The way that economic data is presented, we often think of inflation as a singular number representing a general increase in prices.
For example, it might be reported that nominal GDP growth was 3%, and that inflation was 2%. Since the inflation represents a rise in price levels, we subtract it from the nominal rate to get a real GDP growth of 1%.
But in reality, price changes do not affect products and services in such a uniform and simple fashion. In the above example, all goods aren’t increasing in price at a 2% rate – that’s just an average. What really happens is that there is a full spectrum of price changes: some goods end up falling in price, while other goods get more expensive.
What’s Actually Getting More Expensive?
This week’s chart looks at the change in prices of consumer goods since 1996, using data provided by Mark J. Perry of AEI’s Carpe Diem blog.
Here’s his original chart, which is also very telling:
The average price increase, as shown by the CPI (Consumer Price Index), is 55% over the last 20 years. Meanwhile, the prices of individual sub-categories have a much wider variance.
The good news is that the price of technology is generally getting cheaper. Software, TVs, wireless, and new cars have all come down in price relative to the CPI. Clothing, toys, and furniture are also way more affordable than they were 20 years ago.
The bad news? Most of the above items are not the ones that really matter to most of us. The things we actually need to live healthy and fruitful lives – education, food, healthcare, childcare, and housing – are all skyrocketing in cost.
Tuition costs have soared 197%. Textbooks have more than tripled in price, going up 207% since 1996.
Taking care of our loved ones is more expensive. Healthcare and childcare costs have risen almost as much: 105% and 122% respectively.
Meanwhile, basic necessities such as shelter and food have increased at rates higher than the CPI as well. Housing costs are 61% higher and food is 64% more expensive.
technology and social services are two totally different beasts…
as there are more slaves… the scale of technology sucks that up…. these relations will always be inverse.
Admin & Dear Readers–I’ve explained why this is so in my many comments. It’s Homer’s ‘Teetertotter Model of Economics’. It all has to do with Supply and Demand. Supply is the money you use to buy things and Demand is the things you want (goods) that you can Demand with that money.
There is little supply and demand and that is supply (the amount of goods up for bid) and demand (what your little heart desires). Big Supply & Demand is different from little supply and demand and that’s the way you should think of it to avoid confusion.
The things your little heart desires is going to command more money because more people are biding the price up, like food. Also, the manufacturing chain is experiencing higher prices, too, which finds its way to you, the final buyer. Over production and under production also affects costs and leads to niche price variations. Car prices are going down because no one wants (can afford) them.
Food prices too high? Everyone needs to stop eating for a month and food prices which are ‘time inelastic’ will fall. Simple! You can fight food ‘price inflation’, just tighten your belt 4 notches and get a cardboard motel to sleep in.
You see, folks, with Inflation everything gets cheaper in quality, there are exceptions. The value is stolen by those who create Inflation, by those who create credit, you call money.