Reply to Big Mac inflation index is better than CPI

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[quote=Anonymous]While normally trust anything I read on a site called "Shadowstats.com", this figure does not appear to be accurate. There have been more credible estimates of the effects of this change in methodology regarding house prices:
"Another estimate — using calculations used in a paper for The Quarterly Journal of Economics and updated for the newsletter Full Stack Economics — found that including home prices and interest rates instead of rent would have pushed the inflation rate to 11.5 percent in February, the latest date available, up 3.6 percentage points from the official figure that month." 
https://www.nytimes.com/2022/05/24/technology/inflation-measure-cpi-accuracy.html

So while changes in how CPI has been computed over time do matter, it's not a good idea to "just double it". It's not ideal that the methodology changes over time, but typically the changes are for the better (like accounting for consumer substiution, and seller discounts). You can disagree with some aspects, but the official measures are certainly more accurate than cherry-picked metrics like the price of hamburgers or houses in DC.

[quote=Anonymous]Correct.  Look at the work of John Williams at shadowstats.com.  He runs the inflation numbers using the government’s own methodology that was used pre-1980.  This shows that in 2022, inflation actually peaked at around 17%, not 9% as we’ve been told.

Following the massive inflation of the 1970s, the government statisticians got together and determined that, “You know what?  It turns out we’ve been calculating inflation all wrong and that the true numbers are actually lower!  Isn’t that great news?!”  Among the changes they have made since then are that home prices are no longer used in calculating the CPI.  Now they use a nonsense metric called “owner’s equivalent rent,” which is basically just a survey question where they call random homeowners and ask how much they think they could rent their house for if they decided to do so.  This was ostensibly done to remove the investment component of housing and focus only on the shelter cost, but the true reason was to be able to manipulate the numbers — imagine in the modern, data-driven world collecting information in this manner.

So, yes, basically just double the CPI and that will give you a more accurate assessment of the true inflation rate. And if you are shocked that the government would behave in this manner, wait until you hear about what’s going on in today’s “booming job market.”[/quote][/quote]

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