For CPI Geeks

If you take pleasure in thinking about economic measurement in general and the Consumer Price Index in particular, I urge you to read this lucid short paper [pdf] by Robert McClelland, Chief of the the Division of Price and Index Number Research at the Bureau of Labor Statistics, and John S. Greenlees, a research economist in that division. It’s called “Addressing misconceptions about the Consumer Price Index.” The misconceptions come from people like Kevin Phillips and John Williams.

I admire McClelland and Greenlees’ rigor and drive for objectivity. My worry is that their methods fall short of objectivity, in the sense of a bias-free truth-tracking, because those methods can’t fully capture the added value to consumers from the introduction of new products and the improvements in quality. They’re right that Phillips-types clearly don’t know what they’re talking about. But I’d be interested in their response to the opposite worry: that their measures are too conservative in accounting for gains to consumers and so overestimate inflation and thereby underestimate gains in standards of living.