Re: oops, again

[Daniel Davies <dsquared@xxxxxxxxxxxxxxxx>]

In my limited understanding, there are two capture issues here (my missus
used to work in statistics, but every time I ask her, she keeps talking
about some plants I haven't watered or something).

1.  Doug is entirely right, in principle, that if a service which used to be
free is now paid for, that is the sort of thing that the CPI people would be
interested in.  On the other hand, no statistical body on earth has the
resource to monitor the proliferation of mobile phone payment plan options;
even the consumer press gets confused on this one regularly.  So what they
do is either a) take the plain vanilla tariff option and look for changes in
that, b) take a sampling of the tariffs on offer and guesstimate or, most
often, c) a mixture of a) and b), mostly a) but having a look at b) every
now and then in the hope that that it won't be too far out of line.

Note that this would probably give you a decent estimate of the overall
economy-wide average price of mobile phone services, because you would often
miss the funky fees they started adding on, but you would also miss the
superduper discount plans that they put forward to preferred customers and
the two would quite likely cancel out.  On the other hand, note that this
would mean that the CPI would systematically overstate the cost of living
the life of a rich person but underestimate the cost of being poor, which is
a known problem of RPI and related statistics.

2.  There are also, on the other hand, the "late payment" fees that
companies often tack on to bills.  It would be pretty unusual for these to
be part of any price index, since at least in principle, they are not
transactions between willing parties (the company makes a big show of not
wanting to miss the payment) and in general only willing transactions are
considered to be part of the national economy.  Again, the incidence of
these fees falls on two groups, a) the poor and b) the terminally
disorganised.

3.  Also, in order to be part of a big aggregate index like CPI, something
has to be reasonably widely consumed in the economy in order to make it
worth while collecting the statistics.  That means that hire-purchase fees
are almost certainly in there (so the financing deals on SUVs will show up
as falling prices), but check-cashing services and payday loans probably
aren't.  In general, financial services have a surprisingly low weighting in
RPIX and HICP and I would imagine that they did in CPI too.  Statistics bods
tend to hate financial services because it's so difficult to work out what
the hell the value added is.

best,

dd

-----Original Message-----
From: PEN-L list [mailto:PEN-L@xxxxxxxxxxxxxxxx]On Behalf Of Doug
Henwood
Sent: 19 July 2004 19:56
To: PEN-L@xxxxxxxxxxxxxxxx
Subject: Re: oops, again


Daniel Davies wrote:

>they wouldn't, necessarily.

Fees most certainly should be included. "Usurious" interest rates
would be difficult to define in a world of 18-21% credit card rates.
And if they're not changing, but just constantly high, it's a
distributional issue, a form of secondary exploitation, but not
really a CPI issue. But a fee added to a service that used to be
free, or an increase in a fee, most certainly should be captured by
the CPI.

Doug