Inflation: Difference between revisions

Claim: when it comes to inflation and growth, Economists don’t even understand the theory of their *own* price and quantity indices mathematically:

6:26 PM · May 12, 2021

Anthony Pompliano

@APompliano

WILD IDEA: Maybe the economists don't actually understand what is going on right now? https://x.com/disclosetv/sta/disclosetv/status/1392488787838742536

6:26 PM · May 12, 2021

The problem of inflation index calculation has not been adequately updated since Ragnar Frisch destroyed Irving Fisher’s attempt to axiomatize economic indices following the last great advances of F. Divisia and A. Konüs on continuous and welfare indices respectively.

6:26 PM · May 12, 2021

Economists are holding their own field back by retaining their freedom to just cook up any revised index they want.

It’s as if physicists retained the right to define temperature differently every year based on a closed door meeting and manufactured new thermometers thereafter.

6:26 PM · May 12, 2021

If you’re going to push us all to move to “true” “economic” indices & chain them to reflect dynamic actors (or to disguise true inflation!), you would end up chaining ordinal preferences. And you can’t do that without gauge theory because it is a problem in parallel transport.

6:26 PM · May 12, 2021

Watch the US CPI revisions and methodology going forward. People who like to print money tend to want to change their definition of inflation and therefore don’t like anyone taking away freedom to make up methodologies to suit their political objectives involving wealth transfer.

6:26 PM · May 12, 2021

Moral: whoever constructs CPI and GDP numbers in a dynamic economy is in a position to fake higher growth and lower inflation if they are also in a position to stop the field from debating methodological advances that would restrict the freedom to make up index number recipes. 🙏

6:27 PM · May 12, 2021

CPI is broken. Why?

Think of CPI as a gauge like a thermometer. You can’t have politically motivated folks making your thermometers or they can change the design to cover up climate change. Likewise you can’t have economists changing the gauge to disguise the effect of printing.

6:52 AM · Jun 15, 2021

sam.frax

@samkazemian

A crypto native CPI governed on the blockchain to create a decentralized stablecoin people can rely on to keep their standard of living the same across time. A true alternative to fiat rather than a speculative investment asset like most other coins.

6:52 AM · Jun 15, 2021

The economists can’t yet compute a dynamic Cost-Of-Living-Adjustment or COLA or “Chained Changing Preference Ordinal Welfare Konus Index” to be perfectly pedantic. Not because it doesn’t exist. But because they don’t have the math and don’t want to lose their finger on the scale.

6:52 AM · Jun 15, 2021

We must take CPI away from those who wish to back out a political agenda of printing money, raising our taxes by indexed tax brackets and slashing our indexed social security & Medicare.

Economics can’t construct dynamic economic gauges like CPI/GDP until it learns gauge thy.

6:52 AM · Jun 15, 2021

But more importantly, we have a culture that economics literally trumpets (and I swear I am not making this up) “Economic Imperialism”. It is “we know math and you don’t”-culture.

No. They don’t know their own math. I will debate any high ranking economist on this point.

6:52 AM · Jun 15, 2021

It’s time to reveal that economics, far from embracing math or having physics envy, is deliberately avoiding solutions to old problems so that it can make up new gauges for CPI/GDP at will while telling the rest of the soft sciences “We know your field better because we do math.”

6:52 AM · Jun 15, 2021

No. Economics is an avoiding gauge theory, connections, Lie Groups, etc so it can retain its political relevance as an expert consultancy. I’m with the crypto folks on this. Our economy must be protected from Seigniorage (printing money) and CPI tampering (e.g. Boskin Commission).

6:52 AM · Jun 15, 2021

CPI should not…MUST NOT…be adjustable to disguise inflation. It needs to be protected from the FED diluting the power of money and the BLS being free to disguise the effects by changing the method of construction.

6:52 AM · Jun 15, 2021

End the forced wealth transfers of central bankers covering up their own failures with “Relief”, “Easing”, “Stimulous”, “Rescues”, “Toxic Asset Purchases”, and other bailouts of our incompetent financial overlords.

We must protect CPI from economists disguising wealth dilution.

6:52 AM · Jun 15, 2021

https://nber.org/system/files/working_papers/w7300/w7300.pdf

P.S. before you remind me how arrogant this sounds, keep in mind, that I am willing to debate this publicly with any leading economist eager to defend the central bankers and triumphalist theorists openly bragging about their math. Read this, and be sick:

6:52 AM · Jun 15, 2021

Moral: Gauge Theory fixes this intellectual corruption problem of economic imperialism, and #btc, blockchains and Crytpo can help.

6:59 AM · Jun 15, 2021

I am wholly supportive of this effort. Whether this iteration succeeds or fails is immaterial. The important thing is to take inflation away from those who would disguise:

A) The printing of fiat money by central bankers.

B) The fact that economists are holding back the field.

9:13 PM · Aug 5, 2021

Balaji

@balajis

A truly global inflation dashboard would be the next coinmarketcap. It'd be bigger than that, in fact.

So we're offering a little prize to build one.

5:11 PM · Aug 5, 2021

Why are they holding back the theory of index numbers (CPI, GDP)? Because the more innovation, the less freedom to dial our gauges to whatever values the political patrons of macro economics ask. The field is literally held back by leading economists to preserve their own power.

9:13 PM · Aug 5, 2021

Around 1996, Boskin Commissioner Jorgensen held back the biggest unambiguous advance in mathematical economics that I am aware of in decades. It would have interfered with their finding that the CPI was 1.1% overstated. He calculated 1.1% would save a round Trillion for U.S.

9:13 PM · Aug 5, 2021

We can’t afford for economics to pretend it is a science in public, yet act as an incentive operated consultancy which can get you any result you need to fit the political agenda.

So this effort of @balajis needs to be supported! We must take this away from our current leaders.

9:13 PM · Aug 5, 2021

https://www.amazon.com/Physics-Wall-Street-Predicting-Unpredictable-ebook/dp/B006R8PMJS/ref=nodl_

Inflation is like a thermometer. You ask how hot/cold it is. You don’t get to ask “What do you need the Gauge to say? How much thumb should be on the scale?”

This is all discussed in detail by Jim Weatherall in his book in the final chapter/epilogue:

9:13 PM · Aug 5, 2021

Lastly, it is high time my co-developer of the theory got her due without being subjected to both the Matilda & Matthew effects. Man-boys really do drive technical women out of technical fields because they can’t cite a woman who is smarter than they are. Enough.

Go @balajis.

9:13 PM · Aug 5, 2021

https://www.openculture.com/2018/08/the-matilda-effect.html

The co-developer of gauge thy in econ as a 2nd Marginal Revolution is Pia Malaney in the early 1990s at Harvard.

There is no reason to pretend this inflation thy never happened just to flatter power. Let’s disintermediate the old:

9:13 PM · Aug 5, 2021

https://www.fields.utoronto.ca/talks/neoclassical-mechanics-economic-field-theory

I think this is a great introduction to geometric marginalism and economic field theory. Hope you love it:

9:17 PM · Aug 5, 2021

This eliminates a step or two. You may have to watch in lower resolution if you are on your phone however: https://x.com/sabinowitz/status/1423394091409330182

9:25 PM · Aug 5, 2021

For the technically inclined who are wondering about the measurment & theory of Inflation/CPI construction, I highly recommend the following search terms: "Konus index", "superlative index", "Divisia Index", "cycling problem", "mechanical index number", "COLA" and "chain index".

5:48 PM · Oct 14, 2021

You'll soon see that "The Index Number Problem" lies beneath everything from the measurement of the impact of prices on households/consumers, to the construction of Divisa Monetary Aggregates & the measurement of the money supply.

Our gauges are riddled with error & discretion.

5:48 PM · Oct 14, 2021

A thermometer is a gauge of temperature. You can't let those trying to disguise human impact on climate change make the thermometers giving them discretion.

A price index is a gauge of prices. Likewise, we need to remove as much discretion from the @BLS_gov gauge as possible.

5:48 PM · Oct 14, 2021

Things I don't believe we can't conclusively resolve:

A) COVID's origin.

B) The Jeffrey Epstein story.

C) UAP.

D) JFK assassination.

E) Vegas Shooting.

F) Extent of 'Democracy Fortifying' in 2020.

G) Efficacy of Non-Vaccines.

H) Mysterious WEF 'Build Back Better' mantra.

7:17 PM · Oct 23, 2021

I) Negative impacts of Trade known to have been suppressed.

J) Adulteration of BLS CPI measure of inflation.

K) Negative economic impacts of Immigration.

L) Sudden spike in fake 'Objective Third Party Fact Checking'.

M) Sudden "Diversity Equity Inclusion" explosion.

7:17 PM · Oct 23, 2021

Q) Joe Biden's state of cognitive decline.

R) Nature of MSNBC campagin against Andrew Yang.

S) Nature of Dean Scream, Anti-Ron Paul and other interference in democracy by Mainstream media News.

T) Impact of loss of mandatory retirement on young people seeking work.

U) Rex84.

7:17 PM · Oct 23, 2021

V) Collusion between National Academy and National Science foundation division of Policy Research and Analysis to fake demographic crisis in mid 1980s.

W) Lack on anyone building the significant & desperately needed new non-profit institutions despite skyhigh wealth inequality.

7:17 PM · Oct 23, 2021

X) Loss of Academic Freedom across the board in Academe.

Y) Loss of the Lancet and other publications as trusted non-political sources of fact.

Z) The true nature of @EcoHealthNYC w its relationship to @doddtra & Dr A. Fauci.

Moral: much of this 'ambiguity' is serving the few.

7:17 PM · Oct 23, 2021

Can just *one* of them compute a simple Cost-Of-Living CPI for a consumer whose notion of well-being evolves even *slightly* during any period in question?

I claim not. Let's not get carried away with this concept of economic experts. This field first needs to become healthy.

6:17 AM · Nov 1, 2021

Secretary Pete Buttigieg

@SecretaryPete

An important, under-appreciated feature of the Build Back Better package is how it helps fight inflation.

It’s not just us saying so - leading economists and analysts have pointed this out. https://fortune.com/2021/09/21/nobel-prize-winning-economists-back-joe-biden-build-back-better-plan/

9:28 PM · Oct 31, 2021

ANNOUNCEMENT: I head next week to @UChicago for 5 days (Nov. 8-12) at the request of its storied Department of Economics to present our theory that all of economics is based on the wrong version of the differential calculus.

Importantly, this error afflicts Inflation & the CPI.

5:57 PM · Nov 4, 2021

Hi Eric, where can I find your calculations, data, and conclusions on what the real inflation and CPI numbers are?

11:19 AM · Nov 5, 2021

Weird question. You seem to have me confused for the BLS. I don't take in Data. I don't have a staff or a budget. You're assuming that I have the 'Real Inflation & CPI numbers'. I don't.

This is about not even having a correct *theory* to calculate. What we corrected was theory.

11:40 PM · Nov 4, 2021

Just to give you an idea:

11:44 PM · Nov 4, 2021

So if you have the correct theory then why wouldn't you be able to calculate the correct results from the existing input data available?

11:47 AM · Nov 5, 2021

I didn’t say what you said. I said there was a wrong theory for CPI. We corrected that theory.

The issue of how to implement a theory in practice leases to different data being collected and different aggregations. For a different theory, you would collect different data.

1:00 AM · Nov 5, 2021

As an example. The Boskin commission gave a single illustrative example in their report using two goods, chicken and beef. They gave prices but not ordinal utility. Here is the COL answer assuming Cobb-Douglas and Linear interpolation of all quantities. They could not compute it.

1:07 AM · Nov 5, 2021

The reason they had no theory to cover it was because the C-D exponent changed. And there is a claim that no extension of the Konus COL exists for dynamic tastes.

Hope that helps with your confusion. Be well.

1:09 AM · Nov 5, 2021

*leads not leases in the above.

1:10 AM · Nov 5, 2021

Yea I understand that and find your points interesting. So I would like to understand how we would go about invalidating the traditional theories by collecting and analyzing the correct data. I don't think those tweets answer that. I get your hypothesis.

1:21 AM · Nov 5, 2021

Well I think the BLS should begin by questioning their own premises. They say they work in a COL framework. They do not. They do not share how they construct the representative consumer. How they estimate substitution if they don’t have preference data. It’s fake and a mess.

1:27 AM · Nov 5, 2021

If they are going to do COLas they should estimate preferences. If they aren’t they should do mechanical index theory.

But I would use a bunch of that money to develop a research program on preference collection/imputation for substitution bias if I was running a COL shop.

1:29 AM · Nov 5, 2021

Ok how many researchers would you need? Is the average salary $300k? What are the non-labour costs needed? Could this be done in 1 year?

Could we get this done with let's say $10m? Is $609m necessary for a MVP?

1:33 AM · Nov 5, 2021

I am not sure. But the first question I have is do we believe ordinal preference maps are constructable from revealed preference.

1:59 AM · Nov 5, 2021

Well if we were to get you started with all the resources necessary, wouldn’t the assumption be yes to apply your theory?

2:02 AM · Nov 5, 2021

I would take a look at Paul Samuelson’s Nobel lecture. He goes into depth on revealed preference and preference field non-integrability. I think we have lost track of the fact that integrability of tastes was never actually settled except by fiat. Will talk on this.

9:20 PM · Nov 5, 2021

Sorry to say that I've been informed that my upcoming Nov. 10, Money & Banking Workshop at @UChi_Economics will closed to non-@UChicago folks, as will the Zoom connection. Researchers in other fields/students are allowed to attend.

This sort of breaks my no closed chambers rule.

11:15 PM · Nov 5, 2021

Because this is arguably the most famous econ seminar running, it's widely known for being absolutely *brutal* yet also fair (it was founded by M. Friedman). Thus I have decided NOT to get hung up on this issue, but will comit to give an OPEN seminar on the same subject if asked.

11:15 PM · Nov 5, 2021

I am particularly irritated by the dismissive nature of the academic economists towards my tagging members of the Bitcoin community as if they are some kind of a joke.

If you bitcoiners want to have a jam session on this material, I'm yours. Despite our frictions, we're aligned.

11:15 PM · Nov 5, 2021

The academic economists need to learn a lesson that the public is not going to stand again for revisions in CPI that disguise inflation, tax us through indexing our brackets, or impoverish us through under compensating cost-of-living adjustments to Social Security and Medicare.

11:15 PM · Nov 5, 2021

I also want to say this, there is a tremendous amount of nasty Glee on #EconTwitter that this is going to be a blow out. A mauling. That I have no idea what I am in for. Etc.

If you're an economist interested in expressing your bitchery as a bet, I'm not above taking your money.

11:15 PM · Nov 5, 2021

If you're an economist convinced that this is hilarious, propose a bet. Your arrogance is really my opportunity set after all...

As long as your seminar is fair, I'll be just fine. Academic econ. is in a *lot* more trouble than I am. So, if I could open the livestream, I would.

11:15 PM · Nov 5, 2021

The two most dangerous printing presses in Washington DC are directed by the Federal Reserve to dilute our dollar assets, and the @BLS_gov to print CPI inflation numbers that increase taxes through underindexed brackets & slash entitlements we pay into over our working lives.

11:15 PM · Nov 5, 2021

See you in Chicago. Let's take back CPI inflation which leads to mega transfers, from our unaccountable 'experts' before the money supply, modern monetary theory, and CPI hacking transfer even more of the wealth of ordinary people to those few who hold significant risk assets. 🙏

11:15 PM · Nov 5, 2021

Great news, given that *every* tick of your BLS CPI forces billions of dollars to change hands.

"The concept of the cost-of-living index guides the CPI measurement objective and is the standard by which any bias in the CPI is defined."

I found this on @BLS_gov site. Is it true?

6:13 PM · Nov 6, 2021

I assure you we are not dangerous! If you want to read about how the BLS calculates the consumer price index you can check out the CPI handbook of methods (https://bls.gov/opub/hom/cpi/).

12:03 PM · Nov 5, 2021

I cannot find any place where the preference maps needed to construct a Laspeyres Konus COL index are gleaned through revealed preference. I will go so far as to say that this is bait & switch. There is a CLAIM of a COL framework, but no one is constructing anything of the kind.

6:13 PM · Nov 6, 2021

Q1: Where exactly do I find the ordinal indifference maps constructed by BLS for a 'Representative Consumer' used to find substitution bias in fixed basket Mechanical approximations to a welfare Cost-Of-Living framework based on a Konus economic index of intertemporal welfare?

6:13 PM · Nov 6, 2021

Q2: What happens to our BLS COL framework when ordinal tastes change? How is the effect of substitution due to price change disaggregated by BLS from changes in ordinal preferences? This is important because marketing, education, etc change tastes & there is no theory for this.

6:13 PM · Nov 6, 2021

Let me give you the non-answers so you can correct:

A1: "Well, you are looking at it too literally...we have studied superlative index numbers which give a second order approximation to flexible functional form...blah blah blah."

A2: "That's really an obscure academic issue."

6:13 PM · Nov 6, 2021

https://www.bls.gov/cpi/questions-and-answers.htm

What I'm looking for is for BLS to stop pretending it's discerning "THE rate of inflation" to admit that it's making *policy* choices while appearing to be technical. It's determining our taxes and our entitlements by indexing, with our future in its hands as mere 'technicians'.

6:13 PM · Nov 6, 2021

Matt Darling

@besttrousers

JosephPolitano-X-post-1457082991067516941-FDiZONeX0AUfiln.jpg

6:56 PM · Nov 6, 2021

What I'm looking for is for BLS to stop pretending it's discerning "THE rate of inflation" to admit that it's making *policy* choices while appearing to be technical. It's determining our taxes and our entitlements by indexing, with our future in its hands as mere 'technicians'.

6:13 PM · Nov 6, 2021

"[A] market basket of goods and services equivalent to one they could purchase in an earlier period."

Exactly. Looking for the *exact* *technical* definition of 'equivalent' in the above. Can you point me to it? I assume it's a notion of revealed indifference in ordinal welfare.

6:56 PM · Nov 6, 2021

I wasn't able to find the answer to the above. Perhaps you had better luck?

6:58 PM · Nov 6, 2021

Matt Darling

@besttrousers

This is why it is useful to read the handbook of methods!

6:33 PM · Nov 6, 2021

https://bls.gov/news.release/cpi.br121996.geors.htm

Since CPI is a Laspeyres-based index, the "equivalent" in this case refers to the weighting of the basket. I like this research note on the difference between the modified Laspeyres formula CPI currently uses and a possible geometric mean formula.

8:50 PM · Nov 5, 2021

Uh…The Laspeyres is a *mechanical* index. The BLS site says it works within a *COL* framework.

When Mechanical = COL, it is called an exact index. You are not saying that BLS believes

Laspeyres CPI = Konus COL

I assume, because that is false. So what are you and BLS saying?

9:04 PM · Nov 6, 2021

I think this might do a better job describing it than I can:

JosephPolitano-X-post-1457097908969517057-FDimvaiWYAMHHet.jpg

9:29 PM · Nov 5, 2021

Sorry but that doesn’t make sense. It’s selfcontradictory doublespeak.

It literally just said that despite BLS COL framework claims, a Mechanical index is used w/ base periods *quantities* held fixed.

COL *requires preferences*. Where are they? There are/aren’t preference maps?

9:43 PM · Nov 6, 2021

Great news, given that *every* tick of your BLS CPI forces billions of dollars to change hands.

"The concept of the cost-of-living index guides the CPI measurement objective and is the standard by which any bias in the CPI is defined."

I found this on @BLS_gov site. Is it true?

6:13 PM · Nov 6, 2021

I assure you we are not dangerous! If you want to read about how the BLS calculates the consumer price index you can check out the CPI handbook of methods (https://bls.gov/opub/hom/cpi/).

12:03 PM · Nov 5, 2021

I can only answer your questions in a personal capacity, not as an official representative of BLS. I would encourage you to reach out to CPI team with any questions and they would be happy to answer.(https://data.bls.gov/forms/cpi.htm?/cpi/home.htm)

8:30 PM · Nov 5, 2021

The Bureau is rather open that the main Consumer Price Index (CPI-U) is only one measurement of cost of living and the prices faced by consumers', and there are good reasons that the Federal Reserve targets the Personal Consumption Expenditures Price Index instead of CPI.

8:30 PM · Nov 5, 2021

In addition, the Bureau is open about the limitations of the CPI and works continually to update methods and calculations in order to improve price measurements and indexing.

8:30 PM · Nov 5, 2021

The Bureau has introduced alternative data series (including the chained CPI index) to better account for the taste changes and substitution effects that reflect real consumer spending habits. You see information for that index here: https://www.bls.gov/cpi/additional-resources/chained-cpi-questions-and-answers.htm

8:31 PM · Nov 5, 2021

The CPI is guided by the concept of a COL index, but is not a perfect measurement of either cost of living or inflation. The Bureau is open about the inherent flaws in the index and has had to make tough choices in a tradeoff between precision, complexity, and timeliness.

8:32 PM · Nov 5, 2021

“Guided by the concept of a COL index but is not a perfect measurement.”

Can you show me *any* imperfect COL preferences to give me a sense of how far we may be off? Specifically preference maps: there is no COL without preference maps with which to evaluate substitution bias.

8:53 PM · Nov 6, 2021

Q: Where do I find the imperfect preferences maps for the COL claim?

Q: How were those preference maps computed or imputed?

Q: How does chained CPI calculate taste change given the claim of the fed that time varying ordinal preferences cannot be tracked in COL even in theory?

8:57 PM · Nov 6, 2021

There are no preference maps, chained CPI employs a superlative Tornqvist formula to account for substitution. The documents introducing the chained CPI do a better job outlining the methodological and theoretical structures than I could.(https://bls.gov/cpi/additional-resources/chained-cpi-introduction.pdf)

9:24 PM · Nov 5, 2021

Wait. Slow down.

Did you just say that BLS is claiming to work within a Cost of Living framework which *requires* preference maps *definitionally*, but…words fail me…has no preference maps? At all??

I must not be understanding. Chaining Tornqvist indexes isn’t an answer here. https://t.co/IyIArW40OV

10:17 PM · Nov 6, 2021

You mean field. Economics is actually all about fields: field operators & field theory.

Technically, inflation is classically like a Wilson Loop observable on path spaces. But economists have historically denigrated path-dependent approaches (e.g. 'cycling problems', 'drift').🤷

4:56 AM · Nov 8, 2021

Michael Saylor

@saylor

There is a different inflation rate for every consumer, varying all the time, depending on their consumption requirements and jurisdiction. Inflation is a vector, not a scalar. Just like fluid dynamics & aerodynamics, it is impossible to model an economy with simple arithmetic.

1:03 PM · Nov 8, 2021

You have no idea how crazy econ got to make us all the same so that what we're saying can be ignored. Seriously, think about asserting that all folks have the same tastes & that they can never change so that economists can use 'Stable preferences...relentlessly & unflinchingly'.

4:56 AM · Nov 8, 2021

You will see in the inflation literature various bizarre tendencies to introduce 'homogenous' or 'homothetic' utility functions and to hold these functions fixed. Ultimately it fell to 2 giants to claim that taste is universal. That way, rich/poor, you/me all have common utility.

4:56 AM · Nov 8, 2021

“The combined assumptions of maximizing behavior, market equilibrium, and stable preferences, used relentlessly and unflinchingly, form the heart of the economic approach...” -Gary Becker

Followed by inexplicable & inscrutable 'work' of Becker & Stigler: https://sciencedirect.com/science/article/abs/pii/016726818990067X

4:56 AM · Nov 8, 2021

The move to look out for is 'Superlative price index numbers give an excellent approximation to the true 'Cost-Of-Living'!" which totally sidesteps the field issue you bring up, the dynamic taste issue (replaced by 'Stable preferences'), & inequality (replaced by homotheticity).

4:56 AM · Nov 8, 2021

All of these simplifications are made better in a fully path dependent field theory framework with endogenously determined differential operators.

Claiming we all have the same unchanging tastes (e.g. Becker-Stigler) and working in simplified regimes isn't at all understandable.

4:56 AM · Nov 8, 2021

It's like publishing a number for the temperature in the US in 2020. Your path dependent price index measure of inflation is as individual as your commute. It's *mildly* meaningul to posit a 'representative commute to work' that doesn't depend on our various routes. But not very.

4:56 AM · Nov 8, 2021

And we are not even trying to measure that. To this day, I can't *really* understand what CPI-U is. That is either because I'm too dumb, or the field has gone mad agreeing with itself while disconnected from reality. And I believe no one is that dumb. Even on a really bad day...

4:56 AM · Nov 8, 2021

Surprise.

[Word to the wise: watch very very carefully how your CPI is constructed. You have the right to know EXACTLY how it is constructed.]

5:26 PM · Nov 30, 2021

Bloomberg

@business

NEW: Powell says it's time to retire the word "transitory" regarding inflation https://www.bloomberg.com/news/live-blog/2021-11-29/powell-and-yellen-in-the-senate-kwkw102n

3:41 AM · Nov 30, 2021

It’s hard to imagine how confused Economics is. Imagine you work for the @BLS_gov and you have to admit that your agency claims to compute our Inflation within a Cost-Of-Living framework, but doesn’t maintain the central ingredient needed to compute or even impute Cost-Of-Living.

5:26 PM · Nov 30, 2021

Joey Politano

There are no preference maps, chained CPI employs a superlative Tornqvist formula to account for substitution. The documents introducing the chained CPI do a better job outlining the methodological and theoretical structures than I could.(https://bls.gov/cpi/additional-resources/chained-cpi-introduction.pdf)

10:24 PM · Nov 6, 2021

Follow the thread back from here. This is where the conversation ends. #EconTwitter may tell you terrible things about me.

Maybe. Or maybe they don’t have a theory that works and they refuse to admit it while transferring billions through CPI releases.

5:26 PM · Nov 30, 2021

Wait. Slow down.

Did you just say that BLS is claiming to work within a Cost of Living framework which *requires* preference maps *definitionally*, but…words fail me…has no preference maps? At all??

I must not be understanding. Chaining Tornqvist indexes isn’t an answer here.

10:17 PM · Nov 6, 2021

You cannot keep mumbling Economic word salad forever “Modified Laspeyres…core inflation…Lowe generalization of the Laspeyres…Chained Tornqvist with revisions…chain drift…superlative index approximates flexible functional form…”

5:26 PM · Nov 30, 2021

Tastes change. Cost-Of-Living inflation is about tastes. If tastes evolve in time, the economists’ COL framework disintegrates. That is: there is NO theory. #EconTwitter can tell you I don’t get it.

It is THEY who don’t get it. They can’t escape it. It’s in their own literature.

5:26 PM · Nov 30, 2021

What you are seeing reported as Inflation is not coming from a well grounded theory. It is coming from human beings making policy level judgements as if they were merely making technical adjustments to a technical time series devoid of values about who should benefit or suffer.

5:26 PM · Nov 30, 2021

Moral: you have a right to know what’s in your food and how your pharmaceuticals were tested. You have a right to ask your surgeon what she plans to do during an operation.

You have a right to demand what economists are actually measuring as Cost-Of-Living W/O abuse for asking.

5:28 PM · Nov 30, 2021

And, no, the answers to these questions are NOT in the BLS handbook on CPI methodology. I’ve looked.

5:30 PM · Nov 30, 2021

The funniest part of our inflation measure is the “.8” here.

I so wish they were a little bolder and went with “6.8139942%, plus or minus 3*10**(-7) according to a Lowe index modified by hedonic adjustment for sub-aggregates” or some such.

More of us could share such a moment.

5:13 AM · Dec 29, 2021

Charlie Bilello

@charliebilello

5 / The 6.8% inflation rate in the US is the highest inflation we've seen since 1982 and is understating true price increases as it assumes "shelter" (largest component of CPI @ 33%) only increased 3.8% in the last year.

Breakdown of reported CPI:

Charliebilello-X-post-1474394587825418246-FHYZj9XXoAIPfHi.jpg

3:08 PM · Dec 24, 2021

The meaning of the .8 is significant, but only because of the wealth that will be transferred by it. It is not really meaningful as part of a measure of the cost of living for the representative consumer.

It’s effectively made up to make the “6.x” look solid. Which it isn’t.

5:13 AM · Dec 29, 2021

JAB

@b_bran223

Do you actually have a point here? Your quibble is with the “.8” because it “makes the 6.x look good”??? How do you figure. I honestly think you tweet sometimes purely for the sake of it

5:17 AM · Dec 29, 2021

Actually there are many points.

Inflation isn’t a number it’s a field.

Inflation is path dependent.

Don’t advertise precision that doesn’t exist.

CPI is not yet in the COL framework as claimed by BLS.

Path dependence should be embraced.

Etc.

My followers have heard them.

6:59 AM · Dec 29, 2021

JAB

@b_bran223

Eric, I am one such enlightened follower..

In what regard/magnitude is stochastic path dependency to change such CPI value if prior estimates are proportionately miscalculated? At this point in time, how best would you gauge the relative rate?

5:17 AM · Dec 29, 2021

JAB

@b_bran223

This seems to be more along the line of your “nuclear vs nucular” reference by which we quibble about semantics, with absurdly low impact on the end problem. The lack of precision for x path dependent function would similarly yield y persons debating lack of precision..

5:21 AM · Dec 29, 2021

I don’t want to go into it all here. But here is what I want.

A) BLS stops lying about COL framework. Stops hand waving about economic vs mechanical indexes.

B) Stop readying c-cpi-u to take over from cpi-u. We can see you coming.

C) Move towards personalized CPI using inputs.

9:55 AM · Dec 29, 2021

D) Embrace curvature if moving to chaining.

E) Publish methodology of basket or representative consumer(s). BLS isn’t an oracle.

F) Consider moving to a Cobb-Douglas/CES aware changing preference mechanical index if wedded to COL.

G) Admit to conflicts of interest (Boskin).

9:59 AM · Dec 29, 2021

H) Move to field theoretic & group-valued indices (e.g. GL(2, R) indices for trade).

I) Stop trying to hide Holonomy. It’s there. Accept that it is supposed to be there rather than hiding it with Walsh multi-period circularity test.

Etc.

But please stop making vacuous claims.

10:04 AM · Dec 29, 2021

I’m prepared to have high level conversations about this. But our current system is an abomination. No one knows what is in or out. It’s a black box that means little. The theory is bad. The explanations are fake. And the system is opaque. Even a Laspeyres without lies is better.

10:07 AM · Dec 29, 2021

2022

We should talk about national security and the Money Supply even before we talk about national security and crypto.

We should talk about CPI inflation #s and index number methodology at @BLS_gov before we talk about crypto threats.

M2 monetary aggregate from the St Louis Fed:

5:59 PM · Jan 28, 2022

You are experiencing 7.5% inflation.

You are getting sleepy. So very sleepy.

You no longer need to know how hedonic adjustments are calculated.

You don’t need to worry about C-CPI-U, tax brackets, Social Security adjustments.

#EconTwitter’s got this. Your lids feel heavy now.

2:02 PM · Feb 11, 2022

Relax. Think of a summer’s day with a light breeze.

Why worry about May 2020 after all? It simply causes stress to read so many words.

There was a data series discontinuity. It is probably all an artifact. A data flaw. Mother will take care to make sure baby is safe and warm.

2:02 PM · Feb 11, 2022

Don’t worry about the 7%. Just remember the .5%. That precision tells you @BLS_gov knows what it is doing.

Focus on the .5% and remember: it’s only your taxes, wages, life savings and benefits on the line.

It’s not your health. You can read a book. Money, isn’t everything…

2:06 PM · Feb 11, 2022

Let the experts handle this. People study this for years. Don’t listen to non experts. Experts have this. Expert expertise is so very expert that you the non-expert may come to fear expertise if you listen to non-experts.

I’m sure if there is a problem they will warn you. #2008

2:11 PM · Feb 11, 2022

7.5%. You are all experiencing 7.5%

2:14 PM · Feb 11, 2022

Imagine @NOAA were like @BLS_gov and released a single number called CTI: Consumer Temperature Index. It was a measurement of the “Temperature Change In America” computed in some random US city that they picked & changed at their discretion to represent that faced by Americans.

3:22 PM · Feb 12, 2022

You’d DEMAND a field map so that they didn’t quote a temperature in Miami when you lived in Nome Alaska.

Ok.

So @BLS_gov quotes you 7.5% inflation and NONE of you know what it represents, and NO economist on #EconTwitter will explain the .5% precision?

Demand CPI be a field.

3:29 PM · Feb 12, 2022

“Immigration has no negative effects.”

“I won’t make you pregnant.”

“Two weeks to flatten the curve.”

“NAFTA is a rising tide lifting all ships.”

“US STEM employers are facing a deep labor shortage.”

“Inflation is transient.”

“CPI is a measure of the COL.”

“Iraq has WMD.”

12:47 PM · Feb 18, 2022

Sam Altman

@sama

genuinely curious:

the fed has smart people. how were they so wrong about inflation being transient, when it seemed so obvious to most people that it wasn't going to be?

8:23 PM · Feb 17, 2022

Presidents, Senators, Representatives, Agency Heads, Operatives, etc. in a democracy, must and can be *forced* into accountability. This is what Ronald Reagan sounded like when forced out of prolonged silence over the Iran-Contra scandal:

10:03 PM · Feb 23, 2022

You can *force* your representatives to hold deep painful searching hearings. What is our problem with forcing open hearings on Epstein, Wuhan/Covid-19, Afghanistan, CPI?

10:06 PM · Feb 23, 2022

This happened. It hasn’t always been like this. This is still possible. We could do this with Epstein, Wuhan/COVID, Bagram, CPI/Inflation, Stock Trading in Congress, Tech Censorship of political speech at government request:

cc:@tedcruz , @BernieSanders

10:12 PM · Feb 23, 2022

Economists: Ken Arrow taught us we can’t aggregate rational preferences into the preferences of a mythical super-individual to represent society.

Also Economists: Konus taught us that Inflation is measured relative to agents’ PERSONAL preferences.

BLS Economists: US CPI is 7.9%

5:10 PM · Mar 30, 2022

This is what meteorologists condition you to think of as “reporting the weather”:

Contour lines. .
Dynamic fronts.
Probability distributions for rain.
Vector fields for wind.
Scalar fields of pressure & temperature

By contrast, Economists tell us your CPI is 8.3%. Discuss.

1:22 PM · May 11, 2022

[Yes there are sub reports on inflation. But the use of, and focus upon, a single number with opaque methodology and misleading description is preposterous. Bad theory. Bad economics. Bad government.]

1:26 PM · May 11, 2022

A cost of living index is something like a group valued field on path spaces of seasonal loops of dynamic preferences and prices. It’s not a damn number. It’s just not. This is theater.

1:30 PM · May 11, 2022

You seem to be the 1st to ask. Been waiting years for this question. Thank you!

Take 3 stylized goods:

F = Food in kgs
G = Gasoline in ltrs
H = Housing as Rent in sq meters

Assume Cobb-Douglas tastes with 2 exponents a_F, b_G (so c_H=1-a_F-b_G) & prices p_0, p_1in R^3 x R^3.

4:39 PM · May 17, 2022

porkchopps

@koocabeans

@EricRWeinstein so how do we make a gauge theory economic chart similar to your meteorological analogy?

2:35 PM · May 17, 2022

The COST OF LIVING that @BLS_gov pretends to calculate, for any price vectors as above is now a function on the 2-simplex (a_F,b_g) called the Laspeyres Konus formula.

Only one computer programmer needs to be able to understand the above. She can build the function in python.

4:39 PM · May 17, 2022

That function is akin to the temperature or pressure I keep talking about in the standard inflation theory. From there, we move to what is wrong with the standard theory. But this would already show you what is wrong with BLS’ crazy claims to be computing the cost of living. 🙏

4:39 PM · May 17, 2022

That is not gauge theoretic yet because we are assuming fixed tastes. But we have to understand the **mountain** of layered nonsensical assumptions in CPI measurements of COL inflation. CPI as COL isn’t even consistent with pre-gauge theoretic theory. It’s sort of unbelievable.

4:42 PM · May 17, 2022

#inflation #CPI #CostOfLiving

4:44 PM · May 17, 2022

Great question. Inflation is SUPPOSED to be a group valued field. In the case of bilateral trade it’s an element of GL(2,R) although the economists haven’t gotten there yet. But it is mostly not a field on Geography. It’s a field on path, Loop, preference and geographic spaces.

4:05 PM · Nov 6, 2022

invisible_college

@invisi_college1

I have heard you say inflation looks more like a heat map, than a single number. Would you say a heat map by both geography and product? Good morning

2:21 PM · Nov 6, 2022

Q1: Why is it a field on Preferences?

A1: Because a true COLA is not an index on baskets (mechanical index) but on welfare derived from baskets (economic index). BLS misrepresents CPI being COLA-driven abusing work of Erwin Diewert on Superlative indices. A COLA prices WELFARE.

4:05 PM · Nov 6, 2022

Q2: Why is inflation a field on LOOP spaces of preferences?

A2: Tastes are seasonal. In USA “We never spill Egg Nog on our bikinis.” What you both want & price HAS to be made seasonal to avoid the Cycling Problem (Holonomy) in index number thy. So we have LOOPS of tastes/prices.

4:05 PM · Nov 6, 2022

A2 Continued: If you don’t make loops of tastes and prices, you will show meaningless regular inflation if prices, quantities and tastes Circle back to their initial Jan 1 values. This confuses economic experts (Like Diewert) when it comes to chain/path indices…which is up next.

4:05 PM · Nov 6, 2022

Q3: Why is inflation a field on Path Spaces of Looped Preferences/Prices?

A3: Loosely, Index number theory really died w/ work of Ragnar Frisch (rightly) destroying Irving Fischer’s misguided work on axiomatic tests for bilateral (2 period) mechanical index numbers. Here’s why.

4:05 PM · Nov 6, 2022

A3 Cont.: As Ken Arrow challenged us “Frisch showed we can’t solve the bilateral index problem because a single agent at multiple points in time is *exactly* dual to multiple agents at a single instant of time. Which is exactly my ‘Impossibility Theorem’ in Social Choice. QED.”

4:05 PM · Nov 6, 2022

A3 Cont.: Our response: “Ah. That would be true but for 2 differences! First, Indices live in markets with *prices*. Our methods *don’t* live in social choice voting paradigms. Second, agents evolve into their future selves via paths. There’s no ‘morphing path’ in social choice.”

4:05 PM · Nov 6, 2022

A3 Cont.: “This is why index numbers will one day be properly understood as parallel translation in Fiber Bundles wrt Economic Gauge Potentials. But Zoe doesn’t become Cam morphing into Fatima when voting. So parallel transport is unavailable. Even in topological social choice.”

4:05 PM · Nov 6, 2022

Q4: Why do you say indexes are Group-Valued? Isn’t inflation just a number?

A4: Here goes. In the most famous case you *can* get away with a number. But that 8.9% style CPI nonsense is actually secretly a 1x1 matrix in GL(1,R). And that actually matters! Why? B/c Non-linearity.

4:05 PM · Nov 6, 2022

A4 Cont.: Only 1x1 matrices commute. NxN matrices do not! And if A.B isn’t B.A, the system goes non-linear. So if you have 2 countries with 2 currencies, the commutative case doesn’t work at all. You need to use Freeman Dyson’s system of Time Ordered Products to save inflation.

4:05 PM · Nov 6, 2022

A4 Cont.: But even in the case of one Currency like the Dollar, economists don’t get the group issue. True COLAs are valued in an *infinite* dimensional non-commutative group called DIFF_0(R^+) equivalent to increasing differentiable functions from 0–>♾ reparameterizing ‘Utils’.

4:05 PM · Nov 6, 2022

Q5: So let’s see. Inflation is a field like temperature. But a field in a fiber bundle over ♾-dimensional path spaces of loops of preferences/prices valued in non-commuting groups leading to non linearities not addressed by economists? What about actual geography!”

A5: Fair. 👍

4:05 PM · Nov 6, 2022

A5 Continued: Prices vary by zip code. So throw in a geographical map as a reward for getting to the end!

Just try to understand my bewilderment when @BLS_gov says 7.9% and everyone pretends that they aren’t really raising taxes & slashing social security. You’re being screwed.

4:05 PM · Nov 6, 2022

Your life savings are being stolen through seignorage as you are being taxed into oblivion with your social Security beaten to a pulp. Meanwhile @paulkrugman and Robert Reich are playing with finger paints.

If you want help, do let me know. But I can’t watch this massacre again.

4:05 PM · Nov 6, 2022

Either do something to save yourselves or continue to sit & wait to be eaten by the Fed and @BLS_gov’s fakely precise single number CPI.

I’ll debate ANYONE on this high enough up for you. But I can’t watch & I’m done w economist abuse & yelling at clouds.

Thanks for asking.🙏

4:05 PM · Nov 6, 2022

Note Added After Posting:

I responded to a question about proper index construction here. Would love to have Prof @RBReich thoughts. Maybe even a debate on CPI and measurement?

4:24 PM · Nov 6, 2022

Great question. Inflation is SUPPOSED to be a group valued field. In the case of bilateral trade it’s an element of GL(2,R) although the economists haven’t gotten there yet. But it is mostly not a field on Geography. It’s a field on path, Loop, preference and geographic spaces.

4:05 PM · Nov 6, 2022

{{Tweet |image=Eric profile picture.jpg |nameurl=https://x.com/EricRWeinstein/status/1589298124191043584 |name=Eric Weinstein |usernameurl=https://x.com/EricRWeinstein |username=EricRWeinstein |content=They have two black boxes. One is called CPI construction. One is called the Fed. The theory is a narrative. The narrative doesn’t match the actions. |thread= {{Tweet |image=Eric profile picture.jpg |nameurl=https://x.com/EricRWeinstein/status/1589287901804007425 |name=Eric Weinstein |usernameurl=https://x.com/EricRWeinstein |username=EricRWeinstein |content=Great question. Inflation is SUPPOSED to be a group valued field. In the case of bilateral trade it’s an element of GL(2,R) although the economists haven’t gotten there yet. But it is mostly not a field on Geography. It’s a field on path, Loop, preference and geographic spaces. |quote= {{Tweet |image=invisi_college1-profile-s_fl5CzZ.jpg |nameurl=https://x.com/invisi_college1/status/1589261786934493184 |name=invisible_college |usernameurl=https://x.com/invisi_college1 |username=invisi_college1 |content=I have heard you say [[Inflation|inflation] looks more like a heat map, than a single number. Would you say a heat map by both geography and product? Good morning |timestamp=2:21 PM · Nov 6, 2022 }} |timestamp=4:05 PM · Nov 6, 2022 }}

Pirate Hodl

@pirate_hodl

And preference space is unknowable without just letting a free computation run. Anything else involves some humans telling other humans what their preferences must be.

4:34 PM · Nov 6, 2022

Sure! And as Samuelson said, it may not even be integrable. And it may be that you are mixing stocks and flows. Etc. But then don’t say you are implementing Konus COLAs while pretending that mumbling “ superlative Index number are exact for flexible functional forms” makes sense.

4:39 PM · Nov 6, 2022