The other day, I got an email cartoon listing nineteen goods/categories whose prices have increased 10% or more over the past year. Nine were grocery products and one was men’s suits. The others were categories: gasoline, airline tickets, used cars, gas utilities, hotels, delivery costs, electricity, furniture, and cleaning products. The bottom line caption was: So how is inflation only 8.6%?
I checked the numbers against the latest CPI-U, and some were exaggerated. The email said used car prices were up 35%, but the CPI lists the annual inflation at 7.8% The email also listed gasoline increases at 49%, when the actual was 29%.
But the most misleading aspect is that all of the items listed by the email together comprise less than 30% of all the items that comprise the CPI-U. All food items comprise only 14%. Eggs [up 44%] only amount to 1/10 of one percent.
Overall food prices (comprising 14% of the CPI-U) increased 11.4%, but all commodity prices, excluding food and energy, only rose 6.3% over the last year.
Now neither 8.6% nor 6.3% is good, but citing huge price spikes in small segments of the economy is definitely misleading. It’s also politically effective. People don’t notice the prices that don’t rise or rise more slowly. They notice that gasoline and egg prices are way up, or that used cars are getting pricy.
Yet, I’d be willing to be that the majority of people who received that email or saw the original posting of the cartoon and its statistics will have the reaction that the government is grossly “cooking the statistics.”
And the government has been “readjusting” the statistics for years, but in little ways, such as reducing the impact of food and energy costs on the CPI, but its figures aren’t “readjusted” by the two and three-fold magnitudes suggested by the cartoon.
This statistical “discrepancy” also illustrates one of the biggest problems faced by a democratic high technology society, that fewer and fewer of the people who vote really understand either the technology or the economy underlying their society, and that lack of understanding becomes fertile ground for demagogues who offer falsified/incorrect facts, gross exaggerations, and beguiling simple (but unworkable) “solutions” to complex problems.