My gut tells me that there are literally trillions of dollars tied to the "official" inflation numbers, so there is a huge incentive to nudge them one way or another, not to mention that no politician likes to be blamed for high inflation.
But if you want to get into it, sure. The inflation numbers are not a fixed basket of goods. They take into account elasticity and shifts the basket to weight less expensive items more as inflation goes up.
For instance, suppose you have only two goods, bread and butter. Bread costs $5 and butter costs $10, and suppose the inflation numbers are based off 50% bread and 50% butter. Now suppose both these prices double. What happens to inflation? The naive response is inflation is 100%. But no, the BLS in its infinite wisdom realizes that if butter doubled, you'd likey consume less of it and opt for more bread! So maybe now the breakdown would be 75% bread and 25% butter, so your basket that cost you $7.5 now costs you $12.5 (0.75 * 10 + 0.25 * 20). Inflation is only 67% compared to 100%. Trillions of dollars of government spending tied to inflation (e.g. pensions, wage increases, etc) has been saved!
In some respects its true, consumption will obviously shift to the cheaper items. But on the other hand, I want a simple objective measure of what increased money supply is doing to the price of goods. I'll figure out myself how much bread and butter I should buy.
So hence, I don't exactly "trust the experts" especially when there is trillions at stake.
But they would never play games right? The BLS is above reproach. What percentage of Americans can name anyone at the BLS or the methodology? Doesn't matter. Obviously the relative importance of Cakes, cupcakes, and cookies is 0.113, shifting from 0.188 just last month. Pretty obvious objective move.
This is not how it works. The weighting is based on the Consumer Expenditure Survey. BLS does not arbitrarily assign the weights. If they change the weighting between butter and bread it's because they found that people were buying more bread in the CES not because they assume that's what will happen.
CPI's methodology is transparent and the data is available if you wish to reproduce it. They aren't playing games with the data. There are all kinds of reasons your personal inflation rate might differ from CPI but it's not because BLS is putting their thumb on the scale to try and show less inflation.
But if you want to get into it, sure. The inflation numbers are not a fixed basket of goods. They take into account elasticity and shifts the basket to weight less expensive items more as inflation goes up.
For instance, suppose you have only two goods, bread and butter. Bread costs $5 and butter costs $10, and suppose the inflation numbers are based off 50% bread and 50% butter. Now suppose both these prices double. What happens to inflation? The naive response is inflation is 100%. But no, the BLS in its infinite wisdom realizes that if butter doubled, you'd likey consume less of it and opt for more bread! So maybe now the breakdown would be 75% bread and 25% butter, so your basket that cost you $7.5 now costs you $12.5 (0.75 * 10 + 0.25 * 20). Inflation is only 67% compared to 100%. Trillions of dollars of government spending tied to inflation (e.g. pensions, wage increases, etc) has been saved!
In some respects its true, consumption will obviously shift to the cheaper items. But on the other hand, I want a simple objective measure of what increased money supply is doing to the price of goods. I'll figure out myself how much bread and butter I should buy.
So hence, I don't exactly "trust the experts" especially when there is trillions at stake.
But they would never play games right? The BLS is above reproach. What percentage of Americans can name anyone at the BLS or the methodology? Doesn't matter. Obviously the relative importance of Cakes, cupcakes, and cookies is 0.113, shifting from 0.188 just last month. Pretty obvious objective move.
https://www.bls.gov/news.release/pdf/cpi.pdf