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

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#521

Post by em500 » Mon, Mar 08, 2021, 7:48 PM UTC

CyberRabbi wrote: post #486

gruez wrote: post #394

Earlier quoted context omitted.

>What drives you to defend the CPI? What drives you to question the motives of the commenter rather than responding to his arguments directly?

I have no intention of refuting his arguments. I have no strong position on the value of the CPI. OTOH I’ve noticed repeated vociferous defenses of the CPI across various Internet forums which seems out of the ordinary for me, so I’m naturally curious in what drives it. This is not trying to dismiss his argument, I just want to understand from where it’s coming because I think I’m missing something.

I have occasionally come to the defence of CPI in several threads. What drives is usually that the critic shows little knowledge about that the CPI is and/or how it's actually calculated. There are real technical issues with CPI estimations. But forum and blog posts rarely reach beyond the level of "everything I bought/want to buy is getting more expensive faster than the CPI, so it must be bogus".

It triggers me in a similar way, I think, as comments like "my (sisters'/neighbours') kid got really sick after his vaccination, so vaccines are very dangerous". A small number of people really do get sick after (and sometimes even from) vaccines, and probably no amount of research will override their personal experience. But it's a bit disheartening if the level of discourse never rises much above personal experiences.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#522

Post by jeofken » Mon, Mar 08, 2021, 7:49 PM UTC

faet wrote: post #491

jeofken wrote: post #136

Earlier quoted context omitted.

Money printing became decoupled from anything real in 1971. See here what happened to the correlation between productivity and labour income after this https://wtfhappenedin1971.com/

Purchasing power has been consistent. https://i.redd.it/7qqhlk5i48l61.png The graph uses average hourly wages which does not include overtime, bonuses, shift premiums, and employer benefits. It also doesn't account for all workers. https://files.stlouisfed.org/files/htdocs/publications/es/07... total compensation tracks pretty well.

Thanks for the interesting data point regarding purchasing power. I think we would agree that you’d expect purchasing power to increase when efficiency increases, rather than staying constant. And as efficiency (as measured by value i.e. usefulness/efficiency of capital) has continued to increase while purchasing power stayed mostly stagnant since 1971, those earning their income from labour are drawing the short stick, while those earning their income from capital gains (ie efficiency of productive stuff) are doing much better.

If I misinterpreted your comment (I think we agree), I welcome your explanation of why purchasing power stays the same when efficiency increases since 1971.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#523

Post by SilasX » Mon, Mar 08, 2021, 7:49 PM UTC

owenversteeg wrote: post #500

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...

Which was horribly tone deaf, but not incorrect: yes, technological improvements do free up money for food. According to the New York Times, in the 70s your average car would survive for 100k miles. Today you can buy a car that not only survives more than twice as long, but it has far fewer costs: engines using a tiny fraction of the oil, coolants that last the car's lifetime, spark plugs that last several times as l…

I don't think we're disagreeing here, at least not about the broad economic and technological dynamics. I agree that, in the large, technological improvements do improve your ability to meet a budget, including to feed yourself, and I think the examples you gave are great. I don't think he's off-base in appealing to that general principle; it's just a matter of failing to realize when specific cases deviate from the heuristic.

That is, it doesn't follow that every technological gain has that effect, and it doesn't mean that that year's technological gain canceled that year's gain in costs of necessities. It doesn't mean that a new iPad's being 50% "more powerful" translates into it providing the utility of 1.5 "iPad 1"s. And it especially doesn't mean that improvements purely for luxury entertainment goods can ever truly act as substitutes for necessities.

Dudley was speaking as if that past year's improvements in the iPad really did cancel, in some substantive way, that past year's gain in necessities. (Remember, the iPad was released in 2010, and the story is from 2011.) It's not relevant to compare to e.g. not having mobile videochat integrated into your phone at all (since we had that in 2010), or the efficiency of cars from the 70s.

>The few bucks you save by not topping up your oil can pay for more expensive bananas,

And as above, those fuel efficiency improvements happened over decades; there wasn't significant gain in the prior year that obviated the extra costs.

Edit: Furthermore, as in the other reply, I think price changes purely attributable to technology aren't relevant to the kind of inflation central banks care about, and shouldn't be regarded as offsetting the "too much money/too few goods" problem.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#524

Post by Diederich » Mon, Mar 08, 2021, 7:50 PM UTC

artificialLimbs wrote: post #478

adflux wrote: post #17

Earlier quoted context omitted.

Sure, almost all central banks over the world have printed an astronomical amount of money. Even though they may state there is no significant inflation, I dont buy it and neither do many other economists. Stock prices, house prices and now, at last, commodity prices have gone through the roof... But you're probably earning about as much as you were a year ago, or less, if your industry was affected... It's not just…

We were going to build a house about 6 months ago. Plywood sheets that we were looking at were $8. They're now $30.

May I ask what region you're in? Thanks.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#525

Post by elzbardico » Mon, Mar 08, 2021, 7:54 PM UTC

phendrenad2 wrote: post #353

elzbardico wrote: post #335

Jeebus folks! This is not about the USA. This is about the vast majority of the mankind that lives on developing countries, vast armies of people already under the threat of food insecurity in the best of times, now unemployed and facing the threat of food inflation. This is the stuff that create coup d'etats, dictatorships, rampant crime and wars. Meanwhile you're working on automating work to make this people even…

Who's making it about the USA? The article is clearly about the world. Food scarcity hits people in developed countries too, especially the US where there's no safety net against homelessness if you're unfit to work. That "small price increase in the friggin US of A" is a big deal to people below the poverty line. There's always someone poorer in the world, it's just weird to draw a line in the sand and say "you must…

I was talking about the comments.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#526

Post by pnutjam » Mon, Mar 08, 2021, 8:01 PM UTC

CodeMage wrote: post #496

pnutjam wrote: post #483

Earlier quoted context omitted.

I don't dismiss the profession. I dismiss the professionals. They need to provide more proof then identifying as a professional exactly because it is not a science. I also need to understand their biases and agenda. Honestly it's usually easier to just ignore them and give their opinion no weight greater then anyone else.

I agree with everything you wrote except that last sentence, and that is exactly what I refer to as "dismissing the profession". Understanding their biases and agenda is by no means trivial, or even easy, but it's most likely a lot easier than spending all the time they spent on studying the subject matter.

Fair enough, an actual economics professional might have some insight is you can ensure your not talking to a voodoo economics professional.

Economic theory is good for asking questions and maybe creating a standard. It has a dismal record of answering questions.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#527

Post by owenversteeg » Mon, Mar 08, 2021, 8:03 PM UTC

dlubarov wrote: post #516

owenversteeg wrote: post #500

Earlier quoted context omitted.

Which was horribly tone deaf, but not incorrect: yes, technological improvements do free up money for food. According to the New York Times, in the 70s your average car would survive for 100k miles. Today you can buy a car that not only survives more than twice as long, but it has far fewer costs: engines using a tiny fraction of the oil, coolants that last the car's lifetime, spark plugs that last several times as l…

It seems like an implicit premise in that line of reasoning is that consumers have a choice: they can increase their spending if they want a quality upgrade, or they can forgo the upgrade and keep their spending relatively constant. In some cases, though, there often isn't much of a choice. I can't buy a (new-ish) car without a rear-view camera, now that they're mandated. I can't hire a builder and tell him that I do…

Well, except that you do have that choice in most things. You can buy a used car without a rear-view camera, or keep your older car - and many people do. If you want a cheap smartphone, you can get one - I recently had a Nokia 1 (cost me 24 euros!) as an experiment, and it worked fine. If you're content with a TV from 2001, you can get one for free off Craigslist.

The reason I like the car as an example is because it is a quality upgrade and also a lower cost. A vehicle with more than twice the lifespan translates directly into cash in your pocket. You save cash on a regular basis by not needing to purchase a quart of oil a week, 11 hours of mechanic time (while the car is still new!), more expensive tires, more spark plugs, more coolant, etc.

I get your point that quality upgrades are _occasionally_ mandatory, but the majority are not. If you want to save money by skipping the improvements (get a TV, flashlight, keyboard etc from 2001, or a more spartan smartphone) - go ahead, plenty of people do, and they save money for it. But if you want the latest tech, and a palace on wheels, and international travel, and organic food, and a fancy university on your resume, well, those things cost money.

Fun fact - community college enrollment has dropped year over year for about a decade now (today it stands at almost half of its peak enrollment.) There are plenty of budget smartphones, but the most popular phone in the world by far is the non-SE current-year iPhone, costing $800 to $1600 depending on configuration and the place you buy it in. A safety razor is cheap and effective (I use one) but Gilette sells millions of copies of expensive razors. The American middle class, in particular, wants to consume at a very high level, increasing every year, and it will not be satisfied with less. Interestingly, this consumption has shaped the political debate on the American left. Student loan forgiveness, which as planned today would be a colossal handout to the upper middle class, is wildly popular. Money for the millions of Americans living in true poverty is discussed nowhere, while left circles are furious that couples making 160k won't get any extra thousands with the latest stimulus bill.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#528

Post by Miraste » Mon, Mar 08, 2021, 8:07 PM UTC

gher-shyu3i wrote: post #218

zo1 wrote: post #207

Earlier quoted context omitted.

So in the same paragraph you blame capitalism for something the government does without our consent? We have to at least assign blame equally, instead of picking and choosing which involved systems and actors to blame. Especially if we can't agree on the actual causes. On a side note: I have seen some good analysis/speculation/theorizing done about how interest/loaning would work in a world without government-regulat…

We have to move away from interest as an underlying mechanism, it's one of the root causes of the chaos in today's financial world. The superior model is investments, similar to how VCs invest in companies in exchange for equity. Loans are to be relegated to charity only. If we apply all this, loans will become close to non-existent. We have seen this successfully work because interest is prohibited in Islam, yet it…

How do you reconcile your idea that Islamic banking systems will lead to no inflation with the inflation rates of countries that have large Islamic banks, which are much higher than the US?

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#529

Post by jpdaigle » Mon, Mar 08, 2021, 8:09 PM UTC

em500 wrote: post #508

pwm wrote: post #363

Earlier quoted context omitted.

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…

Other already gave good answers. The main part is that a house is not a consumption product - it is not "consumed" (used up) in a limited timespan, but rather, a bundle of a long-durable part (building) and an ultra-durable asset (land). Pretty much all durable assets have increased in price since the 1980s in tandem with falling interest rates[1]. The cause of the long term decline of interest rates is largely unkno…

Wouldn't it make sense for the basket of goods used to compute CPI to try to blend the impact of rents (which are included) with "affordability" of buying a house (maybe measured as the carrying costs of an average property per month, which would exclude principal payments)?

Otherwise, because rents and house prices don't always move in lockstep, it's hard to measure the buying power of a dollar over time.

When thinking about purchasing power over time or between different cities, I often think of it as "assume I'm buying 1/180th of an average house in that city each month" as part of a representative basket of goods.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#530

Post by thekyle » Mon, Mar 08, 2021, 8:10 PM UTC

whoisninja wrote: post #435

INGELRII wrote: post #423

Earlier quoted context omitted.

> Technology is deflationary, things should get cheaper because we go after producing them in creative ways one demand is high. And as a consequence the wages you earned by making tech year ago should have less value than the wage you earned today. You should expect small inflation. If you want deflationary money, wages should decline year by year. If you want to save, don't hold cash.

if i want to save, don't hold cash? hold what then? become investment manager in free time instead of my day job as software developer?

You don't need to become an investment manager to invest in stocks and bonds any more than you need to become a bank manager to have a bank account.

Just buy a mutual fund (preferably indexed) from somewhere like Vanguard and let them figure it out.