It's true.
Here is a graph from John Williams' Shadow Government Statistics
If he is only half right, it means that total price change over the past two decades is understated by something near 50%.
When one tries to get a grip on the cost of living, there will always be a subjective element. When, for example, did the cost of ice delivery get dropped from the CPI. The ice man was a big deal in 1922, after all.
That being said, there has been a consistent assault on accurate CPI numbers from pretty much everyone in government for the past 30+ years.
It makes things easier. Artificially ow CPI numbers mask declining living standards and make inflation adjusted benefits cheaper, allowing for lower taxes.
The question is then how is this done.
The first way is through what is called "hedonics". Basically, it adjusts the prices of commodities because their quality has improved. Check out The Illusions of Hedonics from the Mises Institute for a good critique.
Let's apply hedonics to a car, for example. It's clear that a new car today is far safer and more fuel efficient (per weight of car) than a car of a few years ago, so why should we not make an adjustment for that?
The first answer is that we can measure this more accurately in other ways. Safer cars mean less health care spending*, and better fuel economy means less spending on gas. Thus, the market basket would change.
The car delivers the same service as it did 20 years ago, just as my computer, despite being millions of times more powerful than it was 20 years ago delivers the same service, word processing, spread sheets, etc.
The second way of fudging the numbers is by messing with what goes into the "basket" which is used to figure CPI.
Why, for example, is a 3 fold increase in the price of housing in the past decade or so not inflationary, but instead "asset appreciation". Housing is a necessity. It should be an integral part of any look at inflation, but instead, the rising house prices are waved away with some fairy dust, and all is well.
Look at the picture above, and if Mr. Williams is right, and I believe that if anything he is conservative on this, it means that there is about a 2½% spread between official and real inflation.
That means that true cost of living doubles an extra time roughly every 20 years. Which means that right now, the cost of living is nearly twice what the government is reporting, because it ignores skyrocketing healthcare, education, and housing costs, along with using bogus tweaks to create a bogus number.
No wonder the people of the United States are in debt up to their eyeballs.
*I would note however, from a purely economic perspective, replacing airbags with double ought buckshot shells would net an even higher reduction in health care costs, since dead people need no health care.†
†And this argument is why people who see classical economics as the tool for all societal problems are full of it. Economics is a tool, not the tool for dealing with the world.
0 comments :
Post a Comment