It may be - but to the above poster's point - if gas went up 20% in Jan of this year and then stays flat... is it helpful to think of prices as "going up" ? It seems misleading.
"is it helpful to think of prices as "going up" ? It seems misleading."
Here you are encountering a common human cognitive failing, which is the belief that there is some sort of objective answer to the question "are prices going up?" that we should all be able to totally agree on, somehow floating in Platonic space without reference to any particular measure of "prices increasing".
The problem is that if you drill down to the question of "what does it mean for prices to be 'going up'?", you must admit to the fact that there are multiple valid definitions of that. It just isn't possible or plausible to create one true definition.
In the presence of that fact, it becomes inevitable that there will be senses in which the price is going up, and senses in which they are not, and senses in which prices are going up more than other senses. That is the reality, which is complicated.
(One propaganda technique is to take one of these numbers, which really exists and is perfectly defensible on its own terms, and then use it in a context in which you know people are generally going to interpret it as one of the other senses of the term. Excitingly, by controlling which "sense" you anchor your listeners to, both "sides" of a debate can push the numbers in whatever direction favors them at the same time.)
According to our nationally-used, generally-accepted metric, if gas is the same price today as it was 365 days ago, inflation is zero. But does that mean the metaphorical person on the street is "lying" if they say prices are generally going up because gas is 20% more expensive than it was three hundred and sixty six days ago? There is a fundamental arbitrariness both to our metrics, and how we all feel about things. I've seen plenty of "How can annual inflation be %8 if my eggs are 2.5x more expensive than this time last year?" posts around lately. The literal answer to that question is obvious, but if someone's expenses involve more eggs than mine, either because their food is a bigger percentage of their home budget or they are a business for whom eggs is a major input cost, they may feel a higher level of inflation than I do, and they're not wrong. They've just got their own inflation metric that disagrees with the national one, but their own metric may well be more relevant to their life than the national one is.
Most people in this thread are using prices and CPI interchangeably, for better or worse. My read of the thread is that most people in the thread know they aren't actually the same thing.
The misleading bit would be reporting yoy price increases every month. Still not necessarily misleading to someone trained in reading this data, but the average lay person would probably interpret yoy statistics reported monthly incorrectly when comparing adjacent months
People aren't checking their statements for milk prices from Nov 2021 right now. They just know "man it jumped up".
The point is that the everyday person cares about jumps and trends, and hearing "20% YoY increase" for 12 months is misleading to someone not thinking about it in economists' terms.
The fact a bunch of people here are debating what it means and how to interpret it proves my point.
And yet that's the same kind of distinction that you need to understand to be able to make decisions about household debt. If we're honestly at the point where this is considered too confusing for the masses, I think I've stopped thinking democracy is a good idea.
* You have to have a lot of context about surrounding numbers to try and distinguish between these scenarios.
* The drop from +10% to 0% is not related proximally at all to the real change.
* Even if you are careful in interpretation, information and context are removed.
It's not very user friendly or useful as a single number to get an idea about what's happening with prices now.
> If we're honestly at the point where this is considered too confusing for the masses, I think I've stopped thinking democracy is a good idea.
I have a lot of knowledge about economics and mathematics, and it's frequently confusing for me and difficult to tease out what's really happening with prices from a couple of macroeconomic aggregates. If that makes you give up on democracy, uh, so be it.
And it's not even a theoretical issue. Look at the energy component of CPI. And then consider how that flows through to food and transportation. It is very possible that the vast majority of what we are seeing is the result of a big jump in energy prices over a few months, 8-10 months ago.
> Look at the energy component of CPI. And then consider how that flows through to food and transportation. It is very possible that the vast majority of what we are seeing is the result of a big jump in energy prices over a few months, 8-10 months ago.
Well, that makes it even worse, the "flow through" you're describing from prices increasing because an input price increased. That spreads the initial shock over a longer term.
But the effect I'm describing shows up even if it's just a single good that steps once. What's measured in the YoY inflation number is a convolution/FIR filter of 12 months of changes.
Maybe that is why we have a republic with representatives? Of course we can just shift the discussion to point out that US Congress critters don't seem to have a strong grasp on these topics either. :-(
I think that's exactly why we have a republic with representatives, but I don't even think people are qualified to pick good representatives. A campaign can easily pander to people who are acting selfishly or stupidly. At the end of the day, if you have people who can't even understand compound interest by the time they're entering university and who can't do a cost-benefit analysis on loans, why are those people supposed to catch nuances in monetary and fiscal policy and select from a panel of alleged experts?
Imagine a more extreme case where we reported inflation over the past 50 years each month. Every month we compute the price of the basket 50 years ago and the price of the basket today and compare. This number would go up when the most recent month had more price increases than the month 601 months ago. It would go down when the situation was reversed. It would be a number, but it would tell you very little useful information.
It is also the case that going extreme in the other direction is ridiculous. Imagine a daily inflation measure. Also nearly useless. "Oh, prices were flat today so everything is fine."
Published inflation numbers in media are usually used to make either the claim "everything is fucked, you should be mad about public policy" or "everything is fine, you should be happy about public policy." To me, this means that the reported should ideally be tied to some cadence that matches public policy. I'm not sure what that cadence is.
Misleading implies the data has some agency. Data cannot be misleading. People can make whatever conclusions they want based on data at hand and it’s just bad analysis if it’s wrong. The data didn't mislead them.
Sort of. BLS also publishes other numbers. Media outlets choose which one to report.
Consider how last month everybody was reporting Core-CPI because it was higher than overall CPI and therefore produced more urgent sounding headlines whereas earlier in the year when overall CPI was higher that was the reported number. Yes, headlines said "Core-CPI" last month but if you aren't careful you get a very incomplete picture of things.
