By National Research Council, Division of Behavioral and Social Sciences and Education, Commission on Behavioral and Social Sciences and Education, Committee on National Statistics, Measurement, and Other Statistical Issues in Developing Cost-of-Living Inde
How good does the patron cost index (CPI) replicate the alterations that individuals really face in residing charges - from apples to pcs to well-being care? Given the way it is used, is it fascinating to build the CPI as a cost-of-living index (COLI)? With what point of accuracy is it attainable to build a unmarried index that represents alterations within the dwelling expenses of the nation's assorted inhabitants? "At What Price?" examines the rules for purchaser rate indexes, evaluating the conceptual and functional strengths, weaknesses, and boundaries of conventional "fixed basket" and COLI approaches.The e-book delves right into a diversity of complicated matters, from the way to take care of the altering caliber of products and providers, together with difficult-to-define clinical prone, to how you can weight the expenditure styles of alternative shoppers. It varieties in the course of the key attributes and underlying assumptions that outline each one index kind that allows you to solution the query: may still a COLI framework be utilized in developing the U.S. CPI? In answering this query, the e-book makes suggestions as to how the Bureau of work facts can proceed to enhance the accuracy and relevance of the CPI. With conclusions which may have an effect on the volume of your subsequent pay increase, "At What Price?" is critical to everybody, and a must-read for coverage makers, researchers, and employers.
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Extra info for At What Price?: Conceptualizing and Measuring Cost-of-Living and Price Indexes
For some new goods, however, producers follow a different strategy, introducing the new good at a low price in order to promote high initial sales and make the good more widely known to consumers. In this case, as the market expands, the price rises. , cell phones—is incorporated into the index only after a long delay, the period of falling prices will be missed and the overall price index will be biased upward. If, in contrast, the new good is incorporated into a fixed-weight index not long after its introduction, the index will reflect most of the decline that occurs early in its price cycle.
But, as explained above, the BLS collects data on price changes for individual items not from households but from retail stores and other sellers. There is no link between the prices of individual items and the economic and demographic characteristics of the consumers who bought them. As a consequence, the current collection system cannot produce the data needed to answer the questions posed above. CHANGES IN THE QUALITY OF GOODS Ideally, both a COGI and a COLI ought to be based on changes in the prices of “constant-quality” goods.
As a consequence, indexing wages, social security benefits, or other payments scaled to the CPI would usually overstate the amount needed to compensate for increases in the cost of living. Forty years ago, the Stigler Committee outlined the conceptual and measurement characteristics of the CPI that distinguished it from a “true cost-of-living index”—or, under alternative committee labels, a “welfare index,” or a “constant utility” index (National Bureau of Economic Research, 1961). The principal recommendation of the committee was the establishment of a long-run research program designed to make the CPI a better approximation to a cost-ofliving index.