tag:blogger.com,1999:blog-6685155377705481833.post3720357101482308172..comments2023-09-22T03:17:50.469-04:00Comments on Middle Class Political Economist: What is Noah thinking? Part 2Kenneth Thomashttp://www.blogger.com/profile/05747704671007690674noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-6685155377705481833.post-64504560120987012972015-02-02T15:31:47.817-05:002015-02-02T15:31:47.817-05:00Ah, yes "All-or-Nothing" argument. Eith...Ah, yes "All-or-Nothing" argument. Either ALL problems are due to government, or none are. Brilliant.Jackhttp://novatownhall.comnoreply@blogger.comtag:blogger.com,1999:blog-6685155377705481833.post-47078358047568943972015-02-01T18:37:22.419-05:002015-02-01T18:37:22.419-05:00Exactly: every problem in our society is caused by...Exactly: every problem in our society is caused by government screwups, and everything would be perfect if only they would disband and allow us to go about our business unmolested. Now if only we could get people to stop blurting out simpleminded one dimensional pseudo analyses of complicated problems then we all could be cooking with gas.Horace Boothroyd IIInoreply@blogger.comtag:blogger.com,1999:blog-6685155377705481833.post-72255316593742649692015-01-30T09:25:16.107-05:002015-01-30T09:25:16.107-05:00marmico, if I understand you correctly, it would s...marmico, if I understand you correctly, it would seem the answer is that individuals don't spend their money in PCE world, but in CPI world. And part of the gain in PCE world is fictitious, anyway, since it involves doing things like downsizing from a one-bedroom apartment to a studio if you can no longer afford the one-bedroom (example is from Pollitt above).<br /><br />But I'm not 100% sure I'm understanding your point about "reconciliation." There was a discussion of reconciling the CPI-U and PCE in the BEA/BLS paper I linked, so perhaps it is coloring my views.Kenneth Thomashttps://www.blogger.com/profile/05747704671007690674noreply@blogger.comtag:blogger.com,1999:blog-6685155377705481833.post-43401357032478951042015-01-29T17:27:10.855-05:002015-01-29T17:27:10.855-05:00It seems to me that the reconciliation is that the...It seems to me that the reconciliation is that the 2014 AHE deflated by the CPI-U has 25% more PCE purchasing power relative to the 1970 AHE.marmicohttps://www.blogger.com/profile/08277071086056574486noreply@blogger.comtag:blogger.com,1999:blog-6685155377705481833.post-68189556954736195392015-01-29T16:22:53.481-05:002015-01-29T16:22:53.481-05:00Hi marmico, the problem is that the PCE is not sup...Hi marmico, the problem is that the PCE is not supposed to represent the prices individual consumers pay. Moreover, the supposed greater accuracy of chained indices in reflecting substitutions actually obscures the compromises consumers make to deal with rising prices. I think Katha Pollitt said it best: "...switching to cheaper products is what having a lowered standard of living *is*." <a href="https://books.google.com/books?id=CN4PxodWeHUC&pg=PA150&lpg=PA150&dq=%22Katha+Pollitt%22+inflation&source=bl&ots=pz8SA_f01_&sig=NwUWTMivvLUmHOjWTZ26eI5-aY0&hl=en&sa=X&ei=NKDKVJeHMsj5yQSIhYDgDg&ved=0CB0Q6AEwADgK#v=onepage&q=%22Katha%20Pollitt%22%20inflation&f=false" rel="nofollow">Pollitt</a><br /><br />Moreover, in a paper by two BEA and one BLS staffer, they write this about the difference between CPI-U and PECPI: " The CPI measures the change in prices paid by urban consumers for a market basket of consumer goods and services; it is primarily used as an economic indicator and as a means of adjusting current-period data for inflation. The PCE price index measures the change in prices paid for goods and services by the<br />personal sector in the U.S. national income and product accounts; it is primarily used for macroeconomic<br />analysis and forecasting." <a href="http://www.bea.gov/papers/pdf/cpi_pce.pdf" rel="nofollow">BEA/BLS paper</a> (footnote 1)<br /><br />So I continue to think that CPI-U is the better measure for inflation as experienced by individuals.Kenneth Thomashttps://www.blogger.com/profile/05747704671007690674noreply@blogger.comtag:blogger.com,1999:blog-6685155377705481833.post-60927204072396138902015-01-29T06:43:35.550-05:002015-01-29T06:43:35.550-05:00Average Hourly Earnings (AHE) deflated by the Pers...Average Hourly Earnings (AHE) deflated by the Personal Consumption Expenditures Price Index ( PCEPI is blue line) and Consumer Price Index-Urban (CPI-U is red line) normalized to January 1970.<br /><br />The PCEPI, not the CPI-U, is the deflator used in the National Income and Product Accounts and shows that AHE is 25% higher in 2014 relative to 1970.<br /><br /><a href="http://research.stlouisfed.org/fred2/graph/?g=YLE" rel="nofollow">FRED chart</a>.marmicohttps://www.blogger.com/profile/08277071086056574486noreply@blogger.comtag:blogger.com,1999:blog-6685155377705481833.post-62430651278123272362015-01-27T19:10:30.336-05:002015-01-27T19:10:30.336-05:00There is a serious conflation of cause and effect ...There is a serious conflation of cause and effect in this analysis.<br /><br />The Equal Credit Opportunity Act of 1974, if I recall correctly, required banks to consider the wife's income when determining eligibility for a mortgage. This flood of money into the market drove up real estate prices to the point that two incomes are almost NECESSARY to buy. Rent was also bid up.<br /><br />So women in the workforce, and in the housing market, drove up inflation (w/o an increase in wage) which in turn got more women into the labor market, which drove wages down at the same time they were bidding prices up.<br /><br />Result: stagflation<br /><br />We are now seeing similar effects with the illegal immigrants taking jobs. Wages go down relative to prices, because they bid up the prices and bid down the wages.Jackhttp://novatownhall.comnoreply@blogger.com