Posted on 01/27/2014 10:08:08 AM PST by 1rudeboy
Absolutely incorrect. Please direct me to where you received that information.
Might take me a while to find it, it was an article I read about the CPI-U/W and the fact that they do indeed do this to hide inflation. The example given was almost verbatim what I stated in my last post.
Give me some time and I will see if I can find the info.
I’d appreciate it. I’ve always been curious as to who is spreading that BS, and what their political/financial motivations are. Meanwhile, I’ll find my link.
Common Misconceptions about the Consumer Price Index: Questions and Answers.When the cost of food rises, does the CPI assume that consumers switch to less desired foods, such as substituting hamburger for steak?
No. In January 1999, the BLS began using a geometric mean formula in the CPI that reflects the fact that consumers shift their purchases toward products that have fallen in relative price. Some critics charge that by reflecting consumer substitution the BLS is subtracting from the CPI a certain amount of inflation that consumers can "live with" by reducing their standard of living. This is incorrect: the CPI's objective is to calculate the change in the amount consumers need to spend to maintain a constant level of satisfaction.
Specifically, in constructing the "headline" CPI-U and CPI-W, the BLS is not assuming that consumers substitute hamburgers for steak. Substitution is only assumed to occur within basic CPI index categories, such as among types of ground beef in Chicago. Hamburger and steak are in different CPI item categories, so no substitution between them is built into the CPI-U or CPI-W.
Furthermore, the CPI doesn't implicitly assume that consumers always substitute toward the less desirable good. Within the beef steaks item category, for example, the assumption is that consumers on average would move up from flank steak to filet mignon if the price of flank steak rose by a greater amount (or fell by less) than filet mignon prices. If both types of beef steak rose in price by the same amount, the geometric mean would assume no substitution.
This is what I just read at the BLS website about the CPI:
How are CPI prices collected and reviewed?
Each month, BLS data collectors called economic assistants visit or call thousands of retail stores, service establishments, rental units, and doctors’ offices, all over the United States, to obtain information on the prices of the thousands of items used to track and measure price changes in the CPI. These economic assistants record the prices of about 80,000 items each month, representing a scientifically selected sample of the prices paid by consumers for goods and services purchased.
During each call or visit, the economic assistant collects price data on a specific good or service that was precisely defined during an earlier visit. If the selected item is available, the economic assistant records its price. If the selected item is no longer available, or if there have been changes in the quality or quantity (for example, eggs sold in packages of ten when they previously were sold by the dozen) of the good or service since the last time prices were collected, the economic assistant selects a new item or records the quality change in the current item.
The recorded information is sent to the national office of BLS, where commodity specialists who have detailed knowledge about the particular goods or services priced review the data. These specialists check the data for accuracy and consistency and make any necessary corrections or adjustments, which can range from an adjustment for a change in the size or quantity of a packaged item to more complex adjustments based upon statistical analysis of the value of an item’s features or quality. Thus, commodity specialists strive to prevent changes in the quality of items from affecting the CPI’s measurement of price change.
How is the CPI calculated?
The CPI is a product of a series of interrelated samples. First, using data from the 1990 Census of Population, BLS selected the urban areas from which data on prices were collected and chose the housing units within each area that were eligible for use in the shelter component of the CPI. The Census of Population also provided data on the number of consumers represented by each area selected as a CPI price collection area. Next, another sample (of about 14,500 families each year) served as the basis for a Point-of-Purchase Survey that identified the places where households purchased various types of goods and services. More.
They state that they take changes in size and quality into account as well as using statistical models to account for changes in feature/quality of an item: “These specialists check the data for accuracy and consistency and make any necessary corrections or adjustments, which can range from an adjustment for a change in the size or quantity of a packaged item to more complex adjustments based upon statistical analysis of the value of an item’s features or quality.”
Excuse me if I don’t trust the veracity of a government agency to “strive to prevent changes in quality from effecting the CPI”. I’m not sure I buy that they don’t do this and don’t cook the books - you know, in light of everything else they outright lie about.
I will keep looking, but there’s your first clue that they are at least meddling with things.
My last response should’ve been to you also, sorry I goofed on that.
Here is the report (from shadowstats):
http://www.shadowstats.com/article/consumer_price_index
Thanks. It figures.
Do you have an issue with Walter J. “John” Williams the author of the piece I linked to, or just shadowstats in general?
If so, please illuminate for me what the problem is...
Thanks in advance.
I equate Shadowstats with Williams. They are one and the same. I think of the website as an onion—you have to peel away the layers of bullcrap to find the one nugget of truth he uses to sell his subscriptions.
Price of drywall went up 20% on January 1st. Nothing in the news about that.
Interesting. The citations he uses in the article seem valid and he gores both sides of the aisles’ oxen, so it seems fairly even-handed in that regard.
At any rate, he claims they (the BLS) was under pressure from Greenspan and Boysin (sp) to use a variable basket of goods back in the 80’s, then did not go that route under Clinton, but started to use geometric weighting, which in turn understates real inflation based on CPI numbers by about 7% (essentially the same effect or worse that using a variable basket of goods). IOW, gas goes up 10 cents per gallon because of additives mandates, but because you enjoy cleaner air as a result, you as a consumer get a net benefit and inflation goes down based on that metric.
Propane prices have been interesting, to say the least.
That almost makes it worthwhile to buy a diesel generator and heat electrically.
In theory, “fracking” is supposed to recover significant amounts of natural gas liquids like propane.
I wonder where all that surplus has gone?
Consumed by the frigid temperatures, I guess.
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