Inflation, How Does it Work?

[Latrinsorm]

crb recently made the claim that higher education and health care have increased faster than inflation because we spend other peoples' money to get them. I thought that was an interesting hypothesis, so I have tested it.

One problem is that what was measured by the BLS in 1913 is not always what is measured today. However, I have found one
report (http://www.bls.gov/opub/mlr/2014/article/pdf/one-hundred-years-of-price-change-the-consumer-price-index-and-the-american-inflation-experience.pdf) that uses consistent items over many years, which is exactly what we want. From 1913 to 1987, records were kept for potatoes, rice, white bread, round steak, and butter. These items saw annualized inflation rates of 3.14%, 2.16%, 3.19%, 3.54%, and 2.36%. The overall annualized inflation rate from 1913 to 1987 was in fact 3.35% (http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=1&year1=1913&year2=1987
), so there are two takeaways here. First, it is possible for an item to experience higher than average inflation without being subsidized by government loans et al, because that in fact happened. Second, it is possible for one unsubsidized item to experience inflation higher than another by a pretty impressive degree at 3.54% to 2.16%.

We can extend this analysis to categories, and most usefully for the period 1951-2013. In that time, sustained categories include food, rent, apparel, medical care, and gasoline. They saw annualized inflation rates of 3.48%, 3.52%, 1.73%, 5.45%, and 4.56% compared to an overall rate of 3.64%. Again, we see that it is a fact that medical care has outstripped inflation, but so has gasoline, and we certainly buy gasoline with our own money. We also see a gap between apparel and food nearly as large as between food and medical care, and obviously if we are going to reduce the latter to using other peoples' money we cannot do so for the former.

Thus it is inarguably the case that subsidization is not necessary for above average inflation. To establish if it is sufficient, I looked into cars as I suggested to crb at the time. Unfortunately the BLS used "transportation" for most of our history and only switched to "new car" in 1983, but in each case the category does not exceed average: 1.3 to 2.9 from 1983-2013 and 4.7 to 4.7 from 1941-1983 (to be more precise, 4.671 to 4.676).

.

Spending other peoples' money is neither necessary nor sufficient to produce higher than average inflation. This is a fact. There must therefore be some other explanation for why medical and college prices have increased so dramatically.

[Tgo01]

There must therefore be some other explanation for why medical and college prices have increased so dramatically.

http://weknowmemes.com/wp-content/uploads/2012/05/i-got-kicked-out-of-howarts-for-using-black-magic.jpg

I just wanted a pic that said "Magic" on it but I couldn't pass up posting that pic when I saw it.

[Jarvan]

Not an economist obviously, but I would think there are a lot of factors that go into these types of things. The fact that Medical care and Gasoline are both finite resources, and the fact that most of our apparel is made overseas at incredibly reduced cost compared to farming here in the US, would play a roll.

As for round steak being so high compared to the others, not really sure. Maybe the fact more people started eating meat on a regular basis had something to do with it. I would say prior to the 50's, a good portion of America only ate meat when they had it, and couldn't easily obtain it.

Sometimes, I can't really understand how they get their numbers. For example, butter 4 years ago.. I could get for 2 bucks a pound. Now it's 3 per pound on sale. 50% increase in 4 years would seem to be 25% per year. Ground beef in my area used to be 3$ a pound, at 85% lean, now it's 5.49. Lebanon bologna used to be 4.98 a pound, now it 7.99. btw.. that was 3 months ago.

I would somewhat agree about education. Colleges know they can charge more and more for their tuition because of A) Everyone is told they HAVE to go to school to have a good job and "make it" in this country. B) People don't take out personal loans for college anymore. C) parents generally don't save up for their child's education anymore, knowing they can always have them get a loan. But where does the money the government loans the kids come from?

[~Rocktar~]

You make a large number of assumptions in your post Latrin. Primary and most glaring among them are that none of those categories received federal intervention. For almost all of the items you mention, there has been Federal intervention in their pricing through the years. These interventions have used among other things, taxes, price supports, subsidies and rationing. So, while you have some nice numbers there, your underlying foundation is incorrect so your conclusion is not completely accurate. It is accurate to say that it is not necessary to spend other people's money to cause above average inflation. It may not be accurate to say that it is not a sufficient cause by it's self to drive above average inflation.

[Wrathbringer]

crb recently made the claim that higher education and health care have increased faster than inflation because we spend other peoples' money to get them. I thought that was an interesting hypothesis, so I have tested it.

One problem is that what was measured by the BLS in 1913 is not always what is measured today. However, I have found one
report (http://www.bls.gov/opub/mlr/2014/article/pdf/one-hundred-years-of-price-change-the-consumer-price-index-and-the-american-inflation-experience.pdf) that uses consistent items over many years, which is exactly what we want. From 1913 to 1987, records were kept for potatoes, rice, white bread, round steak, and butter. These items saw annualized inflation rates of 3.14%, 2.16%, 3.19%, 3.54%, and 2.36%. The overall annualized inflation rate from 1913 to 1987 was in fact 3.35% (http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=1&year1=1913&year2=1987
), so there are two takeaways here. First, it is possible for an item to experience higher than average inflation without being subsidized by government loans et al, because that in fact happened. Second, it is possible for one unsubsidized item to experience inflation higher than another by a pretty impressive degree at 3.54% to 2.16%.

We can extend this analysis to categories, and most usefully for the period 1951-2013. In that time, sustained categories include food, rent, apparel, medical care, and gasoline. They saw annualized inflation rates of 3.48%, 3.52%, 1.73%, 5.45%, and 4.56% compared to an overall rate of 3.64%. Again, we see that it is a fact that medical care has outstripped inflation, but so has gasoline, and we certainly buy gasoline with our own money. We also see a gap between apparel and food nearly as large as between food and medical care, and obviously if we are going to reduce the latter to using other peoples' money we cannot do so for the former.

Thus it is inarguably the case that subsidization is not necessary for above average inflation. To establish if it is sufficient, I looked into cars as I suggested to crb at the time. Unfortunately the BLS used "transportation" for most of our history and only switched to "new car" in 1983, but in each case the category does not exceed average: 1.3 to 2.9 from 1983-2013 and 4.7 to 4.7 from 1941-1983 (to be more precise, 4.671 to 4.676).

.

Spending other peoples' money is neither necessary nor sufficient to produce higher than average inflation. This is a fact. There must therefore be some other explanation for why medical and college prices have increased so dramatically.

Because when the government is picking up the tab, there's no better time to raise prices. I would.

[Thondalar]

As much as I hate to agree with Latrin on anything, I have to give him just a little bit of credit here. Although there are a lot of contributing factors he hasn't controlled for, and I firmly believe he wholly missed the intent of CRB's post, he stumbled on to something. The issue in both cases is more to what Rocktar was getting at...Central Planning meddling has irrevocably corrupted both processes. Education and Healthcare...is there anything more fondled by the Feds? I don't think so. This legislature goes this way, that administration goes that way...the US Department of Education, Founded by good ol' Jimmy Carter in 1979...what has it accomplished? Are our children more educated, based on any measurable standard, than before it was founded? Why do we give billions to a government entity with no measurable success? Why do we subsidize colleges that charge exorbitant rates? Why do we subsidize healthcare that is, by global standards, way too expensive? Why do we allow insurance companies to dictate healthcare costs, and then, not only allow them, but force people to buy in to it?

So many questions...

[ClydeR]

If a product is better today than it was 20 years ago, then shouldn't its price today reflect a premium? Medical care is much better than it was 20 years ago. Cars are too, but the manufacturing process for cars is more efficient today than it was 20 years ago, and cars are subject to international competition, much of it from places where the currency is not the U.S. dollar. I don't think medical care has experienced the same improvements in efficiency or been exposed to international competition. Higher quality and better outcomes explain why the cost of medical care has increased faster than the rate of inflation. I've been reading Piketty's "Capital" book. He makes the same point about smart phones. The rate at which the price of smart phones has increased is not a pure measure of the rate of inflation in the cost of smart phones, because smart phones today are much better than those of a few years ago. You can compare the cost of today's potatos and butter to prior years without making quality adjustments. Not so for medical care.

[Ker_Thwap]

Spending other peoples' money is neither necessary nor sufficient to produce higher than average inflation. This is a fact. There must therefore be some other explanation for why medical and college prices have increased so dramatically.

Convert those two sentences into logical expressions. Just for giggles.

[Thondalar]

If a product is better today than it was 20 years ago, then shouldn't its price today reflect a premium? Medical care is much better than it was 20 years ago. Cars are too, but the manufacturing process for cars is more efficient today than it was 20 years ago, and cars are subject to international competition, much of it from places where the currency is not the U.S. dollar. I don't think medical care has experienced the same improvements in efficiency or been exposed to international competition. Higher quality and better outcomes explain why the cost of medical care has increased faster than the rate of inflation. I've been reading Piketty's "Capital" book. He makes the same point about smart phones. The rate at which the price of smart phones has increased is not a pure measure of the rate of inflation in the cost of smart phones, because smart phones today are much better than those of a few years ago. You can compare the cost of today's potatos and butter to prior years without making quality adjustments. Not so for medical care.

This post is why you will always be the laughing stock of PC.

[Androidpk]

This post is why you will always be the laughing stock of PC.

Yeah? I thought it was because of his latrin handle posts.

[Thondalar]

Yeah? I thought it was because of his latrin handle posts.

Ya'll give Latrin some shit, but logically, he rarely has an unsound argument...he's just supremely misguided in what he thinks the data he sees actually means.

Whether ClydeR is Latrin or not, I don't really care...personally, I think their syntax is completely incompatible...it would take a lot of effort for someone to be both of those people without some sort of seriously dichotomistic personality disorder that even they aren't aware of.

[Androidpk]

Ya'll give Latrin some shit, but logically, he rarely has an unsound argument...he's just supremely misguided in what he thinks the data he sees actually means.

Whether ClydeR is Latrin or not, I don't really care...personally, I think their syntax is completely incompatible...it would take a lot of effort for someone to be both of those people without some sort of seriously dichotomistic personality disorder that even they aren't aware of.

Well latrin does have a mental disorder..

[Tgo01]

Ya'll give Latrin some shit, but logically, he rarely has an unsound argument...he's just supremely misguided in what he thinks the data he sees actually means.

Whether ClydeR is Latrin or not, I don't really care...personally, I think their syntax is completely incompatible...it would take a lot of effort for someone to be both of those people without some sort of seriously dichotomistic personality disorder that even they aren't aware of.

I wish I saved the post but I do remember reading one post by Latrin that made me think "Holy shit, he is ClydeR!"

It wasn't like a slip up or anything like that, like he was doing his ClydeR schtick on Latrin, but it was just the feel of the post that screamed "I AM CLYDER MOTHER FUCKERS!"

Also one time Kranar hinted that ClydeR has another account on here and kind of gave the impression it was a regular user. He didn't come right out and say these things but one time he wanted to make a bet with PB to prove he (Kranar) wasn't ClydeR and at one point he said something like "I'm not going to say who ClydeR is, I'm not going to give away their anonymity."

To me that was saying ClydeR wasn't just some troll that wandered onto our boards one day and it was in fact someone who posts here on a somewhat regular basis. At least not someone who hasn't posted on their main account in years or anything.

[Androidpk]

Oh come on.. I can't be the only one that sees it. It's so blatantly obvious.

[Tgo01]

Oh come on.. I can't be the only one that sees it. It's so blatantly obvious.

That Latrin = ClydeR?
That Kranar = ClydeR?
That ??? = ClydeR?

Stop counting your SimuCoins and be less vague!

[Androidpk]

Latrin IS clyde.

[Jarvan]

That Latrin = ClydeR?
That Kranar = ClydeR?
That ??? = ClydeR?

Stop counting your SimuCoins and be less vague!

He is being vague so he can later say. "See, I knew it was him. I said I knew it was obvious way back when!"

[Androidpk]

He is being vague so he can later say. "See, I knew it was him. I said I knew it was obvious way back when!"

I've only said latrin was clyde about a hundred times before.

[Tgo01]

Latrin IS clyde.

I suppose their posting style could be a coincidence or that ClydeR purposefully modeled his posting style after Latrin's (or vice versa) but yes, after that initial DUH! moment it becomes more clear.

Just look at some of the shit they say. Like ClydeR will be posting some nonsense then will say some smart ass aside, like saying (making this up as example) "The BBB or Better Business Bureau (not to be confused with Blood Brain Barrier)..."

Latrin has a lot of smart ass asides like that too.

[Warriorbird]

I suppose their posting style could be a coincidence or that ClydeR purposefully modeled his posting style after Latrin's (or vice versa) but yes, after that initial DUH! moment it becomes more clear.

Just look at some of the shit they say. Like ClydeR will be posting some nonsense then will say some smart ass aside, like saying (making this up as example) "The BBB or Better Business Bureau (not to be confused with Blood Brain Barrier)..."

Latrin has a lot of smart ass asides like that too.

I don't know anybody else who makes those.

[Thondalar]

Ok, as much as I would like to buy in to the Latrin/Clyde bandwagon, it's simply not so.

The ONLY way it would be possible is if Latrin had legit dissociative identity disorder and Clyde was his "other self".

Sorry.

[Gelston]

Pk is ClydeR.

[Thondalar]

Pk is ClydeR.

Oddly enough, that would be more likely than Latrin.

[Tgo01]

I don't know anybody else who makes those.

If you're alluding to me then yes, Tgo01 = Latrin = ClydeR. I thought everyone knew this.

[Androidpk]

Oddly enough, that would be more likely than Latrin.

...

[Thondalar]

...

lol.

[waywardgs]

Oddly enough, that would be more likely than Latrin.

What you're really saying is that you agree with Latrin about weed and psychosis!!!

[Thondalar]

What you're really saying is that you agree with Latrin about weed and psychosis!!!

What? I thought I made myself abundantly clear on that particular topic...as someone who has been diagnosed with "clinical psychosis" before I ever met weed...as a matter of fact, anecdotal as it is...it's a consideration Latrin didn't touch on...what about those of us who already suffered from the psychosis weed is "supposed to" cause, but yet use weed to alleviate those symptoms? Where is your data on that, Mr. Data?


edit: I was 11 when I met my first psychiatrist...didn't start smoking weed 'till I was 14.

[waywardgs]

What? I thought I made myself abundantly clear on that particular topic...as someone who has been diagnosed with "clinical psychosis" before I ever met weed...as a matter of fact, anecdotal as it is...it's a consideration Latrin didn't touch on...what about those of us who already suffered from the psychosis weed is "supposed to" cause, but yet use weed to alleviate those symptoms? Where is your data on that, Mr. Data?


edit: I was 11 when I met my first psychiatrist...didn't start smoking weed 'till I was 14.

It was a convoluted joke. If pk is Clyde, and anyone who is also Clyde must have some kind of psychosis, and PK smokes weed, then Latrin was right.

[Thondalar]

It was a convoluted joke. If pk is Clyde, and anyone who is also Clyde must have some kind of psychosis, and PK smokes weed, then Latrin was right.

But neither PK nor Latrin are Clyde.

[waywardgs]

But neither PK nor Latrin are Clyde.

Jesus, work with me here. You said pk was more likely to be Clyde than Latrin, I made a convoluted joke and probably not a very good one, and now I'm having to overexplain a passing comment. Lol.

[Androidpk]

It was a convoluted joke. If pk is Clyde, and anyone who is also Clyde must have some kind of psychosis, and PK smokes weed, then Latrin was right.

PK doesn't smoke weed!

[waywardgs]

PK doesn't smoke weed!

What's he do? Talk to it? Cuddle it? Whisper sweet nothings to it?

[Androidpk]

What's he do? Talk to it? Cuddle it? Whisper sweet nothings to it?

PK has not seen any marijuana since last summer.

[Thondalar]

Jesus, work with me here. You said pk was more likely to be Clyde than Latrin, I made a convoluted joke and probably not a very good one, and now I'm having to overexplain a passing comment. Lol.

What you feel you have to do, and what you actually have to do, are two completely different things. Neither PK nor Latrin are ClydeR. Anything beyond that is superfluous.

[Latrinsorm]

This got off track kind of quickly.
You make a large number of assumptions in your post Latrin. Primary and most glaring among them are that none of those categories received federal intervention. For almost all of the items you mention, there has been Federal intervention in their pricing through the years. These interventions have used among other things, taxes, price supports, subsidies and rationing. So, while you have some nice numbers there, your underlying foundation is incorrect so your conclusion is not completely accurate. It is accurate to say that it is not necessary to spend other people's money to cause above average inflation. It may not be accurate to say that it is not a sufficient cause by it's self to drive above average inflation.There is certainly government interference in everything, and thus we spend other peoples' money on them to some degree, but I think the degree is sufficiently different for the assumption to be sustainable.
As much as I hate to agree with Latrin on anything, I have to give him just a little bit of credit here. Although there are a lot of contributing factors he hasn't controlled for, and I firmly believe he wholly missed the intent of CRB's post, he stumbled on to something.:D
Founded by good ol' Jimmy Carter in 1979...what has it accomplished? Are our children more educated, based on any measurable standard, than before it was founded?ACT scores are slightly up! There's also changing demographics to consider: whether you think minorities are ill-suited to the tests or the tests are ill-suited to minorities, having a larger relative proportion of minorities should push scores down, so if the scores stay the same that means we're winning.
What? I thought I made myself abundantly clear on that particular topic...as someone who has been diagnosed with "clinical psychosis" before I ever met weed...as a matter of fact, anecdotal as it is...it's a consideration Latrin didn't touch on...what about those of us who already suffered from the psychosis weed is "supposed to" cause, but yet use weed to alleviate those symptoms? Where is your data on that, Mr. Data?Because all the studies I cite are longitudinal (taking multiple measurements of each person over time), they can put people in four groups: psychosis then weed, weed then psychosis, weed and no psychosis, no weed and no psychosis. These groups are then further broken down for any other variable controlled in the study: family history (or not), other drug use (or not), etc. This distinction between longitudinal and cross-sectional is something I've (http://forum.gsplayers.com/showthread.php?90888-What-medicinal-cannabis-can-do-for-you&p=1676495&highlight=longitudinal#post1676495) brought (http://forum.gsplayers.com/showthread.php?90888-What-medicinal-cannabis-can-do-for-you&p=1676939&highlight=longitudinal#post1676939) up (http://forum.gsplayers.com/showthread.php?90888-What-medicinal-cannabis-can-do-for-you&p=1696108&highlight=longitudinal#post1696108) many (http://forum.gsplayers.com/showthread.php?90888-What-medicinal-cannabis-can-do-for-you&p=1707727&highlight=longitudinal#post1707727) times (http://forum.gsplayers.com/showthread.php?91800-Ferguson-Guns-and-Cameras&p=1723355&highlight=longitudinal#post1723355).

[Tgo01]

PK has not seen any marijuana since last summer.

Depends on what your definition of "is" is.

[subzero]

So, the Patriots seem to not quite understand inflation. Latrin does not understand inflation. Is Latrin really Bill Belichick? Maybe a ball-boy or Tom Brady himself?

It's fairly simple, really. You take an object, fill it with a gas, and boom (well, not in the literal sense unless you over-inflate)! Inflation.

[Androidpk]

Depends on what your definition of "is" is.

What is "is"?

[Atlanteax]

Latrin does not understand inflation because it is magical in nature.

[Latrinsorm]

Latrin does not understand inflation because it is magical in nature.My coven and I are very well versed in magick, thanks.

[Candor]

My coven and I are very well versed in magick, thanks.

Why does not that surprise me...