Archive for January, 2011

CE#293: What do burger prices tell us about the reliability of official inflation figures? (Economist)

Lies, flame-grilled lies and statistics

What do burger prices tell us about the reliability of official inflation figures?

The McFlation index

Jan 27th 2011 | from PRINT EDITION

INFLATION is creeping up around the globe. But in many countries, ordinary folk as well as investment analysts suspect that governments are fiddling the figures for political reasons, and that the true inflation rate is much higher than officially reported. Argentina’s inflation rate is the hardest to swallow. According to the government, consumer prices rose by 10.9% in the year to December, but private-sector economists estimate the true increase to be at least twice as much. In China, too, many claim that the government’s figures hugely understate increases in the cost of living.

Economists disagree on the best way to measure consumer-price inflation. How often should the relative weights be changed? How should one take account of quality improvements? One reason why the Chinese may think their cost of living is rising so quickly is that consumers are moving upmarket—for example, from the local dumpling stand to a restaurant. That increases households’ spending, but is not inflation.

If you find the theory of price indices hard to digest, why not rely on simple burgernomics? The Economist’s Big Mac index was devised as a lighthearted gauge to whether currencies are under- or overvalued, but Jonathan Anderson, an economist at UBS, suggests that it can also be used to cross-check official inflation rates. Consisting of food, materials, wages and rent, the McDonald’s Big Mac offers a handy consumer-price basket, whose composition has hardly changed over time.


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CE#292: Lux Aurumque – Final Take

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CE#291: Billy McLaughlin performing Helms Place

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CE#290: Space Fence: Watching Over Us

We rely heavily on space for navigation, communication, and even health care research. Through Space Fence, the U.S. Air Force is significantly improving its space situational awareness to protect our satellites and astronauts from spinning debris and other orbital objects before disaster strikes.

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CE#289: Macrowikinomics No. 7: The Rise of The Citizen Regulator

Why the old model of command and control regulation doesn’t work, and how increased transparency and public participation will replace it

…Some of the issues that challenge today’s regulators include the sclerotic pace of rule making, growing economic complexity, increasing international interdependency, the corrosive influence of “junk science” and industry lobbying, and a broadly insufficient capacity for effective oversight.

Arguably some of today’s troubles are self-inflicted. After dismantling or circumscribing centralized regulatory agencies in the 1980s and 1990s, many governments handed industry the power to police itself in areas ranging from toxic emissions to financial services. The thinking was that government regulation was too burdensome and costly, and the mechanics of updating it were clunky. Delegating rule making to industry bodies would make regulation more responsive to the needs of industries that were evolving quickly and becoming increasingly global in scope. Governments were to be the “regulators of last resort”—stepping in only after self-regulation was deemed to have failed.

The problem, in practice, is that most instances of industry self-regulation have deficiencies (like lax rules or inadequate enforcement) and governments (for the most part) have proven unable or unwilling to take swift action when market failures become evident. Indeed, after years of chronic underfunding, it should be no surprise that many regulatory agencies are ill equipped to pick up the slack, let alone confront novel challenges for which they have neither the resources nor the expertise…

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CE#288: Pat Metheny Group. Song For Bilbao

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CE#287: Nike “Fate” Leave Nothing commercial w/ LT & Polamalu

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