Food Prices Are Soaring Faster Than Inflation and Incomes • Hacker News Board

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#371

Post by dragonwriter » Mon, Mar 08, 2021, 4:02 PM UTC

whoisninja wrote: post #237

CPI is a joke, they do something called hedonic adjustments to things like tech products etc. It's completely subjective and BS. Technology is deflationary, things should get cheaper because we go after producing them in creative ways one demand is high. CPI is absurd, it only perpetuates consumerism and punishes savers. We product 2x the food society consumes - mostly wasted away, just with some supply chain efficie…

> CPI is a joke, they do something called hedonic adjustments to things like tech products etc.

Hedonic adjustments have very minor effects on tech products (which is one of the few areas I've seen a detailed impact analysis, though not recently enough that I have it at hand.)

> Technology is deflationary, things should get cheaper because we go after producing them in creative ways one demand is high.

And...they do. Hedonic adjustments have an effect on how that is reflected in inflation statistics, but they don't effect the underlying processes.

> CPI is absurd, it only perpetuates consumerism and punishes savers

I think your are (among other errors with that description) confusing measuring inflation with policies targeting a small positive level of inflation. CPI doesn't do either of those things.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#372

Post by fennecfoxen » Mon, Mar 08, 2021, 4:03 PM UTC

SilasX wrote: post #313

QuadmasterXLII wrote: post #254

Earlier quoted context omitted.

Its probably being cancelled out in the basket by healthcare and education prices skyrocketing. Oh wait.

No joke, back in 2011, a Fed executive insisted that iPad deflation was canceling out higher food prices. Not even that iPads were getting cheaper, just, new ones had faster CPUs, so their effective price was lower. (Which somehow frees up more money for food?) https://www.reuters.com/article/us-usa-fed-dudley-ipad-idUST...

The official was correct, from the perspective of economy-wide price stability. The problem wasn't inflation, the problem was expensive food.

Obviously, this particular exchange was of no comfort to those who suffer from high food prices, but why should monetary policy be the remedy for high food prices (to the exclusion of its current goals) instead of looking for remedies in fiscal policy, trade policy, regulatory policy, or other instruments better suited to a more targeted redress?

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#373

Post by gruez » Mon, Mar 08, 2021, 4:03 PM UTC

pwm wrote: post #363

em500 wrote: post #336

Earlier quoted context omitted.

There's a ridiculous amount of misconception, FUD, and ignorance around inflation / CPI (it doesn't include housing, it overweights entertainent, it exclude food and energy, hedonic adjustments/basket substitutions make everything look artificially cheap) To professional economists, it can be infuriating to read (I imagine similar as medical professionals reading antivax blogs/comments, or radio engineers reading abo…

I'm not an economist. My layman understanding of inflation is that it is the measure of change of purchasing power a unit of currency has over time. I think most laymen, including myself, questions how this rather theoretical concept is actually measured in real life. Eg. I think it is a sensible expectation that if inflation was said to be 2% for 20 years then I should be able to buy a house that cost $200K 20 years…

>My layman understanding of inflation is that it is the measure of change of purchasing power a unit of currency has over time

>I know you wrote that you don't really have the inclination anymore to educate on the topic but I for one would be grateful for any pointers how to explain the above discrepancy?

obvious answer: it's not "price index", it's "consumer price index". First paragraph from wikipedia:

>A consumer price index measures changes in the price level of a weighted average market basket of consumer goods and services purchased by households.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#374

Post by pnutjam » Mon, Mar 08, 2021, 4:03 PM UTC

em500 wrote: post #336

fennecfoxen wrote: post #291

Earlier quoted context omitted.

> CPI is absurd, it only perpetuates consumerism and punishes savers. Okay okay back up. The consumer price index is a series of numbers designed to help people understand what dollar-denominated figures mean to ordinary people going about their lives, spending those dollars. If that's "consumerism," well yes, it's a portrait of consumerism. Many economists, mind you, believe CPI doesn't correct quite enough, and sus…

There's a ridiculous amount of misconception, FUD, and ignorance around inflation / CPI (it doesn't include housing, it overweights entertainent, it exclude food and energy, hedonic adjustments/basket substitutions make everything look artificially cheap) To professional economists, it can be infuriating to read (I imagine similar as medical professionals reading antivax blogs/comments, or radio engineers reading abo…

You forgot the quotes around "economist". Economics is still not science, it's getting closer; but the whole field ignores stuff and deals with spherical cows to simplify complexities.

This, of course, makes it wildly inaccurate.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#375

Post by hitpointdrew » Mon, Mar 08, 2021, 4:03 PM UTC

bfrog wrote: post #239

So housing and food has gone up dramatically, but still "inflation is low" is the story. Doesn't and hasn't passed the smell test in a decade.

"Food Prices are soaring faster than inflation"....Food Prices soaring IS inflation.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#376

Post by whoisninja » Mon, Mar 08, 2021, 4:04 PM UTC

dragonwriter wrote: post #371

whoisninja wrote: post #237

CPI is a joke, they do something called hedonic adjustments to things like tech products etc. It's completely subjective and BS. Technology is deflationary, things should get cheaper because we go after producing them in creative ways one demand is high. CPI is absurd, it only perpetuates consumerism and punishes savers. We product 2x the food society consumes - mostly wasted away, just with some supply chain efficie…

> CPI is a joke, they do something called hedonic adjustments to things like tech products etc. Hedonic adjustments have very minor effects on tech products (which is one of the few areas I've seen a detailed impact analysis, though not recently enough that I have it at hand.) > Technology is deflationary, things should get cheaper because we go after producing them in creative ways one demand is high. And...they do.…

https://www.lynalden.com/november-2020-newsletter/

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#377

Post by savanaly » Mon, Mar 08, 2021, 4:05 PM UTC

pwm wrote: post #363

em500 wrote: post #336

Earlier quoted context omitted.

There's a ridiculous amount of misconception, FUD, and ignorance around inflation / CPI (it doesn't include housing, it overweights entertainent, it exclude food and energy, hedonic adjustments/basket substitutions make everything look artificially cheap) To professional economists, it can be infuriating to read (I imagine similar as medical professionals reading antivax blogs/comments, or radio engineers reading abo…

I'm not an economist. My layman understanding of inflation is that it is the measure of change of purchasing power a unit of currency has over time. I think most laymen, including myself, questions how this rather theoretical concept is actually measured in real life. Eg. I think it is a sensible expectation that if inflation was said to be 2% for 20 years then I should be able to buy a house that cost $200K 20 years…

Good X and Good Y both increase in price over some period of time, but one does by 2% and the other by 4%. What is the true value of inflation? 2% or 4%? Or is it 3%? Or is it 3.5% because you buy one of the goods twice as often as the other? That's a question of first philosophical origins, and there's no "right" answer.

Particularly if one of those is a house and in the period of time mentioned houses not only got more expensive but they changed in character, being more resistant to earthquakes because of reinforced foundations, and because the fire departments built near them got new hoses for their trucks. So if houses were the one that went up by 4% but they also increased in quality, should we "count" them as having gone up by 4%? After all it's not like your money buys you 4% less house since it actually buys you a slightly different house but for 4% more. Now multiply the number of products and dimensions by a thousand or hundred thousand each and we have the true problem of compiling CPI.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#378

Post by [deleted] » Mon, Mar 08, 2021, 4:07 PM UTC

pnutjam wrote: post #374

em500 wrote: post #336

Earlier quoted context omitted.

There's a ridiculous amount of misconception, FUD, and ignorance around inflation / CPI (it doesn't include housing, it overweights entertainent, it exclude food and energy, hedonic adjustments/basket substitutions make everything look artificially cheap) To professional economists, it can be infuriating to read (I imagine similar as medical professionals reading antivax blogs/comments, or radio engineers reading abo…

You forgot the quotes around "economist". Economics is still not science, it's getting closer; but the whole field ignores stuff and deals with spherical cows to simplify complexities. This, of course, makes it wildly inaccurate.

[deleted]

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#379

Post by jerf » Mon, Mar 08, 2021, 4:07 PM UTC

sudosysgen wrote: post #314

luxuryballs wrote: post #138

Earlier quoted context omitted.

These boom bust cycles are caused by fiat money, inflationary debt/spending, government stimulus and over regulation that causes false market signals and creates bubbles, it’s not a capitalism problem, capitalism would be the solution.

You have to face reality at some point. Literally every single capitalist economy, any time, anywhere, with or without fiat money, at all practically possible levels of stimulus, and regulation, has gone through a boom/bust cycle. If anything, they got better since the introduction of Keynesianism, not worse. It's inherent to capitalism. Don't try to delude yourself.

It isn't just "capitalism", it's inherent to economics, period. One of the valuable lessons of studying differential equations is just how easy it is to have cyclic behavior appear. Anywhere you have a the size of a change in velocity that is the negative of how far the value is away from some baseline... in other words, the second derivative is negative... you almost certainly have a cycle of some sort showing up. (Technically it can be avoided, but a lot of those ways are physically implausible.) Negative second derivatives are going to be pretty common.

(It doesn't have to be "pure". "Simple harmonic motion" is the result of when the negative second derivative fully characterizes a system. There are, of course, plenty of systems that aren't as simple, and things get complicated... but where ever you get a significant negative second derivative you've got a system that is going to exhibit some sort of cyclic behavior, even the the cycles vary wildly in size, duration, how fractal the value behaves on smaller time scales, etc.)

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#380

Post by SilasX » Mon, Mar 08, 2021, 4:08 PM UTC

fennecfoxen wrote: post #372

SilasX wrote: post #313

Earlier quoted context omitted.

No joke, back in 2011, a Fed executive insisted that iPad deflation was canceling out higher food prices. Not even that iPads were getting cheaper, just, new ones had faster CPUs, so their effective price was lower. (Which somehow frees up more money for food?) https://www.reuters.com/article/us-usa-fed-dudley-ipad-idUST...

The official was correct, from the perspective of economy-wide price stability. The problem wasn't inflation, the problem was expensive food. Obviously, this particular exchange was of no comfort to those who suffer from high food prices, but why should monetary policy be the remedy for high food prices (to the exclusion of its current goals) instead of looking for remedies in fiscal policy, trade policy, regulatory…

Well, there's technically correct, and substantively correct. Most people would take away the lesson that "hey, the current definition of inflation doesn't quite capture the reality of normal people's cost of living", not "computer says no suffering, sorry bro".

But I don't think it's even technically correct from the perspective of price stability. The inflation the central bank cares about is the kind that is the result of (to simplify) "too much money chasing too few goods". Technological deflation is totally orthogonal to that, and should be ignored to the extent possible.

Furthermore, even on its on terms, the calculation isn't correct. A fifty percent faster CPU doesn't mean the effective price has fallen fifty percent, because the CPU is only occasionally the bottleneck. (And do they ever adjust inflation upward for quality reductions?)