It preempts the Q as to how much imputed rents in Aust have affected GDP. If GDP increases as a result of increased imputed rents should we be patting ourselves on the back for dodging a recesssion?
As it is ,history suggests measuring GDP is a highly politicised activity..... not a straightforward process by a few beancounters......... if Jacob Assa's tract "The Financialisation of GDP" is anything to go by. Does the financial sector add as much to GDP as currently measured, or has the way we measure GDP changed over the years, so that its products which were once all intermediate goods and thus eliminated in national income accounts, to a situation now where they produce lots of final goods and are helping us avoid two quarters of -ve growth which otherwise might suggest a recession..... or so the commetariat tell us
It depends in part on what you want the Inflation measure for. The best measure to use if BoA has and inflation target, might not be the best one for calculating changes in real income. Or real wages.
An inflation measure ought to produce insight into the economic health of the people. Does the CPI do this?
The CPI rabbit hole is deep and so full of maggots that I barely got through this article without dry heaving.
Why, would someone as caring and intelligent as yourself, grant the CPI this level of attention and seriousness?
We ought to have a sensible measure of the change in the price of goods and services across time and space. However, such a measure should not be crammed into a single aggregate nor should it really assume any particular "basket" of goods and services.
When creating a quantitative measure of the change in the price of goods and services across time and space, we are confronted with a problem of relevant resolution.
A measure with the highest possible resolution would be a massive database of the price every single good, every single service, as sold at every single store, at every single point in time. This would leave no stone unturned, but, would also hamper intuitive insight into the economic health of the people.
Consumer Price Indexes, as they’re all currently formulated, strike me as having taken the exact opposite approach. CPIs all strive to be a quantitative aggregate with the lowest possible resolution.
A single number for an entire country derived from a single basket of goods and services. Isn't a person's basket a function of the price of the goods themselves? a function of their net worth? etc.. It's very odd to assume a basket. CPIs also employ other extremely dubious constructs for housing as described in your article.
What would a sensible measure look like?
How about a quantitative measure of the price of goods and services, broken down by intuitively relevant categorisation and intuitively relevant geographic regions of the country, perhaps with the option to zoom in to higher resolutions.
A number for food (with sub numbers for beef, chicken, vegetables, fruit, ...), an number for housing (with sub numbers for renting/owning houses, apartments, ...), etc that varies by region NSW (with sub numbers for Sydney CBD, North Shore, etc...)
Not to mention, isn't the primary goal of a measure of the changes in the prices of goods and services across time and space supposed to be insight? Insight into the health of the people? Their goals? Is the desire to purchase early retirement ever included in such metrics?
Why the obsession with a quantitative aggregate at all?
The economic health of the people seems to me to be a fundamentally aesthetic judgement requiring qualitative human wisdom.
Qualitative human wisdom doesn’t quite fit in a spreadsheet or a news broadcast, but when used in conjunction with sensible quantitative measures at the correct resolution, maybe we’d actually be able to derive some insight?
Interesting stuff Cameron.
It preempts the Q as to how much imputed rents in Aust have affected GDP. If GDP increases as a result of increased imputed rents should we be patting ourselves on the back for dodging a recesssion?
As it is ,history suggests measuring GDP is a highly politicised activity..... not a straightforward process by a few beancounters......... if Jacob Assa's tract "The Financialisation of GDP" is anything to go by. Does the financial sector add as much to GDP as currently measured, or has the way we measure GDP changed over the years, so that its products which were once all intermediate goods and thus eliminated in national income accounts, to a situation now where they produce lots of final goods and are helping us avoid two quarters of -ve growth which otherwise might suggest a recession..... or so the commetariat tell us
It depends in part on what you want the Inflation measure for. The best measure to use if BoA has and inflation target, might not be the best one for calculating changes in real income. Or real wages.
Went down that rabbit hole a few years ago.
https://twitter.com/JohnWake/status/1433936583669870592?s=20
https://twitter.com/JohnWake/status/1434025118829735941?s=20
https://www.fullstackeconomics.com/p/why-the-government-took-home-prices-out-of-the-consumer-price-index
very good piece - a nice reminder that how things like CPI are measured is v important and worth digging into!
An inflation measure ought to produce insight into the economic health of the people. Does the CPI do this?
The CPI rabbit hole is deep and so full of maggots that I barely got through this article without dry heaving.
Why, would someone as caring and intelligent as yourself, grant the CPI this level of attention and seriousness?
We ought to have a sensible measure of the change in the price of goods and services across time and space. However, such a measure should not be crammed into a single aggregate nor should it really assume any particular "basket" of goods and services.
When creating a quantitative measure of the change in the price of goods and services across time and space, we are confronted with a problem of relevant resolution.
A measure with the highest possible resolution would be a massive database of the price every single good, every single service, as sold at every single store, at every single point in time. This would leave no stone unturned, but, would also hamper intuitive insight into the economic health of the people.
Consumer Price Indexes, as they’re all currently formulated, strike me as having taken the exact opposite approach. CPIs all strive to be a quantitative aggregate with the lowest possible resolution.
A single number for an entire country derived from a single basket of goods and services. Isn't a person's basket a function of the price of the goods themselves? a function of their net worth? etc.. It's very odd to assume a basket. CPIs also employ other extremely dubious constructs for housing as described in your article.
What would a sensible measure look like?
How about a quantitative measure of the price of goods and services, broken down by intuitively relevant categorisation and intuitively relevant geographic regions of the country, perhaps with the option to zoom in to higher resolutions.
A number for food (with sub numbers for beef, chicken, vegetables, fruit, ...), an number for housing (with sub numbers for renting/owning houses, apartments, ...), etc that varies by region NSW (with sub numbers for Sydney CBD, North Shore, etc...)
Not to mention, isn't the primary goal of a measure of the changes in the prices of goods and services across time and space supposed to be insight? Insight into the health of the people? Their goals? Is the desire to purchase early retirement ever included in such metrics?
Why the obsession with a quantitative aggregate at all?
The economic health of the people seems to me to be a fundamentally aesthetic judgement requiring qualitative human wisdom.
Qualitative human wisdom doesn’t quite fit in a spreadsheet or a news broadcast, but when used in conjunction with sensible quantitative measures at the correct resolution, maybe we’d actually be able to derive some insight?