I recommend people use many different indicators to get a mental model of inflation, and you will notice that CPI does not represent inflation well.
The memes of Arby’s 5 for $5 becoming 4 for $10 are more informative than the CPI numbers. Don’t let the shock at the grocery store wear off – it’s real and painful despite what the news tells you.
True inflation would measure the amount of prosperity achieved per hour worked.
Take 1963 as an Example. Sears sold entire two story home kits with all materials for $1600. An Italian rifle in 1963 was $20. McDonalds burgers were 15¢ . Postage was 5¢ and had only increased 5 times in the previous 100 years.
You might retort that average household income is $70000 now vs $6200 in the early 60s– a tremendous boon. Remember in 1963 only the man was working, and typically supported 4 kids, a wife and often parents in the home.
In other words you had 1 man working 50 hours a week afford a house and support 5-6 other people. Today you have 2 people working 100 hours a week to support 1-2 additional people , while living in an apartment and living in a run down and crime infested neighborhood.
In case you think this is academic, look at the occupations for those who lived in today’s wealthiest neighborhoods. Today Palo Alto, Menlo Park, and other super zips are exclusively $500k incomes and up. In the 1960 census records you will find these good neighborhoods occupied with plumbers, painters and other blue collar workers.
My point is that inflation isn’t abstract and it isn’t a law of nature. It’s a deliberate approach to stealing your prosperity while you cheer it on.
Summers is right more than he’s wrong. Real inflation has always been higher than the bogus CPI numbers, and the past 5 years it’s been accelerating.
This is a ridiculous exaggeration: the average US household was 3.7 people in the 1960s, not over 6[1].
There are good reasons to hold politicians to task for recent abnormally high inflation. But this comment is more of an atavistic fever dream of the past than an expression of those reasons.
Edit: another source puts it at 3.3[2].
[1]: https://www.statista.com/statistics/183657/average-size-of-a...
[2]: https://www.statista.com/statistics/183648/average-size-of-h...
The average household also includes empty nesters and people who have moved out yet haven't started a family yet. The average number of children per family in the 60s was 2.3, which means quite a few families had 3 or 4 children.
According to our experience of the last 7 years, we should expect interest rate cuts, tax cuts, and more fiscal expansion either at the same time or in some sequence. Each of them will help solve our problem. There is no fiscal conservative left in America.
"Fiscal conservativism" is the equivalent of a household not purchasing any insurance, not going to the doctor or dentist, and saying "look how affordable everything is if we cut out all those stupid things? It's wasteful spending!" Then you get into a car accident, go to the hospital, lose your job, and cry about the inefficiency of the market because you now have a huge bill that you can't pay. It's short sighted at best. True fiscal conservatism would be all about social safety nets and free education to grow the economy, but y'all just want to save a few hundred bucks on your property taxes, everything else be damned.
Which is why Italy and France have such strong economies, right? What’s really standing in the way of economic growth is that the government isn’t paying for people to get free degrees in left wing studies.
or the Scandinavian countries that generally have higher spending power than the us.
remember not to conflate a strong economy with an economy that is worth living in. you can possess minimum paid jobs in order to make profits for shareholders and never see a dime of that wealth yourself, but alas, you live in a strong economy.
Do they? PPP they all have lower disposable income than the US and they are not even at the top in Europe (including social transfers). Germany, Switzerland, Austria and the Netherlands are above Norway and Sweden is even lower than France.
Also, Norway's PPP is as high as it is only because of North-Sea oil revenue.
that is used for a sovereign wealth fond. Norway produces less oil than the us.
Right, but the US has 60 times as many people. Norway's per capita oil revenue is very high.
Of course we have higher Disposable Income in the US, it's a useless metric for these sorts of comparison purposes as it includes expenditures for things like healthcare, which in most other places is paid for by taxes (aka. not part of disposable income). A more useful metric would be Discretionary Income.
The OECD economists are pretty smart cookies, and account for government services delivered in kind (like healthcare). The net adjusted household disposable income includes the value of government provided healthcare: https://www.oecdbetterlifeindex.org/topics/income/ (“Household adjusted disposable income includes income from economic activity (wages and salaries; profits of self-employed business owners), property income (dividends, interests and rents), social benefits in cash (retirement pensions, unemployment benefits, family allowances, basic income support, etc.), and social transfers in kind (goods and services such as health care, education and housing, received either free of charge or at reduced prices).”) So the income top line in European countries is higher than the actual income to account for the value of those services.
I agree that you can’t conflate a strong economy with one worth living in. But OP was saying that we should invest in education for economic growth, and that doesn’t make sense. There’s trade offs to be made between growth and quality of life.
It’s not true Scandinavian countries have more spending power. The OECD keeps very detailed economic data. The US has the highest PPP disposable income in the OECD: https://www.statista.com/statistics/725764/oecd-household-di.... It’s about 67% higher than Sweden and Denmark.
Now you might say, but Swedes and Danes live longer and are happier. That’s true! But as far as I can tell, Americans would rather live shorter lives and have more TVs and trinkets. My parents came back from traveling in Australia. My mom was ranting for weeks about how small and close together the houses are and nobody can get really rich. We are immigrants from a third world country. All of my family members that have come here think that “making it” means living in a McMansion and driving an SUV. I don’t know if it’s something in the water, or the people who come here are just that way, or maybe a bit of both. But it’s worth contemplating that Americans are making rational choices based on their particular utility functions.
You are using a straw man. The reason we have a democracy and freedom of speech is so that each of us can voice our opinions and vote for those that share them. Unfortunately, nothing is perfect.
I'm using the term as it's used 9/10 times it comes up. I've never in my life met a self proclaimed fiscal conservative that didn't just mean "I want lower taxes". The way to lower taxes is a healthy and intelligent population. That is seen as a cost but is actually an investment that pays massive dividends. That's what a fiscal conservative would do, invest at the societal level. Otherwise they're basically just a libertarian.
So a strawman. You set up the premise, you set up your misunderstanding, and then expect everyone else to follow your misunderstanding. You've even redefined what a "fiscal conservative" would actually do (if you were the one defining it).
Then you pulled in "libertarian" out of nowhere. Which is an obvious set up for another strawman, so lets lean into it. Whats a "libertarian"?
I have no skin in this because I don't live in the USA and don't want to, but no, everything in the comment you replied to falsifies "So a strawman".
You can be wrong without being a strawman. When every example you have of X is Y, it's not a "strawman" to say "all X are Y" — when you're wrong like that, it's a black swan.
No it doesn't, user exclaims their ignorance and your follow up emboldens their ignorance does not make a QED.
Does your understanding of reasoning consist solely of the dichotomy "every position is either a QED or a strawman"?
Sometimes yes, but not always.
Is that actually true though? Are you not assuming perfect rationality on behalf of the poster, and that they have an adequate sample size, which tends to be subject to who the individual associates with.
That depends on the truth of the matter.
Only if the initial guess was correct.
You may be describing appearances. That which cannot be seen does in fact exist, it just doesn't seem like it because it exists in a different realm, and how our culture is trained to think about such problems spaces.
I only want lower taxes if I see my current tax money being spent very irresponsibly, like "forgiving" student loans...
Woah, you sound like Adam Smith (the real one, not the one worshipped by alleged acolytes who clearly never read a word he wrote).
I often like to observe that there is capitalism and then there is Capitalism with a an uppercase--dare I say "capital"--letter C.
The first is a kind of economic engineering with trade-offs and conditions and acknowledged edge-cases, the second is a brand supported by some rather culty dogma.
Truer words have never been spoken. Fiscal conservatism died with Reagan.
In what way was Reagan a fiscal conservative other than making the poor targets for pain? He destroyed half the social safety net in this country while running on a hideously bigoted platform and STILL ended up spending an insane amount of money compared to his predecessors. The only fiscal conservative of the past 50 years in the White House was Bill Clinton.
Democrats controlled the House the whole time, so how’d he manage that?
What a remarkable assertion.
The monkey tape is revealing.
Revealing of what? That racist jokes were normalized back in the 1970s? It’s not like we stopped telling exactly that same joke—we just changed the social norm around who is allowed to tell that joke. Are you more likely to treat people fairly because you won’t tell that joke (but would still laugh at the similar Dave Chapelle bits?) and what does it have to do with his platform?
Neoliberal democrats
I saw an interview where Bill quipped "You know how we balanced the budget? We used a little thing called 'arithmetic'."
That one of the two American political parties believes they can lower the deficit by cutting taxes (primarily for the wealthy but that's immaterial to the basic math here) has always created some sense of unreality for me; I really no longer understand what the goal is for many of these people and I often think that they don't really know either. It's almost pure nihilism except when it comes to lust for power.
It's much less deep then nihilism.
Their goal is simply to live their life as richly as they can at the expense of those they consider less than themselves. They are the wealthy and they act accordingly.
Why anyone sees Republicans as anything else boggles my mind.
Anyone who isn't a billionaire and is voting Republican may as well be a turkey voting for Thanksgiving.
Imagine a candidate who could make a quick, sharp and accurate quip.
Out here in the wider world, American elections are more terrifying every time they come around.
Yes, Reagan the fiscal conservative who tripled the deficit and national debt:
https://www.pbs.org/wgbh/commandingheights/shared/minitext/e...
Greek austerity imposed by Germans had resulted in the doubling of debt as percentage of GDP.
Which Germans imposed Greek austerity? AFAIK Greek austerity was imposed by Greece's major creditors, but Germany was only one of many.
Between Brussels and Frankfurt (EU institutions I mean) the general consensus was that the Greek situation was more akin to loansharking than anything else. And Germany was undeniably the largest driving factor behind this approach, and the country that most benefited from it.
But what was the better alternative for Greece?
Fiscal conservatism died with fiat and John Maynard Keynes' "In the long run we are all dead."
maybe more like Bush. Clinton was the last president who oversaw a brief surplus in the federal budget and once said "the era of big government is over".
pretty wild to think that surplus was in part driven by the internet boom. now we have some kind of stock market boom while the federal deficit is 10% of total GDP and national debt is growing by a trillion dollars (a million times a million) every 100 days or so.
Far more divorced now too, so more demand on housing, and more people want to live in cities than in the 1960s, leading to even more demand.
It all comes down to the cost of housing, at least in the UK where housing has been ridiculous for over 20 years. That housing is driven up to soak all available income by artificially constrained supply.
All available income has increased on a household basis because of egalitarian reasons -- more women work now, which means that more women have to work now. The excess income is lost to housing costs.
We’ve replaced a world in which women are forced to stay at home with a world where women are forced to work until 70 (or whatever the retirement age is in your country). Great if you’re an exec or have some mentally stimulating job, but for the typical woman it means stacking shelves until your back gives out. What an achievement for society.
That's what equality means and what they fought for.
There is more at play than simply equal rights. Housing supply hasn't risen to keep up with demand. Education and healthcare costs too have grown significantly compared to pregnant-and-barefoot-in-the-kitchen eras.
I agree. But what does it have to do with your rant about women particularly getting a worse deal?
That's missing forest for the trees. The more important part is that average 3.7 people household was a single-income one.
I would rather disagree with GP's:
A lot of the inflation, including how suddenly a single-income household isn't a viable option for most people in the West, is market working as intended - quickly consuming any surplus money, should it suddenly become greater than 0 on average, and slowly eating into any value that isn't bare-minimum strictly necessary to move a product.
I think people are asking the wrong questions when it comes to inflation. It's not which president is at fault... It's who is profiting from it? It's not the minimum wage worker. It's not the standard office worker.
What class has shown absolutely insane growth in wealth and income in the face of what looks like crippling inflation?
Your standard office worker probably refinanced their mortgage at ~3% and is now laughing their way to the bank as their debt inflates away so they probably are profiting from it. I know I am.
Your standard retiree on the other hand who holds a lot of bonds that got absolutely hammered by inflation and rising interest rates is not doing so well.
That only works if you’re income rises faster than inflation, otherwise the relative amount of debt either remains the same or even increases.
That 3% rate was plowed into a property whose price was inflated by exactly the amount that the 3% rate discounted the cost of money.
It's not the market that's eating the "surplus". Economic inequality is at an all time high. Big corporations are posting record-busting profits. Inflation is driven by greedflation, mostly.
Corporations aren't natural persons. You have to look a the in/equity of the wealth of the people who enjoy the corporation's money.
Did you think I was claiming the corporations themselves were hoarding the wealth? Did it not occur to you that I was referring to the corporations as the tools of the shareholders? Do I really have to be that explicit and include misquotation alerts for every possible idiot?
That's not necessarily true. Per FRED (https://fred.stlouisfed.org/series/LRAC25FEUSM156S), in 1963 about 44% of women aged 25-55 were in the workforce. That's obviously much lower than the ≈96% rate for men, but it implies that the average couple had closer to 1.4 incomes. The comparable rate based on today's labour force participation rates would be about 1.66 incomes.
The single-income family may have been the norm, but it was far from a rule. I think that our popular perception of life in the 60s has been filtered through media portrayals, which all tend to reinforce ideals as commonplace norms.
What's the definition of 'in the work force'
Is a child with a paper route 'in the work force?'
You are also assuming that 100% of those 44% were in a relationship.
We just dont know what % of those were single mothers, widows, divorcees or single women, etc.
> That's missing forest for the trees.
However, when a person is making a post saying "don't trust those dodgy manipulated numbers" and offering alternative numbers, their post is a lot less convincing if their numbers are also dodgy
I didn’t get they said the numbers were dodgy or manipulated. Don’t make the typical straw man when discussing inflation that people challenging the current formula for CPI are challenging the underlying data and so are conspiracists. The point is the relevance of the indicator. In fact the very article is about a different value if we take an older formula.
When I worked a lot with government this used to be a big problem. Some minor tangential point in a finding would be slighty off or not adequately supported and people would jump on that, ignore the rest and pretend it invalidated the whole argument. It's mainly something that comes up talking to insecure bureaucrats that don't want to change.
You can listen to Bing Crosby's Christmas album, to the song "It's Beginning to Look a Lot Like Christmas", where the parents having 4 children (household size thus 6) is described, as an anecdotal supporting note... since it was a popular song for the masses, 4 kids was not seen as unusual.
You cant seriously be comparing actual cited stats for household size to lyrics from a song that was popular?
I specifically stated it was anecdotal... here are the census stats in graph form however: https://www.census.gov/content/dam/Census/library/visualizat... ; 2.5 kids plus 2 adults is 4.5 in the household.
4.5 in the household is very specifically not 4 kids, like you claim is common. Just an insane random hill to die on
You're deliberately misunderstanding. Have a nice day.
Why not? Stats are numbers compiled for someone at some point. A song this popular is a snapshot into how people lived and perceived themselves back then. A measurement of sorts. A disagreement between the two is a good indicator that the stats are suspect, or not the right stats to be looking at
The parsimonious reason is that people write songs about comfort and large, happy families, not about AGIs and statistical households of 3.3 to 3.7 people with 1 to 1.44 breadwinners. Songs (and media) reflect cultural values, not cultural realities; see also rosy movies about the "good old days" of 1960s USA being not particularly representative of the period's racial and economic strife.
Because people dont accurately represent their situations? This seems so silly. West Virginia has a huge culture of music singing about how its a state of coal miners, when in reality, there are less than 15k working in the coal mines, with a population of 1.75 million.
That does not indicate that there are secretly a lot more coal miners, it just indicates that people are clinging to and showing off an identity that they like and want to be represented by.
Ok putting the fever dream aside, even at 3.7 people per household the 1963 to 2024 numbers as it relates to income vs cost of living is pretty eye opening. You are not really disproving the general point by getting fussy over the numbers.
The current average US household has 3.1 members. There’s an important discussion to be had about cost of living and stagnant wages despite productivity, but as I said in another comment: that conversation needs to be factually grounded. Vague reactionary handwringing about the good old days isn’t going to cut it, especially when the good old days weren’t all that great by contemporary standards (or for contemporary American demographics).
If we’re to correct the exuberance of emotion then this reactionary reply doesn’t fit either.
On the topic, I found this informative: https://www.in2013dollars.com/us/inflation/1963?amount=1
“ $1 in 1963 is equivalent in purchasing power to about $10.21 today, an increase of $9.21 over 61 years. The dollar had an average inflation rate of 3.88% per year between 1963 and today, producing a cumulative price increase of 920.69%.”
Also: https://www.census.gov/library/publications/1964/demo/p60-04...
“ The median income of all families in 1963 was about $6,200; but for families headed by college graduates, the median was $9,700. The median for all families was about $290, or 5 percent, higher than in 1962. Consumer prices rose during this period by about 1 percent; therefore, not all of this amount represented a net gain in purchasing power for the average family.1
Median family income in current dollars has more than doubled in the postwar period (from about $3,000 in 1947 to about $6,200 in 1963). This rise was accompanied by a gradual upward shift of families on the income scale. However, consumer prices have risen substantially during this period so that only about three-fifths of the increase in current-dollar incomes represented an increase in real income. In terms of constant (1963) dollars, median family income increased from $4,200 in 1947 to $6,200 in 1963. This increase was less pronounced than the increase in current-dollar income, but it was nevertheless substantial.”
The entire point of this discussion is whether we should question the CPI figures you are using to 'debunk'... this discussion.
You still haven’t addressed the greater point. Instead you are fixating on the accuracy of least important number in the point the original commenters post. I suspect it’s because it’s the only one you can pick at. The point being can the average single income household of 3.x in 2024 afford house, car, groceries, etc at the same ability as the average single income family household of 3.x in 1963?
What stagnant wages? The labour share of GDP has held roughly constant over the decades.
the average lifespan in the middle ages was 35 too. does that mean there were no old people?
Your comment explicitly mentions averages. It's a matter of basic fact that the average working-age male in 1963 was not supporting 5 other people with his salary.
They are not census statistics they are an amateur assembling statistics using public census data. The methods are not published
The method is listed in the description below the statistics. Again: if you think these numbers are suspect, you are encouraged to find a different citation that contradicts them. Without that, your complaints are unsubstantiated.
No, but the “typical” person isn’t old. Just like the “typical” man didn’t support 6 people in the 1960s.
This, and also the myth that only the men used to work and provide for the needs of their family: while is was true in the growing middle class it wasn't the case in the popular class at all.
Well, maybe 25% for the budget deficits. The Fed is responsible for 75%. They keep over-goosing the economy. They keep saturating the money supply. That devaluing is what inflation reflects. That is your money is worth less (and appears like prices going up).
> In other words you had 1 man working 50 hours a week afford a house...
With inflation, we want to know about the change in value of the dollar only. We don't want to factor in the change in value of houses, food, etc. There is a place for understanding that too, but inflation is not it. Something like a cost of living index is more suitable to that kind of information.
On that note, houses are unquestionably more valuable today. For one, they are twice the size they were 60 years ago. We can all agree that a bigger house has more value than a small house, at least within reason. You can fit more in it, it is more comfortable, etc. and that is valuable. They are also a lot safer. That too is more valuable.
As such, a housing costing x% more today than as compared to some time in the past does not mean that inflation is x%. Again, we only want to know about how the dollar changed in value, not housing. Of course, if you only have numbers, it is impossible to know what share is due to housing being more valuable and what share is the dollar being less valuable, although we can say with great certainty that it is some combination of both.
CPI tries to tess out what is the dollar portion only by looking at a large basket of goods of things people buy frequently. Where you see common moment in the change in price across all items in the basket, that is assumed to be the change in value of the dollar. It's not perfect. There is no perfect metric. You are quite right that one should look at many different models, even though none of them will be perfect either. It is all good information, none of it great, but at some point you have to pick a single number.
On average, it will be close enough.
Pick whatever word you like if "inflation" is reserved for economists because regular people are "just too dumb to understand".
We need a concept for debasement / hidden tax that allows people to hold their policymakers accountable.
My point is that CPI isn't it, it underestimates true inflation by 3-5x or more , and it interferes with good governance.
If the govt wants money from the people, they need to tax them and be held accountable for the policy
> Pick whatever word you like if "inflation" is reserved for economists because regular people are "just too dumb to understand".
Regular people understand inflation just fine. How useful it is to them is debatable, but it doesn't have to be for everyone. It's okay if some measurements are only useful to scientists and economists. The measure of the speed of light doesn't mean much in my day to day life either, but we don't have to abolish it because of that.
> We need a concept for debasement / hidden tax that allows people to hold their policymakers accountable.
I think what most people are looking for is simply cost of living measure. They want to know by how much the costs to live (housing, food, etc.) have increased over inflation. Which we have. But that one might actually be a case of being "too dumb to understand", explaining why it is not commonly put to use. Inflation is, indeed, a much simpler concept. Or it may be that the ultimate cost of living measurement comes from one's own personal accounting records[1], negating the need to reach for any 'universal' perspective.
[1] But I suspect most people don't keep any accounting records, so most likely the first one.
You may have cracked the conundrum right there. People use inflation as a gauge of COL. That is incorrect, but understandable given the lack of a well-publicised national COL metric.
> People use inflation as a gauge of COL.
Which is interesting as you'd think actually living, and incurring the costs that go along with it, would be a much more useful gauge.
Probably goes along with my suspicion that most people, especially those not already accounting for business activities, don't keep any meaningful record of their transactions. Hard to calculate COL without data.
But at the same time, there isn't much effort in publishing national COL metrics as it is presumed that people will already know their own situation, which is always going to be way more telling. Individual COL can vary widely, even between neighbours, let alone on a national scale.
Not for a monetary authority. Given how much drama we have around even our Census Bureau, this gap makes sense. (Also, for every complaint about a given inflation gauge, one increases the parameter and thus bitchable space by orders of magnitude when it comes to COL.)
But political leaders won’t.
> Not for a monetary authority.
We track this information, though. Anyone doing any economic-related work will be well familiar with the data. We just don't publicize in any grand fashion because who else needs to hear it? I'll grant you that people who write comments on the internet tend to be completely out to lunch, but most people have some kind of handle on their COL situation. They aren't going to learn anything they don't already know, so there is no reason to listen in. You need demand in order for supply to show up.
Inflation doesn't mean much to Average Joe either, to be fair, except it is a leading indicator of interest rates, and Average Joe does care about interest rates, so this is why Average Joe is listening for inflation information.
> But political leaders won’t.
The leaders are the people. The very same people.
If you are trying to imply that the leaders are as lazy about democracy as they are accounting, and are willing to let the hired help do whatever it wants because they don't want to ever have to take the time to talk to them, I'm with you. Not much you can do there. But if they don't care, nobody else is going to either.
5x?
And you think the US in general has gotten more dangerous?
what's your opinion?
The US gets more and less dangerous over time, it varies. It's presently a little bit more dangerous than the early 60s, but way less dangerous than the 70s-90s.
You are completely mathematically illiterate if you think that annual inflation is 3-5 times higher than the reported value. The average annual inflation since 1960 is 3.7%. If the real annual inflation were 3x that (11.1%) then we would have seen 85000% cumulative inflation since 1960. A gallon of gasoline cost $0.30 in 1960, so it would cost $250 in 2024 under 850x inflation. In reality a gallon of gas costs $3.60 today, which is not far off from the 10.5x inflation the CPI measures over that time frame (the same CPI you claim is massively understated).
You're running around this thread smugly declaring yourself too smart to fall for the government's lies while failing to spend a few seconds doing the trivial arithmetic that would disprove all of your deeply held beliefs. Which of your other political or economic beliefs will fall apart with a little bit of middle school math?
Computers got 99% cheaper, so by your analogy of only considering an arbitrary product, we have actually experienced deflation!
Are you seriously insisting that the average product has gone up in price by 850x since 1960 and that gasoline is a huge outlier that has appreciated much much less than everything else?
For me, I'm not surprised inflation went up. We had a global lockdown during which some industries made a lot of money and some industries made little to no money. Once the lockdown ended, I assume the ones who made a lot started to lose sales and increased their prices to keep growing. I assume the ones who didn't make a lot of money started to increase sales again and probably increased their prices to recover the money they didn't make. I imagine both of them want to make sure they have enough money to survive another global crisis, especially the ones that almost didn't survive it.
So, yes, I think the government has a role in trying to limit inflation (and also increase wages), I just think that some inflation makes sense from those dynamics above.
I don't know what to tell you, but buying a house from a previous owner at double or tripple the price is not a hidden tax.
This is a really good idea and I hope someone popularizes a new measure.
By "we", you are referring to you and others who want to know only this.
Some people (not many) want to know what is going on comprehensively, and in fact. For example: I would like to know if there is any strategic changing of formulas to improve appearances going on, like there has been at pretty much every single job I have ever worked on.
But to be fair, this is a subjective personal preference, and an unusual one at that. Most people prefer simplistic, memetic representations of reality (though, few can agree on which memes).
> By "we", you are referring to you and others who want to know only this.
Right. I am referring to all those who want to know only this, along with everyone else. Because those who want to know something else would use another measure. Those complaining that inflation doesn't give you some other economic indicator is like someone complaining that temperature is not a good measure of distance. Well... duh.
> Some people (not many) want to know what is going on comprehensively
Absolutely. Which is why we have many different ways to look at inflation. In fact, don't White House economists use 30-some-odd different measures of inflation throughout the course of their work?
But eventually you are going to want to put it to practical use, mathematically, and our formulas require a single number. CPI is the one we picked to standardize on (but, of course, you can choose another if you want). It won't be 100% accurate – determining that is fundamentally impossible and you know that going into it – but it will be good enough.
"along with everyone else" is incorrect, because you have no way of knowing what other people want (and worse, maybe no way to know that). And the only way you "know" what "all those who want to know only this" is because it is a tautology, it is necessarily true. Though, you have no way of knowing what percentage of the population thinks like you do, so it is not particularly informative knowledge.
Some people (me) would like to see all methodologies maintained indefinitely on a chart, so we can see how different versions of The Truth vary over time. I am interested to see if changes in methodology tend to correlate with changes in the "vibe" of the cost of making ends meet people are experiencing. I prefer this approach because it is more transparent, and because I do not trust my government, or the perceptions of my fellow Westerners (because of the way they think: how it "is", is how it seems to be....which tends to correlate quite nicely with how it is said (repeatedly) to be).
It is also "like" someone whining about how appliances don't last as long as they used to, but "is likes" are often more misinformative than informative (perhaps why they are so popular?).
Are you blaming others for the way you think?
And also why I do not want historic "truth discovery" methodologies memory holed.
Don't know, but I do not trust them.
Also, "in fact" terminating with "?" is a rather interesting approach.
Maybe we should get better formulas, because reality does not fit so nicely into simple, reductive, misleading models.
No, "we" did not pick it, someone else picked it "on our behalf"...according to "democracy" we are trained to believe, though it is not both flawlessly true and not misinformative.
I can't get it published as "fact".
Good enough to satisfy people that want to be satisfied, but not good enough to satisfy all.
> No, "we" did not pick it, someone else picked it "on our behalf"
With a gun to your back, eh? We can use whatever source of inflation we want. Nobody is selecting for us. But, as it happens, CPI is the one we've chosen as the default. If we change our minds, we don't have to default to it forevermore. It's up to us.
> Are you blaming others for the way you think?
I don't think. You do enough of that for all of us. No need for me to duplicate efforts.
I relay the state of the world to the thinkers so they don't have to. The efficiency of specialization!
> Good enough to satisfy people that want to be satisfied, but not good enough to satisfy all.
Which, again, is why we have many sources of inflation. Pick a different one if need be. Indeed, there is good reason why there is more than one.
And if inflation isn't the right tool for the job, which is probably the case, use a different economic measure. There are many tools in the toolbox. You don't have to measure distance with temperature.
Let's be real, the only reason we talk about inflation at all is because it is shares a relationship with interest rates. Interest rates are what people actually care about here. As principal value declines with inflation that makes borrowing more attractive, thus interest rates need to compensate, thus a change in inflation rate serves as a useful leading indicator of interest rate movement. If it weren't for that, it is doubtful that anyone, economists and statisticians aside, would even know that inflation is a used measure.
Beyond interest rates, it doesn't mean much to Average Joe. Average Joe is more worried about things like cost of living. Inflation isn't meant to be useful to Average Joe, though, it is for economists who need to look at much more than Average Joe. Average Joe is free to use it if we wants, but it's funny when he starts complaining that it doesn't work right when misapplied.
People discuss inflation because everyone from the Economist to Yellen to the President brings up inflation numbers whenever people start feeling their COL increase, or when people demand better state services etc. It is one of the most widely publicized economic indicators, along with GDP, unemployment rate, and foreign debt.
But in many of these discussions, it is deliberately being presented as equivalent to COL, which is never addressed separately. So, in reality, for the vast majority of people who learn about these numbers from the media, not economics degrees, "inflation" actually refers to COL, except that the numbers they are given are the ones for what economists call inflation.
Given that a word is defined by what the majority of the people using it mean by it, I think inflation in common English is closer in meaning to COL than to the technical economics term inflation.
Edit: typos
How to manufacture reality (define and coordinate human beliefs) 101.
It is amazing how effective and resilient these techniques are, if one cannot see the layers within layers. Well, it's still amazing even then.
a) Who, specifically, is "we" in this context?
b) What is your information source for these facts?
What is your information source for the meaning contained within the minds of the average Joe? Please be specific, please at least try to speak truthfully.
How to forcefully remote-terminate the Interest service in a Human 101.
General rule of people. If you have seen it at work it is happening in government. Being a public servant doesn't change human nature.
Changing human nature seems rather analogous to the difficulty of nuclear fusion, and I suspect it is similarly powerful/useful if a trick could be found to accomplish it. At least we're trying with nuclear fusion.
They also have better insulation and construction, they’re all wired for electricity and plumbing, they all have advanced HVAC. Fancier kitchens with more plumbing, appliances and nicer materials. People have access to more furniture and fixtures and appliances to fill more home - no one needed laundry rooms before a washer/drier was invented. Few had garages. Don’t let survivorship bias fool you - the 1950s homes that working class families had were not that nice.
The homes today cost more because more goes into them. We could all live in stuck huts we made ourself like in 1750 and everyone could afford two houses in 2024. Instead, housing has gone up because the utility of that housing has gone up.
Oh and of course we’re not making nearly as many per-capita as we used to. So the scarcity is going up.
The increase in housing prices are not at all proportional to these advancements in building techniques and materials.
It absolutely raises the “floor” of the housing costs - more materials simply means more costs. And the labor to do extra work means more costs - and quality labor is much more expensive today. Same reason a bigger house means more costs.
I would posit - admittedly without data - that outside of major metros where land is the clear dominant cost, most costs for housing increase is labor.
There are houses and empty lots available within 15min of downtown Cleveland that are selling for <50k. If you go up to $100k, there are dozens of houses. They’re all empty lots or houses that need renovations. If you want a new construction in the same neighborhood, it’s $300k. The cost difference is labor or materials.
Obviously Cleveland is a cherry-picked example but I used to live there so I picked my old neighborhood. San Francisco, Boston, Seattle, etc are obviously mostly driven by land costs due to demand and very high incomes.
Having worked near these neighborhoods the value you put in would be at a high risk. It's very possible you'll be assaulted, your home will be robbed, and the market value won't match the renovation costs.
All that said, some parts are gentrifying. Though mostly where developers can get large enough plots.
Because of the availability of land. There are three costs for housing
1) Materiels
2) Labour
3) Land
Show me a company that can sell a less advanced 1960s style house for the average worker's median income and I'll show you the next 100-billion dollar company.
Exactly. Why are there so many people trying to talk themselves into a corner?
Have you seen the price of land recently? It’s more than half the price of construction! Mud hut, pole barn, unserviced cabin, what-have-you, the land is going to be a major and significant expense.
Keep in mind, demand was higher with the baby boom than it is today. Houses also used to be built to much higher specifications. Old houses were made with tons of premium timber that is still valuable even 50+ years later.
That is mostly survivor bias and cost of materials difference. We’ve used up most of the stores of large timber causing the price of it to go way up. At the same time the price of construction grade metal has come way down. Thus large beam construction has become a luxury.
As for housing quality, post war tract homes were wildly worse. My wifes family still owns the tract home they lived in growing up. It was exposed concrete, exposed roof and no ductwork until a HUD funded remodel in the 70s. It’s also 750 sq feet. A modern double wide trailer is higher quality.
Have you ever seen an old 2x4? This isn't "large beam" but it's obviously higher-quality than new 2x4s.
There used to be some homes built to low specifications. But most were built super solid. Ductwork, insulation, and just about anything else can easily be upgraded. Compared to classic European houses, ours are temporary trash.
You just discredited yourself there to everyone who knows even a little bit about houses. Go find a 50 year old trailer and see how that looks lol. American houses are optimized for size at the expense of permanence, and trailers are no different. They are cheap for a reason. Although they can be good for some people (no judgement here), it's just not on par with either a new house or an old one.
The 2x4 was decreased in size below 2x4 in the 1920s because shipping costs started dominating lumber prices because we’d depleted the forests near the cities where demand was greatest. It was further reduced during the second world war because building of necessity became standardized and again shipping volume was of primacy.
The US forest labs did tons of tests on this in the 1920s fwiw proving there was no quality difference.
Now there are many fine homes left from prior to these changes, but there are many many more crap homes that are gone because they weren’t capable of lasting. These are the homes you should be comparing to the average home built today.
But you mostly can’t. When you can, as in my example, you will find the older homes were built to similar specs as today from a structural stand point but much lower spec on systems, finish and especially size.
This doesn’t even touch on tenement apartments where most of the population lived in cities (the place housing costs have swelled the most).
These would quite literally be considered incapable of being housing now.
I am certainly not an expert on housing but my father was professionally and I did help my grandfather add an addition to our family farm house that was from the 1910s, when it was literally 1 room without plumbing (they’d done a previous remodel in the 60s to add bedrooms and plumbing, the materials from that remodel were not significantly different than the materials we used in the 90s).
Lol if you see old 2x4s and new 2x4s first-hand you'll know immediately that this is wrong.
In many cases perfectly salvageable homes were demolished to make room for new stuff. Don't forget about those.
There is a high degree of variance in the quality of old construction, I have to admit. But from what I've seen, prior to the 70s (and maybe even later) even simple homes were built with materials that would be considered premium today. Hardwood floors, solid wood walls, tongue-in-groove planks everywhere. If it's a brick house, it's actual solid brick instead of a brick facade on cheap trash wood. Very rare to see drywall or plywood, or the other flimsy materials people use now. Even old plywood is premium compared to the new composite crap all glued together.
Most of what you have said starting with the definition is incorrect. I suggest you read BLS handbook on methodology.
But it’s not like our standard of living has remained static while we need to work more. A lot has changed. In 1960 the average single family home was 1300 square feet, now it’s more than double that, and it’s packed with amazing amenities and entertainment options. What would an iPad cost in 1960?
Obviously the question is kind of nonsensical and yet on the other hand, if you were to try and quantify the price of our ability to work from home, for instance, we have a way better deal going than they did in 1960. You could retort that this is the inevitable march of technological progress, but could it be the result of hard work and innovation including the hard work and innovation of women in the work force?
The main thing is, that I could actually support a household of 6 people on a single income if I was allowed to fix the comfort at the 60s level.
1. No flying on vacation and only simple camping as vacation 2. No technology: Computers, phone, television. Nothing, and no associated costs with subscriptions, etc. 3. Eat like it was the 60s, mainly potatoes (I am from Northern Europe).
That said: I truly believe in the parent commenters key idea. We need to create more real prosperity for people. But in order to do that, we need to adjust the activities – Marketing and expensive dead-end projects (read: projects that occupy a lot of person-hours) does not achieve real prosperity.
No, you couldn't. The average working male earning 6200 USD a year in 1963 was supporting 2-3 other people (i.e., the nuclear family), not 5. This is almost directly in line, via inflation, with the average US household income and size in 2024.
I agree with the larger point about prosperity, and I think there are ways in which the US (and other developed countries) have gone backwards in QoL metrics. But a serious conversation about that needs to start with numbers rooted in reality, not a rose-glass view of the past.
Take your typical family of 4 living on 2 incomes today.
Are they living in a 1,500sf house (median size in 1960)? Without AC, no cable TV, no computers, 1 car, no exotic / organic foods except from the garden, few toys, 60’s era medicine. Do they actually repair or even make clothes? How about home repairs?
My mother was a teen in the 60’s and while objectively they were well above the median income for the time period in many ways they lived like extremely poor people do in 2024. Some of that was actually saving money for retirement, but mostly it was just far lower expectations.
You make some valid points but one nitpick: what we call organic food today, they simply called food in the 60's since all food was by definition organic.
That is abjectly false. Synthetic pesticides have been used since before the second world war. Silent Spring was written in 1962 about the effects of the amounts of DDT that had already accumulated in the environment by that point.
Right. By virtually every metric, the average American family is materially more prosperous than they would have been in the 1960s.
Backwards movement in QoL metrics is mostly on the left tail: impoverished Americans have access to AC and refrigerators, but often live in food deserts or are subjected to perverse policies in our social safety net (e.g. welfare cliffs that punish people for working by taking away benefits that enable them to work).
Yes, so I am saying that a median income today could sustain a 6 person household if you were allowed to fix your comfort level to the level of the 60s. That is 3 more than a single median income supported in the 60s.
I am definitely not trying to paint a rose-glass view of the past. I am saying that we do have more prosperity today than we had 60 years ago.
I am also saying that we pay of a lot of time to have things that provide diminishing returns. (Ie. would you rather have flush toilets or access to facebook - style of reasoning). Maybe the famous 80% value for 20% cost is also inflating?
Sorry, I badly misread your post! I agree about the diminishing returns.
Mainly potatoes is bullshit.
Sild og poteter (herring and potatoes) is still a meme for being poor in Norway.
Potatoes are a main staple in many ways outside of the cities even to this day.
Not for Northern Europe in the 50's.
Like peter theil says, in 40 years only technology has improved , the real world has declined.
Should we value technology so much that we cheer on the loss of the real world?
What exactly has declined?
No. Because the things that cost significant amounts of money aren't computers, phones, and tvs (notice that poor people have these). It's the minimum bar to be a player in society that has been raised.
1960s - could have a good career without college education and it was inexpensive - can afford a house - can often not have a car
2020s - need bachelors degree to get started, probably also need a professional degree - houses occupy - need cars (likely for all adult family members)
What is it then, that is so super expensive today, that wasn't too expensive in the 60s?
also it is a strawman to mention the poor people has it. the hierarchy of what you spend money on is not settled in a hiatorical occurance of said product. you don't buy a watch before a phone because it was invented first.
also, it is completely irrelevant. my proposition is that if you fix your comforts at the 60s level then you have greater spending power than equivalent people of the 60s
We were actually flying on vacation in the 1960s though.
My maternal grandfather was a school principal and his wife didn't need a job. They went to England and Spain on vacation.
We also of course absolutely loved potatoes. We still do.
What did a college education cost in 1960?
I would gladly trade WFH to be the one person supporting a family of 6. (Me, partner, two kids, two grandparents.)
The Internet's great and all (although sometimes it seems like it was a mistake), but we're so far from 1 very average person being able to support a middle class life style for 6 people.
Median income in 1960 was $5,600, which is equivalent to $60,000 today, but according to the EPI*, to provide for a family of 6, I'd need to make about $150k/yr to live in Cincinnati, Ohio (in SF it's $280k). Which isn't a lot in the FAANG world, but the point is that a very average not-very-smart person was able to provide for that many people back then.
How many very average not-very-smart unskilled people do you know make $150k/yr; how many smart people do you know that make less than that?
* https://www.epi.org/resources/budget/.
Ah, the 1850s when life was good!
The US Post is great and all, but I would gladly trade the US post for a large beaver-hunting territory!
Horses are too fast! Walking is better.
Or whatever... come on!
so the tradeoff, for having to have both parents working for a very average family, is that they can surf the Internet and get Doordash? you come on. I'm not denying that we have a better quality of living today, but how much time do you have outside of weekends to just go fishing or whatever? all these labor saving devices were supposed to give us more leisure time but instead we're worrying harder than ever!
I was going to say this typo was accurate, but now I realise I've never actually seen a detailed analysis of how much people worried in the past, just confident claims it was so.
haha good catch. we've only been tracking happiness since 2012, with Finland in the lead, though worry isn't the opposite of happiness, it would be fascinating to be able to have a global tally of how humans are feeling.
I understand, times are hard. Always were.
When was this chill time when we could just take off fishing for a week or two?
Random breakdown of time :) * 1800s * 1900-WW1 * WW1-WW2 * WW2-1980 * 1980-Now
And yeah, single breadwinner households were a thing back in the day it was generally because women didn't have a choice at all.
I'm pretty sure you have more options and choice today as to how you want to live your life, but if you want a family you gotta feed the little bastards one way or another, that has always been a "worry".
The standard of living today is immensely higher. If you wanted to live at 1960 level you could certainly afford to do so. You’d have 1,000 sq ft of house, a single unreliable car, almost never go out to eat or travel, etc.
Is it? sure we have the Internet and big TVs and fast cars, but how much time do we actually have to enjoy them? quality of life is measured in more than just the things you have. I mean, yeah, if you're getting Doordash every meal and spending all your money that way, that's on you. Trader Joe's is frigging great, imo. but eating at home and having an older car isn't going to get me to a place where one median American salary can comfortably support a meaningful amount of people.
this is after we decry the other ills of there 1960's, of racism and sexism, which hopefully it's obvious I don't want to go back to, but letting both parents work somehow became both parents need to work for middle America and I'm just tired of my friends living at the edge.
Ah, the 1960s. Have you tried living in a jungle, slaughtering villagers in their homes, fighting to overthrow a foreign government in exchange for college tuition? Good times.
They weren't. The average household income in the 1960s (i.e., from a single breadwinner) was supporting a household of 3-4 people not 6[1][2]. The claim that you could support a family of 6 on a single breadwinner's income in 1960 and achieve anything close to 2024's quality of life is an egregious misrepresentation by the GGP.
[1]: https://www.statista.com/statistics/183657/average-size-of-a...
[2]: https://www.statista.com/statistics/183648/average-size-of-h...
I mean, lower it to 4, the EPI calculator still gives $100k. Are there that many jobs paying that for someone who's pretty average in Cincinnati?
I was reading murder Wikipedia the other day and one of the guys got out of prison the second time and was able to pick up a job making 1k/week in the late 70’s (49-50k/year) in SoCal.
That’s what I was making a decade ago in SoCal with a college degree (slightly more with OT).
Ohh to live the life of an uneducated violent offender in the 70’s.
https://en.m.wikipedia.org/wiki/Lawrence_Bittaker_and_Roy_No...
Some aspects have improved, and others have declined.
Home entertainment has more options, we spend more time at the TV and computer.
Other aspects of life have declined.
It's challenging because there are qualitative and aesthetic aspects to the process, so it takes some discussion to come up with a good understanding.
Regardless CPI is misleading. The amount of time spent working over a lifetime to support the family and cover taxes has grown significantly, at a higher rate than CPI suggests.
What specifically has declined? When I compare life that my grandparents had to now it is absurdly better in every way.
Community/social life has greatly declined for almost everyone. Home appliances are fancier today, but they are far less reliable. Furniture is much worse in almost every way (e.g. my grandma sleeps today on the same bed and spring mattress that her parents-in-law bought, some 60-70 years ago, and it is still extremely comfortable). Clothes are far less durable as well. Fruits and vegetables are typically worse in taste. Education is extraordinarily more expensive. Job security is much worse.
Could I ask what parts you favor?
It's the same house. They put drywall up in the basement and walls around the porch and call it a sun room.
I don't think that the cost of a computer should silently get included into basics like rent for a roof over your head, food, and medical treatment.
The opulent space per inhabitant (as families are also smaller) is now viewed by many as a negative in face of the climate crisis, not to mention the cost of housing and the resulting need to work more.
The “one income household” model of the 50s worked for two reasons.
1) the rest of the world was in ruins, so for 50s-60s US was sole industrial power more or less.
2) artificial labor “scarcity” where POC and women were banned from many occupations. The remaining available labor (ie white men) had more leverage.
Is the argument that true inflation should be worse than CPI because it helps with diversity?
From the article, the biggest discrepancy between CPI and true inflation is a result of a change in the formula made in 1987 that removed interst rates aka the cost of money from CPI. The CPI formula replaced the actual cost of financing homes and autos with a new term, owner's equivalent rent. The argument made by the underlying paper [1] is that the older calculation better reflects the cost of living increases experienced by consumers and more closely correlates with the widely used University of Michigan Index of Consumer Sentiment. Also, notable is that consumers care much more about the cumulative multi-year effect of inflation while economists only worry about year/year changes in the rate of inflation as can be seen here [2] (worth a click)
[1] https://www.bls.gov/pir/journal/gj02.pdf
[2] https://twitter.com/darioperkins/status/1770783161330323925/...
The really interesting thing about their proposed measure is that it reduces the period of extremely low interest rates post GFC. We'd be living in a very different world had this been our north star throughout that decade.
It has more to do with a hidden class structure below your average white family, working for much less, providing goods and services at a discount. Inflating the means of the average white family in a way that wouldn't be possible today because we're not as purposefully racist or sexist as we used to be.
In order to make a better comparison one should compare what was affordable to the average black family in the 1960s (or whatever previous time period you choose for which we have figures) to today.
There's other factors like the aftermath of WW2, the real and "soft" power the US held back then in comparison to today, and the role women played in the economy.
Today's world is a lot different from then but the truth is that the wealth and power we've amassed since then should have us in a better position, not worse. The factors at play in today's economy are not benefiting the common man nearly as much as they should.
We're beginning to look more and more like a post-scarcity economy every day yet our laws, regulations, and culture are not evolving with the times. The fact that land and homes are vastly inflated compared to regular every day goods and even the "durable" kind is strong evidence that our entire economic system stands on precipice of great change.
Either we're just getting started on a great collapse or a great sea change in politics and economic systems. I very much doubt things are going to go back to the way they were... Ever.
We as a society can decide to spread our prosperity around or we can increasingly suffer for the lack of it by continuing the status quo.
I think the argument is that inflation is complicated by globalism.
Artificial labor scarcity is a good thing, to keep wealth in the hands of labor instead of capitalists. But it needs to be equitably distributed (more households working fewer hours each).
The 1950s situation can be restored without introducing gender inequality or occupational bans though.
A four day work-week would bring us at least a little bit closer to the 1950s situation, and improve the leverage of workers.
4 x 2 > 5, of course, but 4 x 2 is still less than 5 x 2.
Housing costs.
3) Lack of technology meant housework was so much more difficult that it actually required a full-time housewife or maid.
There are 153 million more people in the U.S. today than in 1963.
The reason these neighborhoods are exclusive to the wealthy is that housing there is scarce despite growing demand due to job growth. Housing in places like the Bay Area is such a big portion of monthly expenses that stuff like Arby's 4 for $10 or whatever isn't whats hurting people the most.
Lots of these issues just come down to housing and restrictive zoning.
95% of zips in 1963 were safe and livable. Now everyone is competing to live in 15% of zipcodes
You address the supply side of the "housing crisis", what about demand?
95% of white suburban zips might have been safe and livable, but nowhere close to 95% of all zips.
Pay no attention to the red lines behind the curtain.
This is absurd. Crime is far lower than it was in 1963.
> 95% of zips in 1963 were safe and livable.
I've been trying to give your comments the benefit of the doubt, but now it's abundantly clear that you're fundamentally unserious about having a conversation grounded in reality.
Where are your stats on 95% of zips being safe and livable? How are you defining those?
Why the scare quotes especially when no such term was used?
"...growing demand due to job growth" <- demand side was indeed mentioned.
It's literally illegal to build enough housing in many, many places where jobs are via low height limits, absurd parking requirements, and large setbacks etc.
It's also quite expensive partially because of garbage regulations on lot sizes and what can be built. NIMBYism is alive and well.
This was unfortunately a deliberate consequence of the dot com boom, not something that happened in previous tech booms. Until around 2000 Palo Alto actually had a lower median income than some surrounding towns due to a policy of promoting section 8 housing, some SRO residences for the homeless etc. Those prior booms didn't suck in as many outsiders and mostly were nerds making fun tech (think of the mac). NYT amusingly published an article were they said how weird the SV was because people who drove mercedes cars still shopped at Costco rather than at "proper" shops appropriate to their "station".
Dot com sucked in a bunch of people who came only for the money ("I'm starting a company -- need a tech cofounder" is the complete opposite of those days when it was "I'm starting a company -- we're big enough that we need some business people"). Then we started to have fancy restaurants and pretentiously-named magazines about how to spend your money.
And then in 2000 the real estate people got control of the city council. The SROs were turned into boutique hotels and the city was re-organzied for the lucky.
PA used to be a town where the Grateful Dead, Jefferson Airplane, and the like got started. Harold and Maude was (partially) filmed here. But such things are now inconceivable.
Although what goes up can come down... if some other state or region within California permitted large amounts of construction, enabled businesses to move in, and threw a few hundred million at building a great university, property values here would drop a lot.
With less intention and planning it will take longer, but could still happen, and there are some natural pressures pushing things in that direction.
If only. Palo Alto is one of the few cities fighting the state’s efforts in this regard. It’s really shameful.
>PA used to be a town where the Grateful Dead, Jefferson Airplane, and the like got started. Harold and Maude was (partially) filmed here. But such things are now inconceivable.
I remember how in the 80's and 90's there were still movies like Mrs. Doubtfire with characters on minimum wage renting in downtown San Francisco lol
In those days SF was a bedroom community for Silicon Valley. SF still had a thriving art scene and was worth living in — I made that commute for a while, thankfully carpooling with Larry McVoy.
Then in the same dot com boom…well that is well documented. People say SV grew up the peninsula and absorbed SF, but I prefer to think of it as SF was sacrificed as a honeypot.
It took off when they lowered the interest rates after the dot com crash. The issue was the too low for too long interest rates that drove the increase in home ownership (and rents).
I think this isn't a measure of inflation per se, because productivity changes are big over the decades. But I do think looking at costs in terms of hours of work is really helpful.
I think back to an event in some HS extracurricular when a group of students got to ask questions of a gubernatorial candidate, and one kid asked if he was going to do anything to make college more affordable at state schools, and this candidate (perhaps keenly aware that almost none of the students could vote) basically laughed it off and talked about working at restaurants to put himself through school (I think in the 70s). How many hours of (unskilled?) labor was a semester of tuition then, versus 30 years later? How many hours was a tankful of gas, or rent for half an apartment, or a heating bill? How feasible is it really to work one's way through even a public school?
I agree with the point about the cost of education.
In real terms, however, the cost of a tank of gas is about what it was in the 1960s[1]. Today's average is $3.63[2], which is about $0.34 in 1960 dollars.
[1]: https://www.creditdonkey.com/gas-price-history.html
I never understand the "in X dollars" argument, especially when looking back longer than about a decade. The CPI only considers a certain basket of goods, it's not representative of a cost of living (that's what this thread is about), various things change price at radically different rates.
How much was an iPhone or Xbox in 1960 dollars? What was the typical cable TV bill? What did a typical American pay for a California roll or a burrito in 1960? Alternatively, given your 10x price boost, why isnt the cost of a television set or vacuum cleaner in the multiple thousands?
The comparison doesn't work on manufactured products. You can really only compare commodities.
Anything that is manufactured has a multitude of factors that will reduce cost of a product significantly over time. If the circuitry in an Xbox were constructed in 1960 no government on the planet would have been able to afford it. It would also be difficult to find enough power to run it or a place big enough to build it with the technology of the time.
Yes, that is, in part, the point I was making
Yes -- the whole thing should be how many hours it takes to buy X instead of how many dollars.
It's then interesting to see how that looks in different economic brackets. Maybe in one bracket a car costs 1000 hours, and in another the same car costs 350 hours (so might as well get a 700 hour car. Still cheaper).
They used older kids to watch younger kids, and generally let the kids fend more for themselves (my boomer dad was the oldest of 8 kids, and that was his experience, but having his grandparents die of spanish flu after WW2 hurt and helped a bit). I actually kind of admire that, and think we've lost something with more hands on parenting.
I totally agree. In a sense, FAANG salaries aren't especially high by historical standards, it is just that everyone else has fallen so far behind. $500k/year household income is firmly middle class, and is like earning $135k in 1980, my dad made more than that contracting in building nuclear plants with an associates degree from Spokane Community College.
You can't be serious.
That's over six times the median household income in 1980. $135k today would still be nearly twice the median household income.
It wasn't that much back then, especially when the industry was feast or famine (and it did implode in 1986 or so). But really, my only point was "a guy who had an associates degree from a CC could earn that much."
My buying power is essentially worse than my dad's, although I put in a lot more time in school for it, and supposedly made the right career choice, things just suck these days and techies are keeping their heads above water but not much more.
It’s the land price. Gets baked into every single good and service and goes up in lockstep with productivity gains.
Is that really true, or is it more a feeling many Americans have? As a Swede it’s a bit hard to relate to.
Crime is much much lower than it was decades ago almost everywhere in the US.
Also “run down” in reference to cities is just not true outside of a few failed areas like Detroit. NYC today is dramatically nicer than it was decades ago.
Your data on New York "today" appears to be pre-opiod.
The opioid issue is absolutely a big degradation in QOL from recent years, but no the current crime rate is still well below decades ago, especially on a per capita basis.
https://www.nyc.gov/assets/nypd/downloads/pdf/analysis_and_p...
There’s a number huge flaws in all that logic.
Comparing Palo Alto circa 1960 to Palo Alto circa 2020 is frankly bizarre. But if we’re using that logic why stop at 1960? Coulda had that land for almost nothing in 1700, so there was infinite inflation from 1700 to 1960! Gasp!
But what’s the result if we look at the price of a compute that a 1960 worker could buy vs a 2020 person? Let’s see a modern household has the equivalent to a very large number of 1960 mainframe computers, looks like their buying power has gone up infinitely!
Or lots in prime La neighborhoods, super affordable in 1860! That means people have lost so much purchasing power because they’re hard to afford now!
Infinite is exaggerating but the US dollar has lost >95.0% of its value since the 1700s. So that observation is technically wrong but intuitively is fairly reasonable. If you assumed infinite inflation since then you'd be accurate enough for casual conversation.
Love to eat and live in compute.
This is easy: how much did an acre of land in Palo Alto cost then, and how much does it cost now? Why? Why does the price of land “need” to go up? It pays no wages, no rent, no suppliers, no anything. It’s just there being land, no matter what price it is. So why has its price gone up and who benefits from that?
Everyone who lives there benefits from that. Otherwise they wouldn't want to live there.
What? People benefit from higher land prices?
"The thing I have noticed is when the anecdotes and the data disagree, the anecdotes are usually right. There's something wrong with the way you are measuring it". —Jeff Bezos <https://sports.yahoo.com/amazon-ceo-jeff-bezos-explains-2123...>
Very good quote. “Data” is not conclusive , it’s just one piece of evidence. Usually it’s a noisy observation , with even noisier statistics applied.
People think “data” is the conclusion, when in fact it’s just a signal to ask more questions.
Huh, so that looks like a way to deal with Goodhart's law?
Okay, it was the McDonald's hamburger that seems to have been $0.15 in 1963. That is $1.53 in CPI-inflated 2024 dollars.
The cost today is $2.19. That's about a 0.6% difference in the compounding inflation rate over 61 years.
Isn't using compounding inflation rate on top of CPI-inflated dollars double counting? It looks and feels like 40+% to me and everybody else
Excellent way to put it.
To put things in perspective if one works for 5 days a week, you are paying the govt (all taxes + inflation) about 3 days of your earnings. You only get to keep what you earn for 2 days.
Does most of the inflation go to the government? Lately a significant portion seems to be going to the capital class and land owners.
- People lived in way smaller houses back then.
- People had only one car.
- People ate meat once per week.
- People had way fewer things in their houses.
You gotta consider increases in material possessions as well if you want to calculate inflation properly.
No people ate more meat and animal products.
https://twitter.com/Outdoctrination/status/16948423262110437...
https://twitter.com/Outdoctrination/status/16948423228723817...
Others have pointed out the flaws in the rest of this, but the labor force participation rate of Women[1] was around 33% in 1950, 38% in 1963, and 60% in 2000; it's 57% now. That's a huge change, but 1963 is a far cry from 0%. See also men[2].
As noted elsewhere, this ignores race. Compare white women under 20 <https://fred.stlouisfed.org/series/LNS11300029> to black women under 20 <https://fred.stlouisfed.org/series/LNS11300032>; dramatically different numbers.
Labor force participation rate isn't ideal, but it gives the picture.
1: <https://fred.stlouisfed.org/series/LNS11300002>
2: <https://fred.stlouisfed.org/series/LNS11300001>
Also look at the prime-age participation rates (https://fred.stlouisfed.org/graph/?g=1k7Vy), which help control for demographic changes over the decades. The 1963 prime-age LFPRs were 44/99% for women/men respectively, and today those figures are 77/89%.
Things are a lot cheaper if you keep them in a 1200 square foot house
Highly doubt people at this income rank were buying houses in 1960 and living comfortably.
Entire argument is whether you should count interest or not. I can see arguments both ways
How big (area-wise) were those houses? What kind of heating did they have? How air-tight/leaky/drafty were they (which would dictate OpEx on heating)? Did they have air conditioning? What kind of electrical service could they handle (60A? 100A? 200A?)? Did that include the foundations/footings/slab? Were those parts insulated (i.e., how cold were your feet)? Did they come with sprinklers or even smoke/fire alarms?
* https://awealthofcommonsense.com/2024/01/americans-are-bette...
I'm not sure how many folks would like to live in a current $1600-equivalent house.
If you think inflation is bad, try deflation (1930s).
The pre-1983 algorithms were moved away from for a reason: do you know that reason? Was it a good or bad reason(s)? Why?
* https://archive.ph/zvtPw / https://www.nytimes.com/2022/05/24/technology/inflation-meas...
Housing prices are not considered in the CPI ("cost of living") because they are mostly an asset:
* https://web.archive.org/web/20210929154549/https://www.pragc...
* https://www.pragcap.com/should-house-prices-be-in-the-cpi/
Upkeep is a part of the CPI (as is Rent, under the broader Shelter category), but house/land prices are not. The "C" in CPI stands for consumer. Housing assets aren't in the CPI for the same reasons stocks and bonds are not: we don't consume them to live.
'Shelter' is considered in the CPI generally though (and with-in that things like home repair (lumber, plumbing) are accounted for); for Canada:
* https://www150.statcan.gc.ca/n1/pub/71-607-x/2018016/cpi-ipc...
And as the Bank of Canada notes, there is no internationally agreed upon method:
* https://www.bankofcanada.ca/wp-content/uploads/2015/11/boc-r...
In the StatCan CPI paper there is some explanation towards the complexities of shelter / owner accommodation:
* https://www150.statcan.gc.ca/n1/pub/62-553-x/2019001/chap-10...
* https://www150.statcan.gc.ca/n1/pub/62f0014m/62f0014m2017001...
How much is this related to inflation compared to the complete refusal of the Silicon Valley suburbs to building new housing? If rich people want to move somewhere, and people living in that area dont build houses for them to move into, its going to drive the prices up, because the wealthy people will go there no matter what.
Also your whole bit about the past being so much better is insane. Hard to tell what is you exaggerating and what is a serious argument. My partner and I make ~100k + 40k combined a year, and we rent an apartment in one of the nicest SF neighborhoods, save for retirement, go out and do (paid) things every weekend, and still save a good chunk of money every month. We also have gym memberships, own cars, buy nice groceries, etc.
Inflation does suck, and the sticker shock is bad, but the high inflation also stems from policies that have let us have insanely good unemployment levels. Post 2008 we saw less inflation, but unemployment stayed high for almost a decade. Unemployment is already down to super low levels post 2020, which is better for everyone. Average and lower wage workers have also seen large growths in what they make.
Perhaps a Cost of Thriving Index? https://manhattan.institute/article/the-cost-of-thriving-ind...
I also have like six different machines in my house that would each, single-handedly, put the entire computing infrastructure of the Apollo program to shame. And my corneas have been reshaped into the ideal form by a computer-controlled laser, giving me 20/10 vision. I haven’t done it yet, but I could get my entire genome sequenced. A $20 Italian rifle sounds like a good deal but today you can buy a machine that literally prints guns (some assembly required). Any one of these things would be worth millions if not billions of dollars in the 1960’s.
This also explains why Palo Alto is so much more expensive these days. Some the things I mentioned were invented around there, which made a lot of those people rich.
Other things have become more affordable too. In 1960, a round trip flight from New York to London cost $550. I can find similar fares right now. In 1984, a Macintosh cost $2500, had 128 KB of RAM and a 9 inch 512 by 342 pixel display. For half as many dollars today, you can buy an iMac with a 24 inch 4.5K display and 8 GB of RAM.
Now, I will admit that many things are needlessly more expensive, and while the reasons for this are complicated, I don’t think it’s any coincidence that many of these cost increases are directly associated with institutions getting taken over by parasitic classes of administrators and bureaucrats. If you go to college, you’re not just paying for the inherent costs of the college; you’re also paying for the growing administrative bureaucracy that has infested the institution. If you go to the doctor, you’re not just paying your local family doctor; you’re paying an entire bureaucracy that has reduced your family doctor—who used to own a private practice—to the status of a corporate employee, plus a completely separate “health insurance” bureaucracy. (It turned out that the doctor who reshaped my corneas with lasers was happy to just take cash though!)
Governments are some of the worst effected. The cost to build the US interstate highway system was, adjusted for inflation, about 618 billion dollars. The 2021 infrastructure bill totaled 1.2 trillion dollars, but are we really getting the equivalent of two complete interstate highway systems? But hey, it could be worse—it’s not like they actually collected all the tax dollars they needed to pay for it! That’s a problem for future America. I don’t envy those guys!
Price inflation tells you very little about how well the average person lives.
The average person today has a far higher standard of living than the average person in 1963.
The extremely short summary of where all that prosperity went: up and abroad. The capitalist class hollowed out the middle income USA by siphoning solid jobs off abroad and pocketing the difference. You can thank all the neolib useful idiots for that. It is not really the result of interest rates.
I randomly ran across this blog post https://economistwritingeveryday.com/2024/04/10/grocery-infl... today. It says fast food prices have gone up faster than grocery prices or inflation. I don't eat fast food so I don't know if it's true. But it got me thinking.
Maybe the likes of Doordash are to blame, at least indirectly. Food delivery companies have proved that people will pay $15 for a lukewarm McDonald's burger if it's brought to their doorstep. So there is obviously some room to increase prices even for in-store purchases.
I agree with this: inflation as an economic measure is an intentional policy tool to transfer wealth from the poor to the wealthy.
In the last few months we've seen headlines about inflation "levelling off" but that just means prices aren't growing as fast. The 20-30% increases in housing in particular aren't going down. In fact, it's intentional government policy to make sure house prices and rents never go down.
You mention Silicon Valley and others dismiss this as a result of the dot com bubble but it's really not. It's zoning policy. IIRC the smallest lot in Menlo Park or Mountain View is ~10,000 square feet.
But you see it elsewhere. The average house price in London is ~706k GBP. 30 years ago it was ~70k.
Inflation is used to justify wage suppression. Whatever the formula, it doesn't accurately reflect to cost-of-living crisis we're in.
Crime infested neighborhoods? You mean like living with a bunch of billionaires as neighbors?
As a counter point, this post by Matthew Yglesias might be interesting. Basically makes the case that the standard of living today is significantly higher than back then, and we wouldn’t be okay living today like we did back then.
https://www.slowboring.com/p/nostalgia-economics-is-totally-...
I believe in 1963, black people were still second class citizens.
Hard to believe this example is worth it's weight in freedom units per capitalist product.
The reality is the economy and government were weaponized to enforce the lost of freedom to discriminate.
This is an interesting take and it got me thinking. The replacement rate in the US is not 4. In fact, I would imagine that 4 is probably unsustainable. I like to see money more as a chemical gradient a la chemotaxis, though more clever people than I call it a carrot. With inflation the carrot is being removed, perhaps even being used as a stick. A superfluity of resources without controls of some sort may well lead to runaway growth, and I presume with the relative expenses of everything that there is an unsustainable imbalance at the fundamental level excess demand for intrinsically limited supply.
Of course the inflation model is applicable outside of the purely monetary. The more people you have the larger the labor army, and with each number added to that the less valuable the individual becomes even in terms of highly specialized labor, because ostensibly this can essentially be predicted with a distribution and with the way people are commoditized in most positions and companies these day, excellence is neither expected, sought for, nor wanted. This is still within the realms of the economists wheelhouse.
I would argue there's a third inflation, social inflation, as well. And this essentially hinges on the same principal that the labor army does: more people, less individual value (“a single death is a tragedy, a million deaths are a statistic”). And I would posit that the decrements have been seriously exacerbated in this realm by social media, television, celebrity, and so forth. I would also point out that the civil rights movement and women's lib has also (rightly) had a profound effect on social orientation that has yet to fully manifest itself.
If I recall correctly many developed nations have declining "native" populations. I'm unsure of the causal factors, but I wouldn't be surprised if it was in some ways an instinctual aversion to these sorts scaling laws. If I'm not mistaken Dunbar's number is roughly adhered to in nature, so it makes sense that there is somewhat of a drive to limit pack/civilizations size.
Yeah, and unless they were like, a doctor or a lawyer, they were living in borderline poverty.
I'll add 1 more to the mix.
Subway fares for NYC [1]
- 2 fare increases in the first 60 years of operation.
- 17 fare increases in the next 60 years.
Note that even with the fare increases in the last 60 years, once adjusted for inflation, the cost of MTA fares were actually going down until 1984 or 40 years or so, when fares really exploded [2]
[1] https://en.m.wikipedia.org/wiki/New_York_City_transit_fares
[2] https://old.reddit.com/r/nyc/comments/11u0s3z/nyc_subway_far...