CPI Skepticism

Every few years, skepticism of officially calculated inflation rates surges, so it seems a good idea to now recap how the CPI measures (and mis-measures) the cost of living, remembering that in the absence of knowledge of the “true” utility function of the “representative agent”, one can’t know the correct approach.

Here is a graph of month-on-month annualized inflation over the past two years, as measured by the CPI, the chained weight CPI, CPI of sticky price items, 16% trimmed CPI inflation, and personal consumption expenditure deflator.

Figure 1: Month-on-month annualized inflation from CPI-all urban (blue), from personal consumption expenditure (PCE) deflator (black), chained CPI (brown), sticky price CPI (green), and 16% trimmed mean CPI (red). Source: FRED, and author’s calculations. [graph updated 6/10/2021]

As discussed elsewhere, the official CPI is quasi-Laspeyres (main category weights fixed at 1982-84 levels fixed for two years (correction h/t RW, see here), subcategories flexible)***, PCE is a chained-weight index (based on NIPA goods and services), chained CPI is chained-weight using CPI categories (including factor payments like rent). Sticky price CPI measures inflation of sticky price goods and services, and 16% trimmed CPI excludes the 16% of biggest and smallest changes in goods prices.

Notice the official CPI inflation rate is the highest of the series, in the most recent period (not guaranteed to be true in general).

The plutocratic aspect is addressed in any of these alternative measures. Here is my recalculation of year-on-year annual inflation, from a 2008 post.


Figure 2: Year-on-year inflation calculated using annual CPI (not seasonally adjusted) , (black), and guesstimated CPI for first quintile (blue) and fifth quintile (red). Inflation calculated as first log difference of annual CPI. Guesstimated CPIs calculated as arithmetic averages of component indices. Source: BLS, and author’s calculations based on weights in Kokoski (2003), Table 5.

None of the foregoing should be taken to imply that one should take actual reported CPI inflation numbers as “the truth”. Rather, it’s that you need to be careful to understand what the official CPI number measures, and how alternatives provide answers to different questions.

What you should take from the foregoing is to stay far away from anything like Shadowstats. Jim H. [link corrected] describes in detail why this is so.

Addendum, 6/7 2:15pm Pacific:

*** From 1987-98, the main aggregate weights were fixed at 1982-84 levels; from 1998-Jan 2002, they were using the 1993-95 levels. From January 2002 onward, the main weights were revised every two years. See BLS here for a chronology.

69 thoughts on “CPI Skepticism

  1. pgl

    Nice detailed discussion of the various issues. Why did this catch my eye?

    ‘in the absence of knowledge of the “true” utility function of the “representative agent”, one can’t know the correct approach.’

    The correct approach has to heavily weight the price of bagels if Princeton Steve is the representative agent. Then again I just watched my favorite Door Dash commercial starring Cookie Monster so maybe we should heavily weight the price of cookies instead!

  2. pgl

    Shadowstats cost $175? INFLATION.

    The link to James Hamilton’s discussion needs fixing as it goes to that BLS page of data.

  3. Moses Herzog

    Anyone want my usual rundown on prices?? I mean honestly I think it’s interesting, even if it doesn’t represent a true basket or index of goods. I wouldn’t mind other people discuss how ty beat me or regional differences…..I’m not gonna repeat where I live because I don’t like to advertise it. But if you’re a regular here and have half a brain it’s not hard to figure out which state I’m in. I’ll just drop one, Nationally I read a USDA quoting of lime prices. I like putting limes in my sodas and other drinks. Nationally USDA quoted individual limes cost 44cents each and within the last two weeks I could get decent sized ones (NOT the tiny key limes) for 19cents a piece. I wager unless you are buying them off a farm somewhere you’re going to have a hell of a time beating that. ON my mosts recent trip to my regular grocers choice I could have got them for 28cents, but am going to wait and see if I can still get them for 19cents at the other place. Recently here, gas station prices have gone down 2 cents from $2.59 to $2.57. I think I can do better than that at other stations closer to the center of the city, but cannot know until I have other reasons to gallivant to where those cheaper stations are. I wager I can do better than $2.41 a gallon, but cannot be certain until I go out there. I have found Gasbuddy to be undependable on that score in recent weeks, so I have to see them with my own eyeballs. But it’s a good bet i can get that $2.41 or better on my next outing.

    1. pgl

      As long as you have enough to buy the gasoline to get to where they sell wine at a decent price, you are good to go. Me? Keep me stocked in good microbrews and all is cool. Hawks visit Philly tomorrow so my TV will be on ABC starting at 1PM.

      1. Barkley Rosser

        While retail gasoline prices have fallen some in many locations since the Colonial Pipeline incident faded, crude oil prices have been creeping up again recently, with both Brent crude and WTI finally topping $70 per barrel. This is not in steven Kopits range yet, but it does suggest that retail gasoline prices will probably stop declining and start creeping up again also.

        1. Baffling

          There used to be a bigger spread, maybe $10 per barrel between wti and brent. Why is the gap now only $2?

        2. pgl

          My favorite rule of thumb:

          Gasoline price per gallon = $1 + oil price per barrel/40 =
          $1 +70/40 = $2.75. Precise details vary by locality as the $1 is just the average tax + refinery margin + distribution margin.

          Even if oil hits that $100 mark, national average gasoline prices will still be below his $4 a gallon.

          1. Moses Herzog

            Roughly $2.55 here today, although I can probably get it at a lower price, that’s our regional average. Our prices tend to be lower than the national average. Again, 2cents better than yesterday. May pick up some tomorrow, but I don’t wanna be filling up every 1/4 tank just out of fear of the next hike. There’s one station that is about 15 cents cheaper than any other place because there is construction on the main thoroughfare passing by. I’m convinced the second that construction completes it’s gonna raise 14 cents that same night.

      2. Moses Herzog

        @ pgl
        BTW, I like Trae Young from a talent-wise perspective. But the reality is he is exceedingly selfish. He reminds me a lot of Russell Westbrook. He’s going to collect a lot of nice statistics, but he’s a 2-guard, NOT a point guard. If they do what OKC Thunder did with Westbrook and try to tell everyone “Westbrook is a point guard” when the guy is a 2-guard, it’s eventually going to cause team friction and they’ll never get deep into the playoffs. Now if Trae Young can face reality and let another player take the point while he plays the 2-guard spot, then they can beat a lot of teams. But with guys like Westbrook and Trae Young the ego always gets into everything, so just be ready for lots of broken plays because Young wants to dribble the ball at the top of the key for 5 hours on “isolation” plays. He’ll get his 36 points with 5 assists and the Hawks will lose most of their playoff series.

        1. Moses Herzog

          Westbrook shot 3-for-19 in game 4 of the series and the Wizards only won by 8 while the Sixers most important player was injured and only played 1 quarter. In game 5 of the Sixers-Wizards series Westbrook shot 35% and had a negative 21 “plus/minus” stat. But guess what, the headline for him was “Westbrook scores 24!!!” Teammates get tired of that cr*p and losing series 4-1 in round 1 while Westbrook collects the superstar paycheck. The same deal is going to happen with Trae Young if he tries to play point-guard when he’s a 2-guard. It’s not going to fly.

        2. pgl

          “But the reality is he is exceedingly selfish.”

          Maybe you do not get basketball but please look at the stats. He gets lots of assists now that his team mates know how to put up shots. He is a good scorer but his assists are beyond breathe taking. At age 23 he is so good at being a point guard that even Glenn Doc Rivers (best point guard Atlanta ever had) is bowing down to him.

          Of course the last 4 minutes today were brutal but I suspect our coach is giving them one of his classic lesson sessions.

          1. Moses Herzog

            OKC fans said the same thing about Westbrook, that he was “a great point guard” that “his assists and outside shooting is amazing”. He was traded to Houston, where he lasted 1 year before being driven out of town by his teammates who hated him, to a losing squad which was coached by the same coach who suffered through him in OKC. Some people are slow learners, as the time goes by and Atlanta gets the 1st round boot year-after-year-after year with headlines like “Trae scores 35 again” maybe you will start to get the idea.

          2. pgl

            “I never quoted Trae’s assists, I quoted Westbrook’s stats in game 4 and game 5 of the Philly series. The numbers I gave for Trae were a hypothetical example.”

            The topic was the Hawks point guard not Westbrook. I have no trouble reading coherent discussions but you ramble on and on incoherently. Like when have ever praised Westbrook – I haven’t.

        3. pgl


          I’m sharing the box score of today’s game which shows Trae got twice the number of assists that Moses claimed he got. And yea I watched the game which apparently Moses did not. I watched all 5 of the games with the Knicks too and he burned them with his incredible passing too.

          Hey Moses – Dr. Fauci and I both being Brooklyn boys are looking for a good 2 on 2 pick up game. Pick whoever you want as he and I will school you in the game of basketball.

          Trae Young did not get assists – dumber comment ever!

          1. Moses Herzog

            @ pgl
            You’re having problems with reading comprehension AGAIN, a recurring problem for you. I never quoted Trae’s assists, I quoted Westbrook’s stats in game 4 and game 5 of the Philly series. The numbers I gave for Trae were a hypothetical example. Surely even someone like you can understand quotation marks used as an intimation or allusion to a typical example of something. I’m giving you too much credit??

            You might spend A LOT less time “correcting” commenters on this website if you didn’t make-up what they had said in your “correction”. You misquote, then correct the misquote. Does Menzie airmail you small box of Barnum’s animal crackers every time you use the phrase “dumbest comment ever”??

    2. Moses Herzog

      Someone in this damned household “lost” the most recent grocers receipt. But I wanna say I got some pretty good quality ribeye for roughly $7.75. Now sometimes, back (like months before the virus hit. I could get them for about $5.95—$6.50, but during the virus, they got as high as $9 if you bought them in individual packs (which I often, but not always do. So ribeyes are getting cheaper. I will often eat a ribeye and a single vegetable as a meal, cuz it’s higher quality food and I’m paying less than a trip to McDonalds. I can get TWO solid pieces of lamb meat, to feed two people for around $9, and that meat is seal packed, supposedly from a farm near Sacramento California (lambs in north Cali?? Don’t ask me cuz I have no idea).

      For the most part I believe the CPI numbers~~but I will say this, most of my life I have been sympathetic to the view that inflation is higher than “official” statistics (not in the paranoid conspiratorial way either, just a feeling the true data was not being captured). But I would say, certainly in the last 3 years, maybe some before, I now think that inflation is often exaggerated, if not by economists, then certainly the mainstream media. I can still get “Monster” energy drink for between $1.58—$1.68, and I know many people online say that in their city they have to pay $2.00 for “Monster” energy soda before tax. I get good prices on most stuff, when prices rise I substitute, and I’m semi good (not as good as I was 20 years ago) at remembering prices. I go back and review the receipt to get the prices in my head good also. Freezer helps for stocking, I probably have enough Chuck-eye, rib-eyes and chicken thighs to hold out transitory reflation 18 months, maybe more. Not to mention enough canned Salmon and Canned tuna that I loaded up on (both high in vitamin D) to get me to hold out ANOTHER 18 months past my red meat run out. I will not be tread on by price gougers, kids, BTW I can get LARGE containers of salad, for $3.58. But I can’t store those in the freezer like the meat, I can only pick up 5 of those per grocers trip, but one pack of those make a meal EASY, sometimes two really. $3.58 for a VERY LARGE pre-made salad, compare that any any fastfood joint in your area that offers packaged salad and tell me what you get. UNless it’s Wal Mart (And I doubt you can get the size I get) you’re not going to beat my $3.58.

      1. Baffling

        Inflation is compounded, so over a few years higher rates are more obvious while lower rates are less obvious. This is why the argument over current conditions being transient or sustained are so important.

      2. Baffling

        We got prime strip steak $10 pound over memorial day. I prefer ribeye, but that was a pretty good deal. Tender as can be. Although that diet will put me into corev lifestyle issues soon enough.

    1. Dr. Dysmalist

      ” … if we’d lost Harris County — Trump won by 620,000 votes in Texas. Harris County mail-in ballots that they wanted to send out were 2.5 million, those were all illegal and we were able to stop every one of them,” he explained.”

      This is the same Ken Paxton that’s working his tail off to out-MAGA the MAGATs and out-Q the Qholes in a desperate attempt to keep his office and avoid prosecution for corruption. Add to that Abbott trying to out-Paxton Paxton himself and you have Texas’s leaders attempting to sidestep demographic changes and make their state into a s*/thole.

      The entire Gulf Coast, from Florida to Texas, could attract more young people, new economy businesses, and reasonably well-to-do older people and retirees if the state GQPs weren’t so damn fascist ultrareactionary. Florida and Texas are still getting by (so far) but Alabama, Mississippi, and Louisiana (despite its Democratic governor) apparently would rather die for whiteness, to appropriate a book title. Rational is the last thing they are. What a waste of natural and human resources.

      1. Baffling

        Ever see the movie roadhouse with patrick swayze. The bad character brad wesley? Those character are not fiction in texas. That is why texas has a problem with election integrity. Wealthy and entitled still rule with impunity because they have scared away federal oversight.

        1. Moses Herzog

          Gotta like anything with Kelly Lynch, my personal favorite “Drugstore Cowboy”. And I usually don’t go for blondes. A bit on the depressing side but pretty well done.

    2. Baffling

      I told you all during the election that texas is turning blue. What i did not realize at the time was how extreme the republicans would take to voter suppression. This is why the federal government needs to step up with voter rights laws. What the republicans are doing in texas is shameful for a democracy. A modern jim crow society is what the texas republicans are pushing for in America today.

      1. Paul Mathis

        “This is why the federal government needs to step up with voter rights laws”

        Not gonna happen. Joe Manchin and his buddy Mitch are going to block everything. Even infrastructure is going to get very little. West Virginia is the most important state, apparently.

        1. baffling

          i don’t think most democrats around the country understand the importance of voting rights and the restrictions being imposed on them by republicans around the country. the comments by paxton are clear. if republicans cannot manipulate the vote count, they cannot continue to win elections. this is why the state laws being implemented are so drastic and in your face. this is a last stand. biden needs to understand how important this is to him keeping power after the 2022 elections. there needs to be a full on assault at manchin to get him to change his ways. otherwise republican will regain government control by immoral means.
          people need to understand texas. it is possible for democrats to win this state in a fair election. texas is the only thing keeping republicans competitive in presidential elections. and it is breakable. but the republican corruption is pretty extreme in texas, and if the federal government cannot address this issue, texas will continue its fraudulent influence on american politics. republicans control the power structure in the state of texas, and are not afraid to abuse it to maintain power.

  4. ltr


    June 6, 2021

    Over 763 mln COVID-19 vaccine doses administered across China

    BEIJING — Over 763 million doses of COVID-19 vaccines had been administered across China as of Saturday, the National Health Commission said Sunday.

    [ Vaccination is proceeding at a rate of 20 million doses daily, with 5 Chinese vaccines being used. Distribution of Chinese vaccines as public goods includes dozens of countries. ]

  5. ltr


    June 6, 2021

    Does the New York Times Prohibit Its Reporters from Mentioning China’s Vaccines?
    By Dean Baker

    That seems to be the case. A few weeks ago it ran a major piece * on vaccinating the world. The article never once mentioned China’s vaccines (or Russia or India’s). It had another piece ** today on the topic, which again did not mention China’s vaccines.

    Ignoring China’s vaccines in the context of vaccinating the world is truly bizarre. It has been by far the leading supplier of vaccines to South America, North Africa, and the countries of South Asia, excepting India. It also has administered more than 750 million shots domestically. (The New York Times piece bizarrely told readers that 85 percent of the shots given have gone to the world’s wealthiest countries. This is clearly false, unless the NYT considers China one of the world’s wealthiest countries.)

    China is also producing around 500 million doses a month. At this pace, it should be hitting its target vaccination rate in a bit over two months, which means it would be in a position to distribute 500 million doses a month to the rest of the world. By contrast, our pharmaceutical companies claim they can’t even figure out how to get the syringes and vials needed to distribute the volume of vaccines necessary to protect the developing world. (Thomas Cueni, the director general of the International Federation of Pharmaceutical Manufacturers and Associations, makes that assertion here *** )

    Given that China can apparently produce and distribute 500 million doses a month, while the western industry claims to lack the competence to substantially increase production, it looks like vaccinating the world will be primarily a Chinese project. It’s too bad New York Times reporters are not allowed to talk about it.

    * https://www.nytimes.com/2021/05/15/world/americas/covid-vaccine-patent-biden.html

    ** https://www.nytimes.com/live/2021/06/06/world/covid-vaccine-coronavirus-mask

    *** https://munkdebates.com/podcast/vaccines

    1. pgl

      “Given that China can apparently produce and distribute 500 million doses a month, while the western industry claims to lack the competence to substantially increase production, it looks like vaccinating the world will be primarily a Chinese project.”

      Sad to see that Dean Baker cannot be bothered with the efficacy issue either. Now we know ltr is being dishonest in this regard but Dean Baker too?

    2. pgl

      “The article never once mentioned China’s vaccines (or Russia or India’s).”

      And the NYTimes is also not mentioning bleach as a treatment. Good Lord – this has become an incredible embarrassment. Efficacy matters but you can’t be bothered with this little detail.

      1. Barkley Rosser

        Apparently Russia’s Sputnik V is about 90% effective. The bad case for Sinopharm is the Seychelles Islands, the second most vaccinated nation on earth, with about 60% of the population getting Sinpharm, most of the rest Astrazeneca. There has since been a major outbreak of the virus. Coming out of that the estimate is that at least there the effecrtiveness of Sinopharm at about 50%.

    3. ltr


      May 15, 2021

      Hot Tip for the New York Times on Vaccines: There Are These Two Countries Called Russia and China
      By Dean Baker

      I realize that it’s hard for reporters at the country’s leading newspaper to stay on top of the news, but this major piece * (four reporters) on vaccinating the world should get a Pulitzer for ignorance. The topic of the piece is vaccinating the world, which should be number one on any serious person’s list of priorities right now.

      This is not just a humanitarian point, which should be an incredibly big deal by itself. The idea of millions of preventable deaths in the developing world, and hundreds of millions of avoidable infections, should be enough to get any reasonable person’s attention.

      But beyond the humanitarian issue, there is the simple common sense point that the more the virus spreads, the greater the likelihood that a vaccine resistant strain will develop. This possibility should have everyone terrified. Can anyone in their right mind want to see a whole new round of infections, deaths, and lockdowns, as we wait for a new vaccine to be developed, tested, produced, and then distributed in mass quantities?

      I don’t know what the risk of a vaccine resistant strain developing is, but it is clearly not zero. And, it is obviously greater the more pandemic is allowed to spread unchecked. So the claim that we have a strong interest in vaccinating the world is not really debatable.

      But the place where this New York Times piece goes seriously off the rails is that it completely ignores the vaccines developed by Russia and China. Both countries have developed vaccines that have been proven effective against the coronavirus. The test results from the Russian vaccine show it to be between the mRNA vaccines and the AstraZeneca vaccines in effectiveness. There have been a range of test results reported from the Chinese vaccines (the manufacturers have not been very transparent), but there is substantial evidence that they are effective in slowing the spread and radically reducing hospitalizations and deaths.

      There have already been hundreds of millions of doses of the Russian vaccine produced and China claims that it will be able to produce billions of doses of its vaccines this year. Anyone who is serious in talking about getting the world vaccinated must include the production of these vaccines in their calculations….

      * https://www.nytimes.com/2021/05/15/world/americas/covid-vaccine-patent-biden.html

      1. Ulenspiegel

        “But beyond the humanitarian issue, there is the simple common sense point that the more the virus spreads, the greater the likelihood that a vaccine resistant strain will develop. ”

        That is too simplistic. If most people are not vaccinated a resistant strain which actually may arise each few days has no advantage. Only if a high percentage of the population is actually vaccinated a resistant strain gets an advantage an becomes the new wildtype, i.e. the new normal.

        With half-hearted vaccination you may get the worst of both worlds, a huge breeding ground consisting of not vaccinated people providing resistant viruses and a reservoir of vaccinated people in which the resistant strain proliferates. A new vaccine is overwhelmed in short time.

        “that it completely ignores the vaccines developed by Russia and China. Both countries have developed vaccines that have been proven effective against the coronavirus. ”

        Here the data were not so clear in the past. The “proven effective” has been debated. And a vaccine with a low efficacy also contributes to the resistance problem. However, if the products of Russia and China are found to be effective in good tests they of course should be used.

        “There have already been hundreds of millions of doses of the Russian vaccine produced and China claims that it will be able to produce billions of doses of its vaccines this year.”

        Other claim the same. So what? Without clear data the claim is useless.

  6. Moses Herzog

    Take sustenance and comfort mine own dearest, yet damaged, ravaged, and overly-sandblasted heart. The fairest and most radiant Princess ever of south India way, dost takest thou side in this confounded conflict on cash costs:

    Wait, no, better yet, hark [ !!!!! ], I’m having problems thinking because the blood from my brain is migrating to another part of my body while visualizing someone in my head. What was I talking about just now……..?? Oh yeah, inflation.

  7. pgl

    Trae is balding?


    OK I have already known how the Knick fans at Madison Square Garden were loud stupid and embarrassing. But they had to hand out cue cards telling them to scream Trae is Balding during their only win during the playoffs?

    I would say there were the biggest idiots in the NBA but in today’s beat down by Ice Trae in Philly, the obnoxious Philly 76er fans were chanting the same rant. Hey Philly boys – can you at least make up your own moronic rant?

    1. Moses Herzog

      There is only one other city of sports fans known for being more rude than Philly fans. This has literally been true for decades, and really covers most sports, in other words, those two cities’ rudeness is not exclusive to the sport of basketball. Which city is most racist?? As far as I can tell Boston is the most racist. Certainly if we exclude the deep south, Boston is a slam dunk for most racist large city. I suspect some of this is related to Irish gangs and Black gangs having rivalries over narcotics trade in Boston etc, but that does NOT explain all of it, but explains partcially a facet of that racism.

      1. pgl

        I guess you thought they were saying Westbrook was balding. Comparing Ice Trae to Russell Westbrook – only you could be that confused.

        1. Moses Herzog

          I actually never mentioned balding, that was your gros titre. MSG immature frat boy type chanting is the type thing New Yorkers talk about while gazing at their own navel, hypnotized at its “wonder” and assuming the rest of the country gives a flying rat’s cr*p

          1. pgl

            Lord – you remind me of a dog chasing its tail. I did not say you mentioned balding. You did compare Trae to Westbrook which was beyond weird. Come on Moses – please stop posting while drinking as you have become about as incoherent as it gets.

          2. Moses Herzog

            @ pgl
            I think we all know who chases his own tail on this site. But more like a sickly rat than a dog in your case. A good 3/4ths of your quotes are making up what your opponent has said and then attacking your made up dialogue.

            Go back to excusing Knicks fans acting like rabies infested rodents (the true mascot of NYC) and your “Nation’s leader on Covid-19” sexual molesting Uncle Andrew Cuomo. Cuomo is proud you still carry the banner for his state. Make sure you show your “FemaleNoSpeak” blog’s feminist credentials and wear your Andrew Cuomo #MeGrabbyFeelyToo shirt pin on election day:

            Remember, to prove you’re a fake “progressive”pgl you have to show that #MeToo does not apply to your NYC hero Andrew Cuomo. Don’t forget to vote and make your Mom proud you now a “leader” when you see one.

  8. pgl

    During the first round, the Knick fans were paying $300 even for the cheap seats which blew away the prices at State Farm Arena (my Hawks) for first round games where they team flopped. Atlanta has never given its B’ball team enough support but this tells me things are changing:


    We are talking about 2nd round games so the ticket prices generally strike me as low. But the highest minimum price listed is just over $130 for Friday’s game at State Farm.

    Now Moses thinks Trae Young will hog the ball and not pass to his team mates but then I doubt Uncle Moses has not figured out he can watch these games on ESPN or TNT.

    By the way – State Farms features a bar on court side. Go Hawks!!

  9. ltr


    May 19, 2021

    China takes multi-pronged measures to ensure commodity supply and stable price

    BEIJING — China will work to ensure the supply of commodities and keep their prices stable, to maintain steady economic performance, the State Council’s Executive Meeting chaired by Premier Li Keqiang decided on Wednesday.

    Since the beginning of this year, due to multiple factors, especially the transmission of global price rise, some commodities have seen extended price rally, with the prices of some varieties hitting new records.

    The government must take very seriously the adverse impact caused by the price hike, and take both holistic and focused measures in light of market dynamics to exercise precision regulation, so as to ensure the supply of commodities and curb unreasonable price increases and prevent transmission to consumer price.

    “We must carefully analyze the reasons behind this round of rapid increase in commodity prices and focus on the crux of the issue, to adopt measures in a targeted and holistic approach,” Li said.

    A host of steps was decided upon to strengthen two-way adjustment of supply and demand, including raising export tariffs on certain iron and steel products, temporarily exempting tariffs on pig iron and scrap steel, and canceling export tax rebates for some steel products, to increase supply in the domestic market. Dedicated efforts will be made to advance structural adjustments and discourage projects with high energy consumption….

    [ Commodity supplies and price pressures even now appear to have been significantly resolved in a sector by sector approach by regulators. ]

    1. pgl

      Jimmy Carter tried this with respect to oil. What a disaster. For someone who follows an economist blog, the idea of using price controls on a globally traded commodity should strike you as a disaster waiting to happen. But no – you cannot bring yourself to criticize this government.

    2. Dr. Dysmalist

      Hmm … globally traded, homogeneous or nearly so commodities, trying to reduce domestic prices (in effect subsidize domestic consumption) … where have I heard this before? Ah, yes, sounds a lot like the policies followed by various oil exporting countries to try to keep the prices of petroleum products low for domestic households.

      IIRC, this was a recipe for sacrificing precious hard currency revenues concurrently with causing large and sustained (sometimes steadily increasing) budget deficits. IOW, domestic tranquility was purchased at a very high price. Also IIRC, it didn’t always work out well in the long run, especially for the most autocratic regimes.

  10. ltr


    June 7, 2021

    Can We Bemoan Inequality as We Push Policies to Increase It?

    We know it would be too much to expect that New York Times reporters might have some knowledge of policies that the United States had in place twenty or even ten years ago. After all, that would require some memory or some knowledge of history.

    Anyhow, for those of us who do have some memory, it was rather striking to see the first paragraph of an article * reporting on the expected Senate approval of measures that are explicitly protectionist:

    “Faced with an urgent competitive threat from China, the Senate is poised to pass the most expansive industrial policy legislation in U.S. history, blowing past partisan divisions over government support for private industry to embrace a nearly quarter-trillion-dollar investment in building up America’s manufacturing and technological edge.”

    So now the United States faces an “urgent” competitive threat from China.  Note this this is a news story, not an opinion column.

    This framing contrasts sharply with what we saw in the first decade of the century, when the United States was losing millions of manufacturing jobs to China. This led to the destruction of towns and cities across the Midwest, which were overwhelmingly dependent on these manufacturing jobs. Back then, this was simply a story of free trade benefiting the economy, not a problem of an urgent competitive threat.

    But now, when the jobs being subjected to competition are those of the most highly educated workers, software designers, biotech engineers and others with advanced degrees, free trade is no longer good. And, instead of U.S. companies like GE and Walmart benefiting from cheap Chinese labor, our leading tech companies are worried about going head-to-head with more efficient Chinese competitors.

    We can all see why there would be urgency now. Oh well, this should help sustain the market for hand-wringing books and articles about inequality.

    * https://www.nytimes.com/2021/06/07/us/politics/senate-china-semiconductors.html

  11. Moses Herzog

    If you read the hard-copy version of WSJ, or I think on the internet version of WSJ it came out on Sunday morning, Jon Hilsenrath’s column is very interesting, and what I would call “must reading”. Hilsenrath talks about something called “base effects”. The reason I find this interesting is it reminds me of when Barkley Rosser felll out of his chair when he saw May 2020 consumption numbers had had a “record” increase. I had some issues with this terminology because I viewed it as ridiculous at the time to call it a “record” even though it may have technically fit the definition. I got a little bit of what I would call “pushback” from Menzie (maybe I should use a harsher term??) that indeed it was a record when you looked at the numbers. At the time, I did not word it as “base effect” deal, I just knew that where the consumption numbers had come from, I felt very strongly that calling it a “record” was very misleading. This led to part of the reason, if not ALL the reason, that Barkley Rosser had gotten his 2nd Quarter GDP numbers so horribly wrong. I didn’t know that “base effects” was really kind of what I was talking about. But I can’t help but think this is part of the reason guys like Summers and Blanchard are getting the inflation picture wrong right now. I’m sure Summers and Blanchard would probably laugh at that sentence I just typed, if they read it themselves saying “I am a credentialed economist, I know about ‘base effects’ !!!! ” Still I wonder how much of this “increase” they see, that they aren’t accounting for the lowering in the numbers. Unless Barkley is even dumber than I think he is (which is entirely possible) you know, you can have credentialed “peer reviewed” people that even apparently this doesn’t “register” with.

    1. Barkley Rosser

      Moses Senior.

      I do not even know what this is about, it is so rambling about this and that with not much of a point. You made a mistake; I made a misinterpretation last spring. So what? If the point is that people get different numbers when they use different bases for their over time comparisons, well yes, this is obviously true. Duh.

      Or are you trying to establish that you are stupider and more incoherent than Ivan the Terrible Scientist?

      1. Moses Herzog

        @ Barkley Junior
        Watch “The Father” with Anthony Hopkins. Think of yourself as the character “Antony” and you’ll know what your conceptual problems are here and why you can’t connect the different parts of this “complicated” matrix. If you’re watching the film at home and a woman enters the room in the middle of the film viewing, just go ahead and assume it’s a family relative.

        1. Barkley Rosser

          Sorry, Moses, there is nothing to your post that is not just obvious, aside from you rummaging yet again in a bunch of mistakes and misinterpretations you and I both made in different ways last spring, a period when huge changes were going on in the economy. You keep dragging those tangled discussions up over and over for no clear reason. We have moved well past that time and economic data is not oscillating nearly as wildly now as it was then.

          So, again, what is the point of dragging up this old stuff? Both of us goofed, but again, so what? The economy has moved on, and it is time you did too.

          As for me being s—-e, well, I just published a book last week from Springer, a high-powered mathematically oriented publisher based in Germany, Foundations and Applications of Complexity Economics. Check it out, Moses, and tell us all how this is something written by somebody comparable to Anthony Hopkins in the movie you mentioned. It is available on Amazon.

          (BTW, Hopkins’s performance is indeed worthy of the Oscar he won for it.)

  12. ltr

    Interestingly and importantly, the Chinese have been developing a distinctive monetary policy for several decades and have become increasingly adept at smoothing price movements that could otherwise become system destabilizing by working on a sector by sector basis. A perfect example would be looking to the limiting price increases in pork products these last 2 years while restructuring domestic production.

    Another example is the successful limiting of oil price increases in agricultural communities to protect farm production and farmer income. Western analysts were sure relatively inexpensive oil could not be made available in rural communities, but these analysts were fortunately incorrect.

    Chinese monetary policy differs from Western policy, but has worked.

    1. pgl

      Monetary policies controlling relative price movements? Seriously? Me thinks our host needs to cut in with some sensible economics here as you have gone all PRC off the charts.

  13. David O'Rear

    Courtsey of FRED:

    Chuck Roast, APU0000703213: +8.8% Jan-Apr 2021 vs. Jan-Apr 2020
    Wine, APU0000720311: +8.1%
    Cookies, APU0000702421: +5.8%
    Beer, APU0000720111: +2.1%

    So, the “real” inflation rate is obviously just 2.1% …

  14. ltr

    As for internationally traded commodities, governments often maintain reserves and the reserves can be surprisingly ample.  I do not know the size of the Chinese reserve of pork products, but food product stores in China range from 1 to 3 years with over-production being encouraged each season.  Grain over-production is currently being emphasized, even though reserves might already seem ample.

    Electricity is a commodity that can be regionally constrained at times in China, but work is being done on a national system of ultra-high-voltage electricity transmission lines.

  15. noneconomist

    Since we’ve had more than a few NBA comments, I’d like to add a few on the WCWS (for the uninitiated, the Women’s College World Series—I.e., softball—) underway since Thursday in Oklahoma City.
    Special mention to James Madison and star pitcher Oddicci Alexander who upset favored Oklahoma in a first round game before bowing to the Sooners yesterday. They play again today with the winner advancing to the a Best of Three finals beginning tomorrow.
    They’ll be followed today by Alabama and Florida State in another elimination game. Alabama features Montana Fouts who threw a perfect game with 16 strikeouts against defending champion UCLA Saturday. Saying she was incredible is an understatement. Oklahoma followed that with an impressive exhibition of clutch hitting in ousting UCLA Saturday.
    If you’ve never witnessed softball—especially at this level—you’ll be fascinated by the skill and athletic abilities of these young women.

    1. Moses Herzog

      I say this as someone with ZERO affection to the game of softball, and someone who, in a general way takes little interest in women’s sports (that’s not meant to be a “dig”, just being honest about what I take an interest in sports-wise). Patty Gasso is hands down, without a doubt, the best coach in Women’s softball. She is universally loved by her players ( what is sometimes labeled a “players’ coach” ) and also nearly universally respected by anyone with contact with her or interacts with her. I wager if she put her singularly focused mind on it, she could also coach the pants off of many male coaches in male-played sports (such as MLB, in which I would take Gasso over many MLB managers, with a FEW exceptions, such as the now deceased Billy Martin. Patty Gasso is, although it’s often an over-used term, an icon and a living legend.

      1. baffling

        if you want to start embracing women’s sports, the place to start is women’s soccer. especially the national team. it is a shame the old white men continue to “put women in their place” with the salary issue regarding women’s national soccer. the men are an embarrassment, the women world class. and yet we continue to hear excuses for why we should not pay the women’s team equally, or more. but the women play a game of poetry on the field that is very pleasing to watch.

      1. Barkley Rosser

        Of course the Sooners defeated the Dukes in the playoff last night.

        I am sure that one factor in this was the praise by the wise and benevolent Moses Herzog for their coach. They could not have done it without him.

        But this was reinforced by the cleat poor morale the Dukes suffered from due to them, along with the taxayers of Virginia, having an econ prof at JMU who, as Sean Hannity would put it, is not only sleepy and “mentally challenged,” but drinks milk out of a sippy cup before he goes to bed at 7 PM. Those poor Dukes did not have a chance!

        1. Moses Herzog

          The Dukes beat the Sooners squad in the first game of the college world series. You shouldn’t cut your university’s students short. They overachieved winning that opening game a week or so back:

          Patty Gasso is smart enough to know that it’s all about the students/players. The focus should always be on the students/players. Navel-gazing is not a problem for Coach Gasso. It’s too bad that not everyone in an authority role in America’s accredited universities has the same approach.

  16. Dr. Dysmalist

    “So, the ‘real’ inflation rate is obviously just 2.1% …”

    You read my mind

  17. RW

    You incorrectly stated that ” the official CPI is quasi-Laspeyres (main category weights fixed at 1982-84 levels …” In fact, the weights are based on surveys and are changed every other year. [ https://www.bls.gov/opub/hom/cpi/data.htm ] Thus they are indeed pricing cell phone service and not VCRs.

    On the subject of the unknown utility function for a representative consumer, all is not lost. There are two price index formulas that are optimal second order approximations to the exact index that would be derived from a wide range of utility functional forms. One is the Fisher formula, which is used to construct the PCE price index. The other is the Tornqvist formula, which is used to construct the chained CPI. Diewert has a great exposition on this subject in his essay on price indexes in the New Palgrave. So if you can swallow the idea of a representative consumer, the PCE price index and the chained CPI are using reasonable formulas. And now that the CPI changes its weights every other year, that will limit its divergence from the chained CPI.

    1. Menzie Chinn Post author

      RW: You are right, they are not fixed at 1982-84; they change every two years…”A modified Laspeyres price index is used to aggregate basic indexes into published CPI-U and CPI-W indexes.” (from https://www.bls.gov/opub/hom/cpi/calculation.htm) (I didn’t mean they using pricing VCR weights, but that the higher level categories were fixed, e.g., energy). Turns out they did use the 1982-84 weights until the 1998 CPI revision, used the 1993-95 weights until 2002, and have used the biennial revisions since then.

  18. ltr


    June 7, 2021

    Over 777 mln COVID-19 vaccine doses administered across China

    BEIJING — Over 777.8 million doses of COVID-19 vaccines had been administered across China as of Sunday, the National Health Commission said Monday.

    [ Domestically, China is administering about 20 million vaccine doses daily using 5 vaccines. Another 350 million Chinese vaccine doses have been distributed internationally. ]

Comments are closed.