A $100k Prize for a Decentralized Inflation Dashboard • Hacker News Board

Re: A $100k Prize for a Decentralized Inflation Dashboard

#91

Post by lottin » Fri, Aug 06, 2021, 3:14 AM UTC

acover wrote: post #81

gruez wrote: post #72

Earlier quoted context omitted.

>certain categories feel way off - such as housing. As someone who is considering buying a house their measure is useless. Because it's based off "owners equivalent rent", not the sticker price of a house. The latter is somewhat problematic because a house is an investment, not an expenditure (unlike an apple or a doctor visit).

> Its purpose is to determine changes in the cost of using a stock of dwellings. https://www150.statcan.gc.ca/n1/pub/62f0014m/62f0014m2017001... This is difficult for me to understand as there is no market price for what they are trying to estimate. They have a thousand knobs to guess at. It reads a bit like they are grouping people who’ve own their home for 50 years in with those who just bought - similar to how the…

I think, you're missing the point. Houses are consumed over very long periods of time, which means the price at which you're purchasing your home today is going to affect your future cost of living for many, many years. Therefore, if we are trying to measure the current cost of living, current house prices are pretty much irrelevant.

Re: A $100k Prize for a Decentralized Inflation Dashboard

#92

Post by acover » Fri, Aug 06, 2021, 3:17 AM UTC

perl4ever wrote: post #90

acover wrote: post #62

Earlier quoted context omitted.

Yes, I agree it’s not as useful if you trust government sources. I’m not that familiar with USA inflation but with Canadian inflation statistics, certain categories feel way off - such as housing. As someone who is considering buying a house their measure is useless. BLS numbers are also controversial - https://www.investopedia.com/articles/07/consumerpriceindex....

>certain categories feel way off If you live in Vancouver, it's easy to forget 93% of the country doesn't. From 1995 to just pre-pandemic, my home (in the US, far away from California) appreciated significantly less than inflation.

I was looking at a city specific inflation measure.

Re: A $100k Prize for a Decentralized Inflation Dashboard

#93

Post by lottin » Fri, Aug 06, 2021, 3:24 AM UTC

anythingdude321 wrote: post #47

throwawaygh wrote: post #35

> Inflation is a monetary phenomenon, a function of money printing Is it, though? Are hotels and used cars more expensive this year because of money printing?

this is a reference to a famous Milton Friedman quote "inflation is always and everywhere a monetary phenomenon" — of course this is a tautology, but he didn't mean the trivial version when he said it, but rather he was making an empirical claim. in this piece it looks like the author is making the tautological version of the claim, by following up and describing it as "a function of money printing" — which is obviou…

To be clear, inflation is not a function of money printing. For example, under metallic standards (so no money printing), countries would experience inflation or deflation as a result of trade imbalances (because a trade deficit leads to a net outflow of precious metals, and vice-versa).

Re: A $100k Prize for a Decentralized Inflation Dashboard

#94

Post by acover » Fri, Aug 06, 2021, 3:39 AM UTC

lottin wrote: post #91

acover wrote: post #81

Earlier quoted context omitted.

> Its purpose is to determine changes in the cost of using a stock of dwellings. https://www150.statcan.gc.ca/n1/pub/62f0014m/62f0014m2017001... This is difficult for me to understand as there is no market price for what they are trying to estimate. They have a thousand knobs to guess at. It reads a bit like they are grouping people who’ve own their home for 50 years in with those who just bought - similar to how the…

I think, you're missing the point. Houses are consumed over very long periods of time, which means the price at which you're purchasing your home today is going to affect your future cost of living for many, many years. Therefore, if we are trying to measure the current cost of living, current house prices are pretty much irrelevant.

How I interpret their methodology is they are trying to estimate the change in costs for existing owners. Is that correct?

What I feel is that mortgage payments have doubled in 10 years for new buyers. However, because new buyers are a small fraction of existing buyers this doesn't rapidly affect inflation as they calculate it.

Thanks for trying to explain it, I feel pretty dumb as I'm clearly missing something obvious.

Re: A $100k Prize for a Decentralized Inflation Dashboard

#95

Post by mensetmanusman » Fri, Aug 06, 2021, 3:51 AM UTC

BenoitP wrote: post #24

What I'd really like to see is a multi-dimensional inflation vector that would also be future-proof. People really need diverse items: they need food, but also real estate, the prices of which are going through the roof currently, and that's a form of inflation. Also, there are many profiles of consumption. People have different needs. I'd say that it could be a 100 floating point vector; with the first 40 values arr…

it can only be future proof when tech stops improving :)

Re: A $100k Prize for a Decentralized Inflation Dashboard

#96

Post by sellyme » Fri, Aug 06, 2021, 4:08 AM UTC

human wrote: post #79

Geee wrote: post #63

Real inflation is very hard to measure, because it's not only prices that change - more often the product loses quality while price stays the same. Either way, you are getting less for what you pay for, but only the price change is measured as inflation. In addition, people switch over to cheaper alternatives when products get more expensive - meat is replaced with vegetables for example. This changes the average bas…

Loss of quality is totally missed in the CPI. Take this example. A restaurant hires rookie waiters because they can’t pay the more experienced staff. Your meal still costs $50. But is it worth this same? Not at all.

Where I live it's been about a decade since waiters were anything except glorified conveyer belts that serve no purpose except to move my food from the kitchen to my table, and if anything that has drastically increased the quality of my meals. I'm not really sure what value an experienced waiter would provide.

Re: A $100k Prize for a Decentralized Inflation Dashboard

#97

Post by someguy101010 » Fri, Aug 06, 2021, 4:30 AM UTC

bellyfullofbac wrote: post #66

gruez wrote: post #16

Earlier quoted context omitted.

>if you end up starting a company How can you monetize this? The whole point is that the data is public for everyone to see?

I mean, these are crypto-crazed people with their alternate reality. Make a company, add the word "blockchain" in your mission statement, and join in the bandwagon/Golgafrinchan Ark Fleet Ship B?

The crypto version of this is an inflation oracle

Re: A $100k Prize for a Decentralized Inflation Dashboard

#98

Post by grepfru_it » Fri, Aug 06, 2021, 5:01 AM UTC

paulgb wrote: post #31

gruez wrote: post #7

$100k seems laughably low, when you consider that it buys less than 4 months of dev time (assuming a $200/hr consulting rate).

It does seem low compared to the rise in developer salaries of late. I guess that's why they need help tracking inflation.

Just hired some devs for $12/hr. Quality will probably be about par for the course

Re: A $100k Prize for a Decentralized Inflation Dashboard

#99

Post by lend000 » Fri, Aug 06, 2021, 5:15 AM UTC

paulryanrogers wrote: post #61

lend000 wrote: post #42

Earlier quoted context omitted.

The CPI basically measures the median American's budget. So if wealth inequality is unchanging, then it's a decent measure of economy-wide inflation. Otherwise, it measures inflation x delta wealth inequality.

What if those budgets have significantly less buying power? Especially in critical areas like housing, healthcare, and education?

Then people will tend to buy less of them to fit their budget. Here is the most telling chart: inflation-adjusted wages in the US [0]. They never change, because the CPI uses a survey to determine what the average American is buying, and how much it costs, then they adjust weights based on how much they spend on it (which cancels out the cost because people change their buying preferences based on current prices) and leaves you with the median American's total expenditure. Yeah, that's really how they do it. And that's why CPI is a joke.

[0] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...

Re: A $100k Prize for a Decentralized Inflation Dashboard

#100

Post by lottin » Fri, Aug 06, 2021, 9:07 AM UTC

acover wrote: post #94

lottin wrote: post #91

Earlier quoted context omitted.

I think, you're missing the point. Houses are consumed over very long periods of time, which means the price at which you're purchasing your home today is going to affect your future cost of living for many, many years. Therefore, if we are trying to measure the current cost of living, current house prices are pretty much irrelevant.

How I interpret their methodology is they are trying to estimate the change in costs for existing owners. Is that correct? What I feel is that mortgage payments have doubled in 10 years for new buyers. However, because new buyers are a small fraction of existing buyers this doesn't rapidly affect inflation as they calculate it. Thanks for trying to explain it, I feel pretty dumb as I'm clearly missing something obvio…

Conceptually, it's useful to think of a house as an investment good that produces housing services (shelter, living space, etc.). These housing services are what you get when you rent a house. If you're a home owner, you don't pay rent explicitly, but it really is as if you had rented out your house to yourself and you were paying rent to yourself. Therefore the cost of housing services is best estimated through rent prices.

The other thing is the cost of the house itself, not the housing services. This includes the purchasing cost and the cost of repairs that you make periodically. The repairs are not a problem but the purchasing cost would need to be spread over the useful life of the house. If the house is bought on credit then the buyer will also incur funding costs (i.e. in the form of interest payments), but these can't be considered costs that are related to housing. They are separate. It's like if you buy a car on credit you'll pay more than if you paid for it with your savings, but that doesn't mean the car is more expensive.

CPI includes housing services and repairs. As far as I know, it doesn't include houses, probably because they're considered an investment good, while CPI is concerned with consumer goods. At any rate, mortgage payments are not a good estimate of how much houses cost. The reasons are interest, which is a different cost, and the fact that principal payments are arbitrary as they vary depending on things like mortgage length, and so on.

Anyway, I understand that many people feel strongly about CPI and inflation measurements, but while cost accounting is not rocket science it's not completely straightforward either, and most of the time criticism of CPI by layman people turns out to be misguided.