No, a political convenience. You obviously didn’t read my follow up. Here’s a piece of advice - read the whole thread and then reply.
Back it up with evidence from a single reputable source.
Again, dipshit, read the entire fucking thread before hitting “post”.
I did read the thread, and you replied with “this is reputable”. No it ain’t. I laid out why it ain’t. The only source you could say was reputable on this subject without citation is the AEA. If you’ve got someone who isn’t a known whacko saying this, then present them.
So now you’re putting words into quotes that I never wrote? Wow, talk about intellectual dishonesty!
How about just answering his question?
What question did he ask, Warren? I’m not seeing a question? I’m seeing a demand to justify something when I’ve already said, "Do I believe shadowstats? No." Sorry, I’m just not seeing any ambiguity in that statement and I’ve already posted one link to the government itself which describes the methods used to adjust CPI.
The example I used is a simplistic example (one that has been around for decades in economics) and wasn’t meant to be taken 100% literally. Sorry for any confusion, but it’s like using “widgets” in manufacturing. The hedonic tables can be found with simple Google searches:
http://www.bls.gov/cpi/cpihqaitem.htm
As far as product substitutions, no, I can’t provide you a direct example because the government doesn’t release that information. That’s like asking me to provide photos that Osama Bin Ladin is dead. We simply aren’t privy to the list. We do believe that product substitutions can exist for, say, flank steak versus ribeyes because both fall into the “beef steak” category.
Here’s the handbook on methods used to calculate the CPI: http://www.bls.gov/opub/hom/pdf/homch17.pdf
Now back in 1996, some economists argued that inflation was overstated because it didn’t allow for hedonics and product substitutions. Others said that the old CPI measure was fine…you can tell which group I fall under. One group won, mainly (IMO) because it allowed the government to cut spending to seniors without incurring too much political heat. I don’t like it for two reasons:
One, I don’t think that the substitution effect is overstated and the hedoinc effect shouldn’t bother to be measured at all;
Two, like virtually every other government statistic, it gets manipulated for political reasons. Look at the unemployment rate and how it counts workers who have supposedly “given up”…and look at how many of those supposedly “given up” workers re-enter the work force on a consistent basis.
Hence, I feel the old way was far superior for both accuracy and far less prone to interference.
You want a question? Let me repeat my last one, then, since you seem to have missed it:
You stated: “In essence, if steak gets too expensive in the market basket, they can substitute in hamburger and adjust the CPI downward.” The specific substitution of hamburger for steak is explicitly rejected by malchior’s link. Can you offer an example of a substitution that was made, but should not have been? Just one will do.
I was revising my post above to incorporate your question (since you asked one).
Look, I don’t have a horse in this particular race … it’s just amazing to me how dogmatic people are about economics. It’s like there’s a hole in your guys brains where some of the simple realities of the recent housing bubble should be. Go read some economic thoughts on the housing bubble written in 2005 and earlier that decade. You’ll find tract after tract of rationalization that the bubble was not in fact a bubble but a sustainable increase in housing. From every sort of economic institution out there.
I know that you guys must be basically aware of that. And then you write these tortured justifications that simply say, “well we defined inflation as X, and X is low, therefore there is no inflation”. Don’t you see that these definition games are at the heart of what makes modern economics so fucking terrible? By definition there was no housing bubble in 2005. Sadly, reality didn’t give a fuck about definitions.
But let’s take a moment to listen to the wisdom of our current Fed chairman.
Perhaps he’s just stupid. Which is worse, stupidity or callousness?
Greenspan especially opposed regulation of derivatives, the side bets that were at the core of the financial crisis. The basis of this ideology was challenged in 1994, when the Federal Reserve’s decision to raise interest rates sent shock waves through the financial system. The culprit was hidden derivative side bets on interest rates placed by hundreds of companies. Three years later, Long Term Capital Management, a hedge fund, collapsed under the weight of $1.25 trillion of bad derivatives bets. Throughout the 1990s, there were repeated examples of fraud in the private derivatives market. Yet Greenspan continued to lobby for deregulation of derivatives.
Many people believe that unregulated markets are frequently preferable to government involvement. But Greenspan’s ideology was that markets are always preferable to government. For example, consider Greenspan’s view of fraud. He told one senior regulator that rules prohibiting fraud were unnecessary, because participants in the markets inevitably would discover fraud. He said, “We will never agree on the issue of fraud, because I don’t think there is a need for laws against fraud.”
http://www.sonyclassics.com/insidejob/_pdf/InsideJob_StudyGuide.pdf
edit: sorry, don’t mean to raise the dead or derail
To think that the government’s managed to hide inflation behind some revisions in the data series also implies a lot more implausible things than that.
- That either the general public hasn’t noticed increasing inflation or the Fed is manipulating the inflation expectations data series.
- That financial market space cadets haven’t noticed (the yield curve for years have indicated expectations of declining inflation) or the government is manipulating that market.
We can’t be in a housing bubble because if we were the market would have noticed it. </2005>
In the end, if our unemployment really is “structural” (which I really doubt–I just think there’s too much money in too few hands and those people are essentially sitting on it) then we need to figure out how to share the available work, and tax our society’s “winners” somewhat more, particularly at the highest levels of income, to continue to support Social Security and Medicare, . The gains in income enjoyed by our wealthiest people over the last 20 years in particular have come from favorable tax treatment combined with globalization enabled by advanced computer and communications technology, not because they suddenly worked so much harder than their parents’ generation–they were in the right place at history’s right time.
I am halfway expect US crowd to name-drop a few guys and blame them…
Its so much easier than tackling systemic issues.
Protip: when yglesias weighs in the ship has sailed.
So how long can the analogous inefficient market in bonds that doesn’t notice inflation go on? Forever? Remember at the end of the day the real impact of inflation is that the government is effectively taxing holding money, so it’d show up there too.
How long can a housing bubble go on?
You like economics because it lets you take the world, break it into nice, neat pieces that you understand, and then make claims that are pleasing to you. The problem is that you ignore the fact that this model fails, frequently, in ways that can’t be foreseen. It’s unrealistic to expect me to be able to tell you why the pieces might not add up now. It’s sufficient to understand that this entire model of reasoning has repeatedly been demonstrated as flawed.
I’m not sure I particularly buy Blackadar’s argument either. I just think that your counter-arguments aren’t particularly effective. They’re an appeal to authority where the authority in question was recently, catastrophically wrong while using almost exactly the arguments you’re using here. Just how bad do the fed (and basically all economic/financial institutions) have to fuck up in order to shake your faith in this model of thinking?