| > If people completely stop buying product A (which's price increased 100x) and switch to product B (with the same price as before) then by the above calculation there is no inflation at all. If people completely stop buying product A and switch to product B then the model should do that as well because the model should try to match reality. The CPI is about measuring prices of what consumers buy: the P and C in CPI. > It would probably be more honest to project inflation by defining a static consumer's basket and following it's price into the future. But that is not the purpose of the Consumer Price Index. There are other statistics available that may be useful: * https://en.wikipedia.org/wiki/Personal_consumption_expenditu... Or you could go out and measure the prices of these things yourself, as there's source code floating around that was used in academic research: * https://thebillionpricesproject.com * https://en.wikipedia.org/wiki/MIT_Billion_Prices_project The CPI was setup for a particular purpose and it is good at that purpose. If you want to measure something else don't try to shoehorn it in, setup a metric for what you to measure rather rather than wreck what works. |
Its often convenient for government to conflate the two; cost-of-living is a very flexible concept and so there are lots of way to get an answer you like, but they are distinct concepts.
Surely you can understand why a changing basket of goods makes for deceptive year-to-year comparisons.