Inflation is hard to measure. Goods constantly change, so you have to figure out how to compare a cell phone today with one three years ago. The proportion of goods people buy also changes, so if people are buying fewer phones these days because they last longer, but are buying more socks, you have to balance that out to get a “price level” based on a basket of goods. If prices drop for Phone 1.0, but Phone 1.2 is about the same price with more features… what’s the change in the price of a phone? What happens when the price of Phone 1.0 goes from 100$ to 95$ due to production efficiencies, but an increase in the amount of dollars raises it’s price such that the price is still 100$? All inflation estimates can look at it is the price over time, so it looks like 0 inflation instead of ~5%. Ru-roh.
Quick thoughts on inflation
Quick thoughts on inflation
Quick thoughts on inflation
Inflation is hard to measure. Goods constantly change, so you have to figure out how to compare a cell phone today with one three years ago. The proportion of goods people buy also changes, so if people are buying fewer phones these days because they last longer, but are buying more socks, you have to balance that out to get a “price level” based on a basket of goods. If prices drop for Phone 1.0, but Phone 1.2 is about the same price with more features… what’s the change in the price of a phone? What happens when the price of Phone 1.0 goes from 100$ to 95$ due to production efficiencies, but an increase in the amount of dollars raises it’s price such that the price is still 100$? All inflation estimates can look at it is the price over time, so it looks like 0 inflation instead of ~5%. Ru-roh.