Re: CPI a fraud?


<royls@xxxxxxxxx> wrote in message
news:431e462f.37199971@xxxxxxxxxxxxxxxxxxxxxxxx
> On Tue, 06 Sep 2005 17:42:19 GMT, "Bill" <xxx@xxxxx> wrote:
>
>><royls@xxxxxxxxx> wrote in message
>>news:431de720.12861092@xxxxxxxxxxxxxxxxxxxxxxxx
>>> On Tue, 06 Sep 2005 06:11:31 GMT, "Bill" <xxx@xxxxx> wrote:
>>>
>>>>Why could it not be that whomever
>>>>originally developed the process could not come up with a better way?
>>>
>>> A bright high school student could come up with a better way. And in
>>> fact, the original process did not have the fraudulent "hedonic
>>> adjustments."
>>
>>I have no idea what you mean by that.
>
> The BLS website should be able to help you.
>
>>Is it a common term?
>
> Yes.
>
>>What would be an
>>outline of a better way
>
> No hedonics, for one. Focus on standard items for another: a gallon
> of gas, a loaf of bread, etc.
>

We are talking about how to compute the cost of housing in the CPI other than
using rent. You claimed there was a better way and I asked you to outline it.

>>- keeping in mind the frequency of moves and that
>>those paying higher prices may also get higher prices for what they are
>>selling.
>
> That is exactly what the CPI is supposed to be measuring: changes in
> general price levels.
>

Right. We are going around in circles here. You claimed the CPI with respect
to housing is a fraud. I said maybe they could not think of a better way. You
said that a High School Senior could do it. I asked for the outline of such a
way.
>>>>Also as
>>>>the cost of rents to the rentors goes up, the CPI goes up.
>>>
>>> If imputed rents go up in the absence of any investment in
>>> improvements (i.e., if land rent increases), it is _assumed_ that
>>> there is a "hedonic" improvement, and the land rent increase is
>>> _subtracted_ from the consumer price basket rather than being added to
>>> it.
>>
>>That makes no sense.
>
> I'm not the one doing it.
>

I'm saying what you said makes no sense. In what way is the land rent increase
subtracted from the consumer price basket?

>>What you are saying is that if rent goes up in the
>>absence of improvements then it is assumed land rent is subtraced from the
>>CPI. Why?
>
> To reduce both the officially acknowledged rate of general price
> increases (especially of assets) and the officially acknowledged
> aggregate rent of land.
>


So you are saying this is for conspiratoraial reasons. What is the mechanism -
arthimetically - they use to do this?

>>>>But if someone
>>>>buys a new place, the price of land is reflected in their cost and they
>>>>will
>>>>attempt to recover that.
>>>
>>> And if someone owns an old place long paid for, they will attempt to
>>> "recover" the price the land _would_ fetch if it were sold today. So
>>> what?
>>
>>So as the price of land goes up, rents will increase and the CPI will go up.
>
> Nope. Imputed rents (which account for 2/3 of the housing component
> of the CPI) are not calculated based on the price of land.
>

Right they are based on actual rents from a survey. Correct? There is no
direct association to the cost of land - which was the point of my first post
in this thread. However, if the price of land goes up eventually at least some
of that will be reflected in rental costs.

Bill

>>You argued that land rent increase is subtraced from the consumer price
>>basket - though you did not define that term.
>
> The CPI is calculated using a "basket" of goods and services that is
> alleged to represent typical consumer spending.
>
> -- Roy L


.

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