
use-values needed for people to live. (It's a futile effort, however, since
use-values can't be quantified and thus added up; but it's useful to
guess.) On the other hand, the CPI in its various incarnations is an effort
to measure the inflation of the exchange values of commodities (where
exchange-values are measured in money terms).
Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine
