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How Govt Statistics Hide Inflation

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08/27/2003

Another interesting article from the LaRouche site shows how the inflation statistics are distorted to produce a lower reported rate of inflation.  The government incurs a number of costs from a higher reported rate of inflation (CPI).  There are direct costs such as pensions that are indexed to the CPI, the "cost" of lower tax revenuje because regular income tax brackets are indexed to inflation (but not the evil AMT), and there is the loss of credibility for the central bank's inflationary policies.  The scam is to count quality improvements as price reductions.  Teams of government statisticians are busy evaluating new products to assess the extent the impact of quality improvements on prices of new goods. This methodology is unsound from an Austrian point of view.  Like "comparable worth", how can government statisticians know what the value is that consumers place on particular quality improvements?

 

Robert Blumen is an independent enterprise software consultant based in San Francisco.

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