Britain changes the way economics is taught

Aldon

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Nov 21, 2013
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See the article written in the The Economist here. I'm not an econ major, but as cited in the article, I found this interesting:

"Among the demands are fewer lectures bogged down in detailed maths, and more time discussing important historical thinkers."

Mathematics is the global language for almost every subject out there. Will less math benefit British students on the job market? Most economics majors either go into finance or business, where mathematics skills are essential, and history is... probably not at all. What do you think?

I don't agree that they should make students know historic events/thinkners; they should rather offer more historical courses, and with that, a few benefits along with it. The same goes for the British A-levels.
 
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blankslate

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Jun 16, 2008
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It's not a good idea for them to let up on math.

In recent decades U.S. students have fell to the middle of the pack on math and I would argue that it's one of the things that holds the U.S. economy and job market back.
 

OverVolt

Lifer
Aug 31, 2002
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Its not a big deal we suck at math because our schools suck.

They keep trying to reinvent the wheel on teaching methods. The new one is group learning. Which works in practice alot like the blind and uninformed leading the blinder and uninformeder while the only person in the rooom who knows the material (the teacher) twiddles their thumbs and basks in all the peer to peer learning going on around them.
 

Aldon

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Nov 21, 2013
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The fact that most flee to America increases competition among American graduates. Once they fall to the same level of mathematics, the only thing that makes British graduates different is...nothing at all, therefore chances are slim for employment overseas.
 

1prophet

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Aug 17, 2005
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Its not a big deal we suck at math because our schools suck.

They keep trying to reinvent the wheel on teaching methods. The new one is group learning. Which works in practice alot like the blind and uninformed leading the blinder and uninformed while the only person in the room who knows the material (the teacher) twiddles their thumbs and basks in all the peer to peer learning going on around them.

So why not go back to the wheel that worked?
 

poofyhairguy

Lifer
Nov 20, 2005
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What do you think?

I think it is great. It gives economists the opportunity to actually study what happens when their "best-case" and cleanroom economic maths encounter the real world. The worst thing about economists is that they think society is going to follow some logical, mathematical standard when humans are anything but. Maybe if more go down this path we will get more practical economic policy.

I mean, its not like it is super hard math anyway, just a lot of it. An undergrad engineer comes across harder math than a graduate economist. But engineering results are tied to that math, while economic results have a human element.
 

fskimospy

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Mar 10, 2006
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I think it is great. It gives economists the opportunity to actually study what happens when their "best-case" and cleanroom economic maths encounter the real world. The worst thing about economists is that they think society is going to follow some logical, mathematical standard when humans are anything but. Maybe if more go down this path we will get more practical economic policy.

That's really not what economists think or do at all. When you make a model you put assumptions in it in order to simplify the model to get at the underlying behavior that you're trying to understand better. I'm not aware of any credible economist that thinks that society always behaves according to logical and mathematical standards. The saying you most commonly hear is that the issue is not if a model is right or wrong, as all models are wrong. The question is if a model is useful and provides insight.

I am a big fan of more people studying philosophy and history however, philosophy in particular. Philosophy gives you enormous benefits in how you structure your thinking and arguments, something that's useful no matter what business you're engaged in.
 

poofyhairguy

Lifer
Nov 20, 2005
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That's really not what economists think or do at all. When you make a model you put assumptions in it in order to simplify the model to get at the underlying behavior that you're trying to understand better. I'm not aware of any credible economist that thinks that society always behaves according to logical and mathematical standards. The saying you most commonly hear is that the issue is not if a model is right or wrong, as all models are wrong. The question is if a model is useful and provides insight.

True, but then you see certain economists clinging to models that history has proven simply doesn't work.

Macro economics is based on the essential idea that people are rational actors. That is the simplification that is done to make sense of it all, but there simply aren't enough rules (IMHO) where real life application show that certain assumptions shouldn't be made. By studying history maybe better models that incorporate irrational behavior can be created.
 

fskimospy

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True, but then you see certain economists clinging to models that history has proven simply doesn't work.

I agree that some economists (and people in other professions as well) cling to ideas that have been discredited. I think the overall fuzziness of economics makes it easier to do this than with some other disciplines as well.

Macro economics is based on the essential idea that people are rational actors. That is the simplification that is done to make sense of it all, but there simply aren't enough rules (IMHO) where real life application show that certain assumptions shouldn't be made. By studying history maybe better models that incorporate irrational behavior can be created.

That would be really hard to do, as irrational behavior is kind of inherently unpredictable due to being...well...irrational. If you're trying to make a predictive model, that gets really hard really fast.

An important thing to mention about rationality in economics models is that being 'rational' in that sense is not the same as being 'rational' in the way as the word is normally used. Rationality in economics is more about stability in choices given the same inputs. ie: maybe I like the color blue more than I like the color pink. If presented with a blue shirt and a pink shirt, I choose blue. Under a rational actor model if I were presented with the same choice a second time with everything else held constant a rational actor would once again choose the blue shirt.

But yes, basic rational actor models do not cover the entire scope of human behavior by any means and they have large limitations, which is of course one of the reasons why they are all wrong. Still,
 

poofyhairguy

Lifer
Nov 20, 2005
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I agree that some economists (and people in other professions as well) cling to ideas that have been discredited. I think the overall fuzziness of economics makes it easier to do this than with some other disciplines as well.

That is where history can help- clear up the fuzziness. It would be nice to hear top economists say "well so and so policy didn't work the last times we tried in 1915, 1978, and 2003!" or something like that when they engage in policy debates, rather than just debate the merit of policy. I got some of that in my recent MBA economic courses, but not enough.

That would be really hard to do, as irrational behavior is kind of inherently unpredictable due to being...well...irrational. If you're trying to make a predictive model, that gets really hard really fast.

Maybe, but it is worth doing. I think if you wander over to the marketing side of the hallway you will find a wealth of knowledge on when people act irrationally, why people act irrationally, and how to shape human perception and behavior. I think some of that needs to be pulled into Macro-economics. The future of the field is one that is less hard science and more sociology.
 

fskimospy

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Mar 10, 2006
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That is where history can help- clear up the fuzziness. It would be nice to hear top economists say "well so and so policy didn't work the last times we tried in 1915, 1978, and 2003!" or something like that when they engage in policy debates, rather than just debate the merit of policy. I got some of that in my recent MBA economic courses, but not enough.

Maybe, but it is worth doing. I think if you wander over to the marketing side of the hallway you will find a wealth of knowledge on when people act irrationally, why people act irrationally, and how to shape human perception and behavior. I think some of that needs to be pulled into Macro-economics. The future of the field is one that is less hard science and more sociology.

Well if people act 'irrationally' in consistent ways like with marketing, that's actually accounted for in 'rational actor' modeling. (which encompasses a lot of different types of models) That's what I meant about the difference between the common use of the word rational and the modeling use of the word rational. Rationality in models is much more about stability in choices given inputs.
 

piasabird

Lifer
Feb 6, 2002
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It is true that a lot of Algebra is used to determine things like Risk and ratios for things like revenue, profit, and dividends, you should at least know how that information is created in theory. However, It seems you could put in the data to arrive at the results. There are programs and reports that figure out the ratios for you. You still need to know how to interpret these ratios and if that is an indication of a good or bad stock. Still all these figures are past data and don't show real future performance.
 

Spungo

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Jul 22, 2012
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Economics really does need to move away from math and more toward understanding the general concepts of economics and common sense. Example: wtf is the federal reserve doing? Bernanke and Yellen both have graduate degrees, but both of them are idiots. Both of them openly admit they did not see a housing bubble. It's totally normal for housing prices to go up 10-20% every year forever. No amount of math can help you if you're working with the assumption that real estate can't possibly go down in price. Bernanke said that on TV when Maria Bartiromo asked him about the possibility of there being a real estate bubble back around 2005. Janet Yellen was recently asked if she thinks the current market is a bubble and she said no. This is the most obvious bubble in the history of the world, possibly worse than tulip mania and beanie babies. Twitter has a market cap over 21 billion dollars even though the company has never been profitable. Bubble? What bubble? How does economics work? Durrrrr.

It appears to be a systemic problem because many economists seem absolutely clueless when it comes to understanding the economy. Less than a month ago, Nobel Prize winner Eugene Fama said that he thought the federal reserve trying to sell trillions of dollars of US treasuries on the secondary market would be a "neutral event." Let's forget everything we know about economics and approach this using common sense. The fed has purchased trillions of dollars of US treasuries in order to keep the interest rates low. If buying treasuries lowers the interest rate, what should happen when the fed sells treasuries? If you're not completely retarded, you would predict interest rates going through the roof. If you're a Nobel Prize winning economist, you'll claim that flooding the market with treasuries has no effect on interest rates.
http://www.businessinsider.com/fama-to-santelli-qe-is-a-neutral-event-2013-10

The degree of this disconnect can be seen by looking at how much money economists in academia have then compare that to what super rich people believe. If a person has a firm understanding of economics, their investments should reflect this.
Marc Faber - worth hundreds of millions of dollars - Austrian school
Jim Rogers - worth hundreds of millions of dollars - Austrian school
Porter Stansberry - worth hundreds of millions of dollars - Austrian school
Peter Schiff - ballpark of 50-100 million dollars - Austrian school
Paul Krugman - won a Nobel Prize in economics, writes a snarky blog for a living - Keynesian school
Eugene Fama - won a Nobel Prize in economics, doesn't understand interest rates - who the fuck knows what school he belongs to.
Ben Bernanke - has a PhD in economics, didn't see a housing bubble - Keynesian school
Janet Yellen - has a PhD in economics, didn't see the housing bubble or the current stock bubble - Keynesian economics

If this isn't enough, go to youtube and search for "modern monetary theory."
Basically it's the theory that you can print unlimited amounts of money and it has no negative consequences. America's 100-200 trillion dollars worth of unfunded liabilities are not a problem because we can print the money into existence. Increasing the money supply by a factor of 20 won't cause inflation or anything. Just ask the people in Zimbabwe or Yugoslavia.
 

fskimospy

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Mar 10, 2006
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The degree of this disconnect can be seen by looking at how much money economists in academia have then compare that to what super rich people believe. If a person has a firm understanding of economics, their investments should reflect this.
Marc Faber - worth hundreds of millions of dollars - Austrian school
Jim Rogers - worth hundreds of millions of dollars - Austrian school
Porter Stansberry - worth hundreds of millions of dollars - Austrian school
Peter Schiff - ballpark of 50-100 million dollars - Austrian school
Paul Krugman - won a Nobel Prize in economics, writes a snarky blog for a living - Keynesian school
Eugene Fama - won a Nobel Prize in economics, doesn't understand interest rates - who the fuck knows what school he belongs to.
Ben Bernanke - has a PhD in economics, didn't see a housing bubble - Keynesian school
Janet Yellen - has a PhD in economics, didn't see the housing bubble or the current stock bubble - Keynesian economics

And yet in the years after the housing bubble if you had invested according to the Austrian school you would have lost your shirt and if you invested according to the Keynesian school you would have made a great deal of money.

The Austrian school has been wrong about gold, wrong about inflation, wrong about the reallocation of resources, wrong about a treasury collapse, etc, etc. In fact it's hard to find a single thing that the Austrians haven't gotten wrong in the last five years.

Combined I seriously cannot think of a single school of economics that has been more completely discredited than the Austrian school. It's a religion trying to pretend its economics. I imagine this is why you keep coming to thread after thread talking about it even though you've been unable to refute the numerous criticisms levied against it.
 

Spungo

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Jul 22, 2012
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And yet in the years after the housing bubble if you had invested according to the Austrian school you would have lost your shirt and if you invested according to the Keynesian school you would have made a great deal of money.
Schools of thought don't draw specific conclusions about what to buy or sell. Schiff said he was bullish on commodities in addition to stocks that are priced in something other than US dollars (I guess that would explain why his company is called EuroPacific). Those are pretty solid bets since almost every asset class has seen tremendous gains since the great crash. He was pimping gold extra hard because he happens to run a company that sells gold. Stansberry runs a research company that mostly has American clients, so his investments are mostly American stocks. He has been bullish on certain types of companies that are involved in the shale oil boom. I'm not sure what Marc Faber is buying right now, but it probably includes a lot of gold. Gold is super cheap right now. Jim Rogers said he was big on commodities, especially agriculture.


The Austrian school has been wrong about gold, wrong about inflation, wrong about the reallocation of resources, wrong about a treasury collapse, etc, etc. In fact it's hard to find a single thing that the Austrians haven't gotten wrong in the last five years.
Actually the Austrians were right about inflation. Inflation first shows up in asset prices before it shows in other prices. This is why housing prices are at their pre-crash peaks even though household income is way down. The Chinese see the writing on the wall and are placing their bets accordingly. They've officially announced that will no longer buy US debt, and they've been importing very large amounts of gold for the past few years. They seem to think a US currency crisis is around the corner.


Combined I seriously cannot think of a single school of economics that has been more completely discredited than the Austrian school. It's a religion trying to pretend its economics. I imagine this is why you keep coming to thread after thread talking about it even though you've been unable to refute the numerous criticisms levied against it.
Being discredited is why they give Nobel Prizes for classical economics, right?
Friedrich Hayek - 1974
Milton Friedman - 1976
James Buchanan - 1986
Vernon Smith - 2002
Edward Prescott - 2004
 

fskimospy

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Mar 10, 2006
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Schools of thought don't draw specific conclusions about what to buy or sell. Schiff said he was bullish on commodities in addition to stocks that are priced in something other than US dollars (I guess that would explain why his company is called EuroPacific). Those are pretty solid bets since almost every asset class has seen tremendous gains since the great crash. He was pimping gold extra hard because he happens to run a company that sells gold. Stansberry runs a research company that mostly has American clients, so his investments are mostly American stocks. He has been bullish on certain types of companies that are involved in the shale oil boom. I'm not sure what Marc Faber is buying right now, but it probably includes a lot of gold. Gold is super cheap right now. Jim Rogers said he was big on commodities, especially agriculture.

He said to get away from dollar denominated assets because the dollar would weaken. Instead, the dollar has strengthened vis a vis most major currencies over the last five years. (for example it was about 1.5 to the Euro in 2009, now it is 1.35.)

Gold is 'super cheap' right now because it has lost about a third of its value over the last two years. Blackberry stock was/is super cheap too, by this logic. Not only has gold come nowhere close to what Schiff predicted it would, it has lost hugely.

Again, he made concrete predictions about what would happen. Not only were those predictions wrong, the OPPOSITE happened.

Actually the Austrians were right about inflation. Inflation first shows up in asset prices before it shows in other prices. This is why housing prices are at their pre-crash peaks even though household income is way down. The Chinese see the writing on the wall and are placing their bets accordingly. They've officially announced that will no longer buy US debt, and they've been importing very large amounts of gold for the past few years. They seem to think a US currency crisis is around the corner.

More false information. US median income is currently somewhere around 6% below its pre-crisis peak.

http://www.nytimes.com/2013/08/22/u...rises-but-is-still-6-below-its-2007-peak.html

Median housing prices are still about 15% below their pre-crisis peak as of the same time period.

http://www.mortgagenewsdaily.com/08262013_lps_hpi.asp


As for inflation, this is literally just sticking your head in the sand. It has been half a decade now and US inflation has been very tame. Inflation 'shows up first' in asset prices? How long until the US economy proper sees inflation then? How many decades are we going to have to wait? Again, Austrians made very specific, concrete predictions about when the US would experience major inflation. They were wrong. They are on the record saying these wrong things. You can't scrub history.

This is what I mean about Austrian economics being a religion. We have massive amounts of evidence as to the state of inflation in the US, and it unequivocally says that inflation has been low. The Austrians just put their heads in the sand and declare that inflation is just around the corner. The fact that they have been declaring this consistently and wrongly for half a decade does nothing to dent their faith that it's going to happen sooner or later.

When you make predictions that are wrong, the right answer is to look at why you were wrong and change your thinking. Instead, Austrians declare it's a government conspiracy. Why? Because their economics are faith based and can't withstand being wrong.

Being discredited is why they give Nobel Prizes for classical economics, right?
Friedrich Hayek - 1974
Milton Friedman - 1976
James Buchanan - 1986
Vernon Smith - 2002
Edward Prescott - 2004

lol. Your previous post derided people who won the Nobel Prize, now you attempt to use it as a source of authority. My statement for Austrian economics being discredited is that its predictions have been wrong.
 

OverVolt

Lifer
Aug 31, 2002
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We are probably up a creek without a paddle in terms of economic theory because none of the Keynesian quantitative models saw 2008 happening, and QE isn't working so doesn't that prove Keynesian economics wrong too?

Keynesian economics worked relevant to its era, after the great depression 1930's belt tightening, it was just what the country needed. Today not so much.

Economics IS faith based to a degree, there is nothing backing the money. Lol...

Austrian is probably wrong overall too, I don't really know. I just think they are spot on wrt to market bubbles, shortages and surpluses as a result of price controls, etc.
 
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Atreus21

Lifer
Aug 21, 2007
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As for inflation, this is literally just sticking your head in the sand. It has been half a decade now and US inflation has been very tame. Inflation 'shows up first' in asset prices? How long until the US economy proper sees inflation then? How many decades are we going to have to wait? Again, Austrians made very specific, concrete predictions about when the US would experience major inflation. They were wrong. They are on the record saying these wrong things. You can't scrub history.

What's your metric for measuring inflation?
 

Doppel

Lifer
Feb 5, 2011
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Next time England uses the words Maths with the s on the end I am launching a full air strike against the capital.
 

Spungo

Diamond Member
Jul 22, 2012
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What's your metric for measuring inflation?
ipads. Things like food and energy are not factored in because they're too unstable. Healthcare is getting more expensive, so that too is unstable. By the time every "unstable" good has been removed, you're left with a CPI that looks at the price of ipads and cell phones.

I'll let someone else explain it
http://swampland.time.com/2012/12/1...lation-formula-the-secret-to-a-deficit-deal/\
The “chained” index, instituted in 2002, more heavily weighs consumers’ tendency to substitute which goods they’re buying when prices change.

For example: If the cost of cashews skyrockets, people might plop peanuts in their grocery baskets. If the price of steaks rises faster than the price of poultry, a household might eat more chicken. The chained index accounts for this by linking monthly data together rather than using a biennial estimate of which goods and services are being purchased, like the CPI-W does.

So why would using chained CPI reduce the deficit? It grows more slowly—by about 0.3 percentage points annually–than traditional CPIs according to the Congressional Budget Office. That means cost-of-living adjustments for programs like Social Security would increase more slowly.
So basically the government uses apples to oranges comparisons and other statistical fuckery so they can default on unfunded pension liabilities without admitting it. Peanuts are the same price today as cashews were yesterday, therefore there is no inflation. A Cadillac Escalade last year and a Honda Civic this year are the same price but they're both motor vehicles therefore there is no inflation. A cheap Timex watch this year is the same price as a Patek Philippe last year, therefore there is no inflation. For the rare times when they do use apples to apples numbers, things are oddly weighted. At a time when the average minimum wage employee is 28 years old and a very high percentage of Americans are below the official poverty line, BLS still assumes every American has the newest iPad or the latest iPhone or they recently purchased a new $2,000 high end gaming computer. These weird assumptions about Americans have limitless disposable income end up putting far more weight on deflationary items related to technology while putting less weight on highly inflationary items such as food, energy, education, and healthcare. This is why the 1980 method of calculating inflation comes up with a number much closer to 10%. People in 1980 were spending their money on food and energy, just like modern poor people. People in 1980 did not benefit from things like dropping prices for $600 phones, just like modern day poor people. The official modern day CPI is probably accurate if you're a 1%er who buys a new iPad every year and owns a ton of tech gadgets. For the majority of Americans who struggle to get by each month, the 1980 inflation method is probably a lot more accurate.
 

fskimospy

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Mar 10, 2006
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ipads. Things like food and energy are not factored in because they're too unstable. Healthcare is getting more expensive, so that too is unstable. By the time every "unstable" good has been removed, you're left with a CPI that looks at the price of ipads and cell phones.

I'll let someone else explain it
http://swampland.time.com/2012/12/1...lation-formula-the-secret-to-a-deficit-deal/\

So basically the government uses apples to oranges comparisons and other statistical fuckery so they can default on unfunded pension liabilities without admitting it. Peanuts are the same price today as cashews were yesterday, therefore there is no inflation. A Cadillac Escalade last year and a Honda Civic this year are the same price but they're both motor vehicles therefore there is no inflation. A cheap Timex watch this year is the same price as a Patek Philippe last year, therefore there is no inflation. For the rare times when they do use apples to apples numbers, things are oddly weighted. At a time when the average minimum wage employee is 28 years old and a very high percentage of Americans are below the official poverty line, BLS still assumes every American has the newest iPad or the latest iPhone or they recently purchased a new $2,000 high end gaming computer. These weird assumptions about Americans have limitless disposable income end up putting far more weight on deflationary items related to technology while putting less weight on highly inflationary items such as food, energy, education, and healthcare. This is why the 1980 method of calculating inflation comes up with a number much closer to 10%. People in 1980 were spending their money on food and energy, just like modern poor people. People in 1980 did not benefit from things like dropping prices for $600 phones, just like modern day poor people. The official modern day CPI is probably accurate if you're a 1%er who buys a new iPad every year and owns a ton of tech gadgets. For the majority of Americans who struggle to get by each month, the 1980 inflation method is probably a lot more accurate.

You seriously have no idea what you're talking about. This isn't a difference of opinions about established facts, you just have (once again) objectively wrong facts.

- Food and energy are included in CPI. There are some specific CPI calculations such as core CPI that eliminate them, but they are included in the overall CPI.

- The basket of goods that is included in CPI includes products across all categories. The idea that it's simply measuring low inflation items is obviously, provably false.

- CPI does not include substitution across categories within the same product (ie: you can't substitute a Honda for a Cadillac)

I could go on.

I strongly urge you to educate yourself about CPI using these three links:

CPI FAQ:
http://www.bls.gov/cpi/cpifaq.htm

Common misconceptions about CPI:
http://www.bls.gov/cpi/cpiqa.htm

Chained CPI FAQ:
http://www.bls.gov/cpi/cpisupqa.htm

If you are interested in a more thorough demolition of the people who are attempting to trick easily misled people, read this:

http://www.bls.gov/opub/mlr/2008/08/art1full.pdf
 

Capt Caveman

Lifer
Jan 30, 2005
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eskimospy, you're talking to a high school or colllege student who's clueless. Not even worth the effort.
 

Atreus21

Lifer
Aug 21, 2007
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CPI and MIT's Billion Price Index.

From what I've heard the CPI is completely manipulated.

Don't know much about the billion price index.

What other metrics could we use? I know using the price of printing money over time clearly shows an inflationary trend.
 
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fskimospy

Elite Member
Mar 10, 2006
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From what I've heard the CPI is completely manipulated.

Don't know much about the billion price index.

What other metrics could we use? I know using the price of printing money over time clearly shows an inflationary trend.

You have heard wrong. If you have questions about it I highly suggest you read the links a few posts up.

The billion price index is a completely independent measure of inflation calculated by MIT. It tracks very closely with CPI. So not only is CPI credible, it is independently verified.

There are a lot of conspiracy theories out there about how CPI is manipulated, but this is basically the last resort of people who are trying to find some way to claim their economic predictions weren't wrong.