Category Archives: inflation

Why a lot of people think the CPI is not representative of their experience … and are right. At least partly.

Government statistics, particularly the CPI, have been in the news (e.g., [0]). Following up on my previous posts [1], [2], I want to take a stab at the question posed in the title.

This post focuses on issue separate from the mathematics of the index formulation, and has to do with what the typical weights at any given instant in time should pertain to. Should one use the expenditure weights that pertain to all the households aggregated in the economy? Or should one use the expenditure weights that pertain to the “typical” household? Kokoski (2003) [updated link] summarizes the distinction thus:

In the democratic index, the expenditure pattern of each household counts in equal measure in determining the population index; in essence, it is a case of “one household–one vote”. In the plutocratic case, the contribution of each household’s expenditure pattern is positively related to the total expenditure of that household relative to other households–in essence, “one dollar, one vote”.

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The Government’s Macroeconomic Series: X-Files, Dilbert, or Resource Constraints?

Or, is the model for explaining why macro data sometimes appear so counter to intuition best explained by willful deception (Iraq and WMDs), incompetence (the FEMA response to Katrina), or prosaic (resource constraints)? The casual reader might think I’m overstating the extreme hypotheses, but there is, after all, a whole website devoted to the proposition of conspiracy:

Have you ever wondered why the CPI, GDP and employment numbers run counter to your personal and business experiences? The problem lies in biased and often-manipulated government reporting.

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Janet Yellen on risks and prospects for the U.S. economy

This morning we were pleased to welcome Janet Yellen, President of the Federal Reserve Bank of San Francisco, to our UCSD Economics Roundtable. She focused on three main challenges: the housing slump, financial market turmoil, and commodity prices, which she likened to the three witches from Macbeth. Her complete speech is available from the FRB SFO Here are some excerpts.

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More on De-Globalization: Oil, Transport Costs and Inflation

Following up on this post from October 2006, when oil was only $58.88 (WTI,daily average) a barrel, consider this excerpt from today’s Thomas Net:

The impact of rising transportation costs, driven significantly by high oil prices, is already being seen in capital-intensive manufacturing that carry a high ratio of freight costs to the final sale price. But a new report has determined that higher energy prices are affecting transport costs at such an unprecedented rate that “the cost of moving goods, not the cost of tariffs, is the largest barrier to global trade today.”

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