Statistical Inflation – Felt Inflation

How to compare commodities and services over time and space.

And because it is so nice, here is the latest reading of the debt clock…

It has been annoying me for a long time to read the inflation rate as officially published. For me, it feels a lot higher. And the numbers I can trivially notice in a time dimension confirm what I feel: for instance, the increase in beer prices at restaurants or the price development of public transportation has been considerably higher than the officially published inflation rate over several years. The same is true for the development of basic prices in Riemerling over the last 50 years.

The basket of commodities and the balance of its content, too, seems unrealistic to me. Moreover, the question arises if products from different times or epochs can be compared with each other at all?

Here are a few examples of commodities where you definitely cannot just go ahead and nominally compare prices (prices then versus prices today):

• Pretzels and rolls made by the baker next door out of his own yeast dough using his own craft with baked goods from Poland that are deep-frozen and delivered, to be simply re-heated before they are sold.
• A TV or radio set with a casing made of real wood and hand-made pipes with a digital plastic or platinum receiver.
• A flight from Germany to the USA on a PanAm airplane in the 1960ies as a special luxury for a few with the flight in economy class of a no-frills airline.
• The car as part of a well-to-do minority with the modern vehicle as almost self-evident part of civilized life.
• Coffee that was roasted at low temperatures on small haciendas and that you could buy fresh in “colonial shops” with coffee produced in Brazil in destructive exploitation, industrially roasted at more than twice the former temperature, dowsed wet and sold at the discounter.
• Chocolate made by the confectioner as a special treat or from the department store in the 1950ies with the mass chocolate sold at ALDI or hand-made confection from the confectionery with that sold in masses at Lidl?
• High-quality leather shoes which were repaired several times by the master craftsman and still being serviceable and looking good due to good maintenance with modern foam plastic insole shoes that you can no longer use after two years, even if you hardly ever wore them?
• The sofa made by the master craftsman which could be freshly upholstered with the IKEA sofa that will inevitable be worn through after a few years and therefore have to be thrown out?
• The bike you bought at the hardware store and which basically should have landed on the rubbish heap new (even if it looks great and perhaps even has an electric motor) with a quality bike manufactured by craftsmen in a small series?
• The lamp you can unscrew and the switcher of which you can exchange with the modern lamp where the switcher has been welded into the plastic body, where damaged means throw-it-away?

I could continue the list. It is the same with food, furniture, tools, toys, even houses.

Just remember how all the 40-to-50-year-old mansions in Riemerling are torn down because it is too expensive to renovate them, yet the really old mansions are more sought after than ever! And the newly built houses already look like you have to be prepared to have to tear them down in 20 years. Because they have no thick brick walls. Instead, they have insulation material between flake boards that already looks like it will crumble tomorrow.

Or let us look at high-tech devices such as mobile phones, computers and their accessories or the communication services. How would anybody be able to compare a conversation held on the good old conventional postal telephone network with a flat rate? How to compare a call on the C net from an “Opel Kapitän” with today’s mobile telephony?  Both the technological and social development makes it absolutely useless to start comparing prices.

Even the calculation is hard to do. If I were to compare a throw-away product with one that can simply be repaired, the repair option would have to be part of the price, just as the life-span. If a product costs the same but has a life-span of 10 years, then it is definitely less expensive than the same product lasting only 5 years. And it is even less expensive if I can repair it with little effort so that it lasts another 10 years.

To be sure, yoghurt sold in plastic containers is probably easier to produce and distribute logistically than yoghurt in the 1960ies was. You could not buy it in any other form than glass with the round carton lid. But should I not also add the price for disposal of the plastic container to the actual price? After all, in the end, I have to pay it in some way, too, even if not at the moment I buy it. With glass yoghurt, these costs (return of empties, cleaning) were included in the original price.

In theory, even the fact that the quality of yoghurt was a lot better 50 years ago should be part of the calculation.
🙂 If, for instance, yoghurt in those days tasted twice as good as yoghurt today (which I am convinced of), then the price of current yoghurt would have to be doubled if the comparison is to be permitted (after all, it only tastes half as good). And then there would have to be an extra charge for container disposal and the environmental damage done by the plastic rubbish.

Even the place of sales would have to be part of the price development calculation: the price for milk (and yoghurt) from the milk shop you used to find everywhere cannot be compared with the price at the supermarket. If you live “in the country”, you probably have to go ten kilometres by car in order to buy your milk. Well, in this case the price of milk may nominally be less at the supermarket, yet the total cost is a lot higher.

At long last, you would have to do without nominal prices and also take the income development into account. But that is something the development of which was very heterogeneous inside our society. For instance, for the mansion and yacht buyers, biological products are really quite cheap today, while it is almost impossible for a policeman or a clerical worker to afford it, depending on how many children they have to feed.

But even without these considerations, the huge majority will feel the current and nominal inflation of the last three years to be a lot higher in relation to their incomes than the official data suggest. And as I see it, the inflation rates as published have no meaning, anyway (how does anybody want to control them?). All they are good for is comforting and lying to the citizens. Well, now tell me something that is news!

RMD
(Translated by EG)