CPI

["Devine, James" <jdevine@xxxxxxx>]

[was: RE: [PEN-L] super-profits]

 

also, the CPI only reflects prices of goods that are sold on the market, despite the fact that standard economics tells us that opportunity costs, not prices, are relevant. If your local public library shuts down, so you have to buy your books, the extra cost isn't recorded. (I had an article in CHALLENGE on this awhile back.)

Jim Devine jdevine@xxxxxxx &  http://myweb.lmu.edu/jdevine

-----Original Message-----
From: PEN-L list [mailto:PEN-L@xxxxxxxxxxxxxxxx]On Behalf Of Jurriaan Bendien
Sent: Wednesday, September 15, 2004 7:17 AM
To: PEN-L@xxxxxxxxxxxxxxxx
Subject: Re: [PEN-L] super-profits

As regards the CPI, it might well be a good synthetic indicator of price inflation, but not necessarily an accurate gauge of the real change in prices for goods and services which workingclass people buy with their salaries. The reason is that the goods and services included in the regimen, and the weightings attached, may not reflect a modal workingclass lifestyle, but rather an "average" household expenditure.

 

Ceteris paribus, the higher the Gini coefficient of income inequality, the lower the probability that the CPI will measure price changes in the range of goods workingclass people buy very accurately. In times of high inflation, several union federations in Europe therefore produced their own CPI as a rival to the official one, espcially when incomes policies linked wage rises to CPI changes.

 

In the USA, if total real disposable income per year is about $8 trillion, a change in the cost of living of 2% makes a difference of $160 billion, which is equal to the disposable annual earnings of 6 million+ workers at a modal wage.

 

Jurriaan

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