How accurate is the us inflation calculator?

Discussion in 'Economics' started by noob_trad3r, Mar 20, 2012.

  1. In 1968 a 20inch color TV cost 377 dollars, which is $2,466.35 in todays money. but you can buy one for 158 bucks now

    Pajamas in 1969 was 3.49 which is 22.83 in todays money

    4.49 seagrams gin 1 quart, 29.37 today

    ground chuck 69 cents a pound = $4.51 todays money but public has it 3.99 a pound.

    In 1968 a computer cost (IBM model 360/25) for trading costs 253K bucks back then which is $1,655,136.18 today. you can get a dell for less than 400 bucks and it includes monitor.

    Anyhow it seems things have gotten cheaper over time, denominations just changed. (Except college)
  2. heypa


    Anyone who believes any government statistic is naive. Analysis of the consumer price index is extremely complicated. Thorough understanding is in my opinion impossible by the public and the people that produce it. Through the years the method has been steadily changed. Any selection of specific products is not applicable to the index in any realistic way.
    . In my opinion it is just another number the government uses to mislead us. My past experiences and observations seem to indicate to me that for the common man it significantly understates the loss of value. I've been around for 86 years and if it matters I have a BSME from Purdue University. Since 1913 the Fed Bank sure has protected the value of the dollar!
  3. piezoe


    heypa is right, and depending on how you calculate inflation and whose numbers you use, contrary to popular opinion, college costs have not increased faster than overall inflation, since 1968. They have kept pace, but that's it. One of the few things that has advanced more than the general inflation rate is medical costs. Some things have gotten cheaper, as you note. The government has changed the way they compute inflation several times between 1968 and now. Food and energy are not included in what is called the core inflation number, so if you don't use food or energy the core inflation number should work well for you. :D I read somewhere that nowadays "quality" improvements are taken into account when the government computes the inflation rate. I suppose that works something like this: If a computer costs the same this year as last, but this year's computer has twice the memory and is twice as fast, then the bean counters may say that computers have deflated by 50%. This is obviously a gray area that allows those who "calculate" inflation numbers to move the number down some, if that suits their purpose.

    For the inflation rate computed as it was previously, see:

    If a person really wants to understand what inflation is all about they should just ignore the government's number and go to the grocery store or gas station. Most people do not understand the link between government deficits and inflation. That's good, only if you are a politician!
  4. 1) To use the price/cost of a McDonald's hamburger may make for a better "reference". :cool:
    2) Inflation calculations are deliberately understated in order to keep social security payments minimized to those recipients. Otherwise the USA would have sunk into the Atlantic and Pacific Oceans a long time ago. :eek:
    3) "Innovative" products are a good value compared to years past. :)
    4) The killer costs are rising taxes which, I believe, are not included in inflation and cost of living calculations. :( :mad:
  5. Congratulations on the most superficial analysis of inflation I've ever seen. Talk about cherry picking, good grief.
  6. So you're going to tell me college costs have not outpaced the "official" inflation rate over the past 10, 20 years?

    Or are you implying that tuitions lagged official inflation in the 1970's and then adjusted throughout the 90's-00's and over the past 44 years have averaged out to the inflation rate during that timespan?
  7. I paid $1,983.41(in 2012 dollars) for a 21 inch black and white tv in 1959 and I bought it wholesale. See

  8. Yes the Quality of everything you mentioned above has just gotten worse as well...we are squeezing more from less to keep up the pace....

    it took one man to bring home the bacon back in the day whereas now it takes them both man and wife to stay above water....

    maybe we are just buying more shit :D
  9. piezoe


    Well it depends on which inflation measure you use. For example using the consumer inflation rate over the ten year period 1998 to 2008, tuition increased 44 percent from an average of 5200$ to an average of $7800 this is an average annual increase over that period of slightly less than the average consumer inflation rate over the same period which averaged a little over 5%. This is using the 1980 consumer inflation method. During the same period, State and local higher education appropriations actually declined by about 10%, in spite of inflation. Declining State and local appropriations are of course one driver of tuition increases.

    Other time periods of ten years or more, give similar results.

    See for various measures of inflation.
  10. piezoe


    I'll just add a comment on my own post. Even though tuition increases were able to keep pace with inflation, when you consider the decline in state and local appropriations in nominal dollars (~10%) in the face of 40-50% consumer inflation, it's clear that higher education in the public institutions is getting by with less, in constant dollars, than they were a decade ago in spite of rising costs. Many of these institutions, particularly those with small endowment accounts to draw on, are really strapped.

    The stories we hear in the press, which usually do not take inflation into account or use ridiculous inflation rates like the Fed's core rate, are to say the least, extremely misleading and paint a false picture. That is not to say that there may have been some tuition increases here and there that significantly outpaced inflation, particularly in the private sector. Overall however, university administrators are doing all they can to hold the line on tuition without harming academic quality. It's been very difficult to do that!
    #10     Mar 22, 2012