If the price of chicken goes up people will substitute buying.....

[cali]

what will they substitute? And does that even hold true? What about gas prices? What are you supposed to substitute for gas? Oh, that's right, you'll buy less gas.

I admit I don't know much about this kind of stuff, but it seems to be predicated on some flawed assumptions. Actually, not really flawed. It seems more like dishonest bullshit designed to fuck people.

The Chained CPI cuts benefits and if as proposed, tied to income, it raises taxes on the middle class.

What a scam.

[cthulu2016]

1. Small chickens

Like nested Russian dolls... and endless series of smaller and smaller chickens

[unrepentant progress]

2. Oh sure

You just want to live high on the hog, slurping your Fancy Feast from a silver spoon, rather than making do with 9 Lives like any honest god fearing 'Murikan would.

[cali]

4. yum yum fancy feast. so much better than that dried stuff.

[JoeBlowToo]

7. Don't be silly...cat food is way too expensive!

Now Hamster Chow is the way to go!

[The Velveteen Ocelot]

52. I will expect my cats to hunt for me.

Yum. Mice, chipmunks, the occasional robin. Robin drumsticks make nice hors d'ouevres, which I can serve at my elegant dinner parties along with lichen stew and wiener water gravy.

[Cleita]

3. I'm already buying less gas.

I'm on SS. I can't really go out and earn more money at my age, so I don't see how buying less of anything helps the economy. You'd think the brilliant minds on Wall Street would figure this out.

[demwing]

9. They know...

they just don't care. They live in little bubbles, and you and I are not invited in

[JoeBlowToo]

10. Every dollar you have "impoverishes" them....

they must reduce what you get and diminish their taxes to zero or they feel sorely abused.

[arcane1]

19. They figure if you spend a few years thinking SS sucks, you might be more open to privatization

[GreenStormCloud]

30. Us too. We try to wait until we can combine trips to gas up. N/T

[MotherPetrie]

5. "...dishonest bullshit designed to fuck people" - perfect description. K&R.

[sufrommich]

6. Stir fry. I wouldn't be surprised if Americans

start eating smaller portions of meat like most Asians do by using meat more as a flavoring instead of the main course. Sad to see it done out of necessity as opposed to taste,but I think that's what unaffordable meat will do.

[cali]

15. I think you're missing my not very well expressed point

in any case, vegetable prices have been rising dramatically and there's certainly no guarantee they won't continue to do so.

[sufrommich]

20. I didn't miss your point. My point was Americans

will be forced to change their eating habits out of our new acceptance of poverty. My guess is that starch will overtake protein as a main food for many retirees and the disabled who depend on Social Security,as it does in most third world countries.

[Cleita]

16. Many of us do anyway and if you haven't checked the price

of fresh vegetables, I'd say you aren't hurting enough to have to price everything out before you do your shopping.

[magical thyme]

36. certain veggies cost more than the cheaper cuts of meat in my neck of the woods

That includes the most healthful, important ones like kale, spinach, in fact pretty much any salad green.

Fortunately I am able to grow much of my own and am increasing my ability to do so.

Not everybody is able to do that; I'd wager that the vast majority are not. And I am only able to do it as long as I can hang onto my minifarm, or downsize this minifarm to one further away from civilization (which would suit me fine, but first I must find a buyer for this one who is able and willing to pay more than rock bottom, bankruptcy, dire emergency quick cash sale price).

[smirkymonkey]

85. I love all dark leafy greens, but every time I go grocery shopping I am amazed at

how expensive they are getting. I live in a city, so I can't grow my own. I don't want to eat a diet of starch because I am insulin resistant and it bloats me. Lean meat has gone through the roof as well. I have a job, but have not had a raise in 4 years. I am terrified for the future.

[slackmaster]

56. You're absolutely right. I've had to do that as my body has become less able to handle meats.

I eat the same things I always have, but less meat and more vegetables.

[hfojvt]

8. milk, cheese and peanut butter

Of course, I am one of those guys who think Americans eat too much meat

For gas, you can substitute taking the bus. Or if you are elderly, many towns have senior buses you can take. Maybe you car pool.

But I think gas is left out of most measures of inflation because it goes up and down so much.

[Cleita]

14. And what about the elderly who live where there aren't buses and where the

senior buses cost $30 round trip each time? Should they walk on their walkers miles to the nearest store? Should they bicycle even if they are too weak? Also, from what I understand most bus fares have gone up since gas has gone up, so they are paying more for gas either directly or indirectly. Try again and think this out this time.

[hfojvt]

25. and what about the starving people of Bomevia?

Unless you have actual numbers, you are just making up stories about presumably very few people in impossible situations. In the real world, most people live in urban areas, and when they get really old, they move into nursing homes. My grandmothers did it, one in a small town, one in a sort of mid-sized metro area (Madison, Wisconsin population around 200,000). I am not sure either of them owned a car. I know Grandma Madison did not drive, but she made it to play organ at the Wednesday service until she was about 96. Grandma New York may have been getting help from my cousins and uncles who lived within ten miles. Or she may have walked since she was only about four blocks from the downtown (such as it was in a village of 2,000)

[Cleita]

28. Yes, nursing homes. Most old people these days can't afford nursing homes due to cuts in

Medicare. Also, the sequestration has chopped off the Meals on Wheels funding that a lot of seniors were dependent on to eat. In most cases it's the only food they get because they are too weak and physically compromised to go to the store and cook. Oh, yes but put them in nursing homes, but, but, but...... I suppose elderly people on wheel chairs or walkers are supposed to take the bus every where.

Honestly, you need to look up the actual numbers. The AARP website has loads of information on this as does Bernie Sanders website and the Social Security website. I'm not going to do your homework for you.

And most old people do not live in urban areas. Most of us move to smaller towns after retirement because they are cheaper to live in and doctors are more likely to accept Medicare and Medicaid than in the big cities. I live in a state where, even in the city, the buses are too dangerous and crowded for elderly people and where services are so spread out you have to drive miles to get somewhere. I myself have to drive fifteen miles to go to the doctor.

[KamaAina]

72. Actually Medicare does not cover long-term care

It's Medicaid that does. Indeed, the rise of the nursing home industry can be traced to the establishment of Medicaid as a source of payment.

If we're serious about saving the government money, we'll ditch this cat food BS and look at replacing costly nursing home care with much cheaper home- and community-based services. This not only saves money, it keeps people at home instead of sitting around watching TV in the home and getting a visit from family once a week -- if they're lucky.

[Cleita]

73. I'm all for that but they just aren't doing it.

The sequester did a huge cut to Meals on Wheels, a program that has been in effect for sixty years, which helped seniors unable to feed themselves to stay in their homes.

[KamaAina]

77. It's not just a good idea, it's the law.

The Supreme Court ruled in Olmstead v. L.C. in 1999 that the Americans With Disabilities Act grants people with disabilities the civil right to live in community rather than institutional settings. Alas, it's being enforced about as well as Brown v. Board of Education was in the 1960s. I hadn't even considered the Olmstead implications of the sequester. Thanks!

And how does Agent Orange sleep at night? Ambien? $700 wine?

[Cleita]

80. Well, I don't know if passed out really is a good sleep but it's better than none I suppose. n/t

[RebelOne]

108. I am 74 years old and fortunately not in a nursing home yet.

Luckily, I have a car and can still drive. And if I had to take a bus to go anywhere, I would be out of luck because the nearest bus depot is 5 miles from my house.

[Cleita]

109. I'm 73 and I have the same transportation issues you do and

knock on wood, I'm healthy and could probably walk the three miles to the bus stop, but if I ever developed a health issue, all bets would be off.

[GreenStormCloud]

31. Small towns don't exist???

You need to see more of America. I live in a town of about 5K people. No public transportation. Town is spread out. It is drive or walk, and the distances or too much for walking.

[hfojvt]

90. one odd thing about small towns

for every person living in a town of 5,000 there are 100 people living in a city of 500,000.

Heck, in Texas, over 1/5 of the population lives in two cities - Dallas and Houston. To say nothing of Abilene, Amarillo, Austin, Corpus Christi, Laredo, Lubbock, San Antonio, Waco and Wichita Falls, and many other cities of more than 30,000 people.

I'm no fan of big cities, but I think it is true that most people live in them.

Small towns tend to be safer for bicycling, but I don't expect a 90 year old to bike to the store.

[TheKentuckian]

88. False: The vast majority never go into a nursing home.

[markpkessinger]

104. This is simply vile . . .

Last edited Fri Apr 12, 2013, 04:33 PM - Edit history (1)

My hometown, the borough of Beech Creek, has (and had, when I was a kid 40 years ago) a population of approximately 750, give or take. The town has no supermarket or pharmacy (there is a 7-11 at one end of town -- hardly adequate for food shopping). The nearest supermarket or pharmacy is a 6-7 mile drive; there is no public transportation, nor are there is there any taxi service in the area. Pennsylvania has (as I suspect many state have) hundreds of small hamlets and villages scattered throughout the state that are as remote, or even more so, than my hometown.

I have two siblings who still live there, who are getting close to retirement age. These folks may be insignificant to you simply because they aren't as numerous as urban dwellers, but I am not willing to kick these folks to the curb, nor am I going to sit passively by the side of the road while a Democratic president does so. The suggestion that we don't need to consider these folks is perhaps one of the most vile things I have read on DU to date. Following that kind of logic, we could just as easily say we don't need to consider how policies affect, say, LGBT folks, because most people are heterosexual. For shame!

With attitudes like this, is it any wonder Democrats have such a problem getting their message across to rural voters?

[MineralMan]

48. My parents live outsife of a small town in California.

They've had to give up driving. They use a senior on-call transportation system when my brother or sister are not available to drive them. It costs 85 cents, door-to-door. Their home is 6 miles from town. The system is subsidized and responds quickly to calls. Its vans are wheel-chair lift equipped, and the drivers are very helpful.

Such systems aren't available everywhere, but they certainly exist in many places.

[Egalitarian Thug]

17. All of which cost more than chicken. Americans do eat too much meat and the simplest solution is

to remove the subsidization of the meat industries. Of course, if Americans had to pay the actual cost of the meat they eat, they would freak out.

[hfojvt]

26. I find that hard to believe

but I guess I will have to take your word for it, since I have never in my life bought any chicken.

[Egalitarian Thug]

84. I'm not sure if chicken is cheaper out here, or whether milk, PB, & cheese are more

expensive, but I can always find chicken for about a buck a pound.

I don't drink milk but it seems to have become pretty expensive (I use half and half in my coffee and that's $2 a quart), and edible cheese starts at $4 lb. That oil based cheese food doesn't count since I'm pretty sure it will kill you if you tried to live on it.

Finally, I just bought our yearly supply of PB @ Costco and it cost me $12 for 6 lbs.

[riderinthestorm]

33. I'm in west suburban Chicago and milk, cheese and PB are definitely cheaper than meat.

I'm not sure where you live but your area must have really expensive stuff!

Even the cheapest whole fryers average about $5 around here so you'd be able to get the 1/2 gallon of milk, pb AND the cheese for about that much at Aldi.



But I do agree with you overall point though - Americans eat way too much meat. My daughter's been a vegetarian for 3 years now and because its such a hassle to cook two different meals, we all eat the same thing. Once you start eliminating meat from your diet you can't help but be shocked at how often everyone else is eating it all around you.

[RebelOne]

107. I don't eat meat, but do buy lots of milk, cheese and peanut butter. n/t

[Egalitarian Thug]

11. "dishonest bullshit designed to fuck people" You understand enough.

What all these schemes do in essence is to remove the baseline so that, in any given time period, rises can be limited to a small percentage. We saw what high inflation does in the 70s - 80s, so they set about hiding it through devaluation of our currency and fixing the scale.

[kenny blankenship]

12. The chain of substitution is well known and sound as an economic principle

Even the Hollywood lefty Coen brothers alluded to it in an early movie.
Meat -> Fowl -> Crawdad -> Sand

See? there's always something budget strapped households can switch to. Therefore, there's no reason to worry. Ask your older relatives about different ways of preparing and eating clay. If they're very old and remember times during the Depression, their answer may surprise you!

[tridim]

13. I substitued chicken thighs for chicken breasts a LONG time ago.

It's kind of common sense. Tastes better too.

But SS benefits have not and will not be cut unless the emoprogs get their wish and the Dems lose in 2014 and 2016. I think you might be getting just a bit ahead of yourself.

[Fumesucker]

18. Bootstraps make a nourishing and tasty broth when boiled in poverty juice

[Kali]

22. !

no matter what, THAT was a pretty funny comeback.

sig line material, even

[tridim]

39. Okay, so now Obama has signed a bill that puts people in poverty?

Do you have a link?

[GreenStormCloud]

32. What will you do for the next cut?

Remember that chained CPI is a new slice every year. So every year you are expected to come up with some more substitutions.

[tridim]

38. Can you send me a link to the bill Obama signed with SS cuts.

Thanks.

[Marr]

45. Just read this instead:

I think you'll enjoy it more.

[GreenStormCloud]

89. Proposed, not yet passed or signed.

We don't have to wait for a bill to be signed to be able to talk about it.

[tridim]

92. You're already talking about the "next cut"

There isn't a first cut.

Try reality sometime.

[GreenStormCloud]

93. The proposal is an annual cut.

Each year, the COLA increase is to be .3% below that actual CPI, therefore it is realistic to talk about a next cut. It is reasonable to talk about proposals.

[tridim]

98. It's reasonable to talk about reality..

Not worst case scenarios that will never happen.

[MerryBlooms]

21. I heard that crap on Stephanie Miller's show this morning, what a bunch of bs.

Like one of the callers noted- when the hell have any of these rich jerks sacrificed jack? It's always on the backs of the least who can afford it. I'm sick of the 'we all need to sacrifice' meme- it's a fucking lie.

[Cleita]

74. I cringe every time I hear shared sacrifice.

What it means is that what we give up when we sacrifice gets shared by those who take it.

[MerryBlooms]

75. Me too, Cleita.

[smirkymonkey]

86. There is no such thing as shared sacrifice.

The poor and middle class are doing the sacrificing and the rich give up absolutely NOTHING! It's absolutely criminal and disgusting. I really can't even get my head around this.

[Katashi_itto]

23. Meow

[HereSince1628]

24. Hey, cinnamon is a great replacement for diabetes meds!

Well, that's the story, anyway.

[Blaukraut]

27. Beans and other legumes, for the protein

Purely in terms of nutrition, substitution for cheaper products can be done, but if you're reduced to having a plate full of green beans, red beans, and potatoes, where's the enjoyment in that?

[kentauros]

40. That depends on how you make your meal.

How about some yummy bean salad?








(you can also, and easily, grow your own herbs, and some spices, too...)

[kenny blankenship]

29. There's something else to know about substitution

The Neo-Liberal genius economists who cooked this up for you aren't going to tell you about it, but I will. You aren't doing this in a vacuum. Buyers with busted budgets substitute downwards - but that is hardly the end of the story. Sellers notice when their buyers switch from better to worse. It is recorded and analyzed when people, who gave up steak and fresh seafood 15 or 20 years ago, switch from a diet of chicken breast and pork chops and green vegetables down to ground up animal trimmings and starches. They notice because they watch what sells out of their inventory, they notice who buys it and how fast it turns over. They notice it because they see their profits dropping. Do they sit quietly, observing the declining fortunes of their consumer base and do nothing? NO, they do not.

They RAISE prices on the dreck you have substituted for the old goods of your former standard of living. They raise them and keep raising them. They are driven to by their requirement to increase profits year over year, year-in, year-out.

This is a cycle of decline and incremental privations, and if you accede to it there will be no end.

[laundry_queen]

82. + a million. Wish I could rec this post. nt

[AgingAmerican]

34. They can make biscuits out of grass and clay

n/t

[bvar22]

35. The elderly and retired are just being selfish.

The President is doing what is right to protect the Job Creators from the ruinous hardships of Raising the Cap.



[font size=1]As you can see I am not happy. I am angry because you pledged not to touch Social Security and I voted for you feeling secure that you would do so. Now you are making the people who can least afford it pay for something that shouldn’t even be part of the deficit discussion. The Republicans are trying to dismantle anything having to do with the New Deal. We earned our Social Security. Raising the cap on income taxed for Social Security is the correct way to solve the issue.

I hope you will see how many of us are upset with your giving away the store and that you will change direction. Otherwise you will have damaged your reputation and your party irrevocably.[/font]


http://savesocialsecurity.tumblr.com/page/2

[reformist2]

37. Pink slime shaped like chicken? I hear it's just as nutritious...

[gollygee]

41. People have already made all these substitutions

This recession has been going on a while. People are at the point of substitution, and at the point where they (and their kids if there are kids involved) will have to skip meals.

[Junkdrawer]

42. Ya know, my tag line used to be...

"1984 was a warning, not an instruction manual"

Now, I may go with:

"The name 'Catfood Commission' was a joke"

[Baitball Blogger]

43. And here I was laughing about chicken in a can.

[jeff47]

44. This is why the "Chained CPI" people are morons who can't do math.

Let's say 100 people want to buy that chicken, driving the price up.

Then only 80 people buy chicken at the new price. That prevents the price from going up as much as if there were still 100 people buying it.

So there's no need to "chain" CPI. CPI already includes the substitutions that "chained CPI" supporters are concerned about.

[NickB79]

46. The neighbor's dog is a meaty little bugger

And don't even get me started on all those feral cats running around the neighborhood, or those pigeons that live under the bridge.

[mathematic]

49. Denying the substitution effect is like denying evolution or global warming.

It's disappointing, though not entirely surprising, that this denial is pervasive at DU.

What substitutes for chicken? Steak, for one. If the price of chicken rises faster than the price of steak, people will buy more steak relative to chicken. If this doesn't make sense ("but steak is more expensive than chicken&quot then it's highly likely that you do not understand the concept of substitution. The substitution for gas has to be looked at a bit more broadly, since your car is not going to run on anything else. Again, it will depend on the rise in gas prices relative to the rise in the prices for other goods that will determine if the substitution results in more gas or less gas use relative to other goods.

The CPI does not represent any specific person's price experiences and it may not represent the price experiences of any person at all. It reflects the change in prices in an aggregate way. It's not about everybody switching from chicken to steak. It's more like 1 out of 10 people switching from chicken to steak.

Chained CPI is a more accurate cost of living index than regular CPI. I don't think I've seen a single non-fringe economist (think gold-shilling ron paul types as the exception) argue otherwise. With respect to the appropriateness of a specific cost of living index, the argument against using chained CPI for SS is the same argument against using regular CPI for SS. It's a bit of sleight of hand. A chained CPI-E (specifically designed for the consumption patterns of the elderly) would be an even better than a regular CPI-E.

Chained CPI is solid theoretical math combined with the extensive empirical economic work done at the BLS. It's being maligned unfairly by people that think we shouldn't be slowing the rate of increase in SS payments. You can be against slowing the rate of increase in SS payments without trying to deny valid mathematical results.

[cali]

50. Really? So Krugman isn't a non-fringe economist? That Nobel Prize? Meh

The facts are that the chained CPI reduces benefits. Period.

[mathematic]

51. Ugh. Stop reminding me why I don't post on DU.

Krugman, and everybody else that understands the issue, always qualifies the argument with "for seniors". Like I said, sleight of hand. The regular CPI already doesn't reflect the cost of living for seniors. So it's also true that chained CPI doesn't reflect the cost of living for seniors. What good is a better orange when you're still comparing them with apples?

Your OP was about your lack of understanding of chained CPI. That's also a fact.

[jeff47]

61. No, actually they don't.

They happen to be talking about seniors because they're talking about Social Security.

But they also never say "Chained CPI is more accurate for everyone else".

[mathematic]

64. Chained CPI is a superlative index. CPI isn't.

Please find me one economist, international economic standards organization, or government that says that a superlative index is is a worse cost of living approximation than a non-superlative index.

[jeff47]

65. Seriously? I can make an utterly inaccurate superlative index in 5 seconds

We will now adjust social security payments based on the 12-month average of the price of hamsters.

It's a superlative index. So it must be more accurate, right?

[mathematic]

66. Oh please. That's taking it totally out of context.

We're talking about actual inflation indices here.

[jeff47]

70. No, you're talking about a particular method of calculating an inflation index

And what you're failing to understand is it's not better in all situations.

If your goal is to reduce statistical noise, then a superlative index is helpful.
If your goal is to represent what people are actually paying today, it's not. Because people are subject to that same statistical noise you are filtering out.

Superlative indexes are great for trying to assess trends. That doesn't make them more accurate day-to-day.

[Chan790]

102. So stop. You won't be missed. n/t

[Glitterati]

54. It's bullshit for one reason

and that is simple - the things WE seniors spend on aren't IN the CPI.

My prescription medication costs $5.93 per day. Generics, every one of them. I can't change ANYTHING about those meds, except DIE if I stop taking them. Prescription drugs are not a part of CPI. Fuck you, Seniors.

My doctor bills are AT LEAST $25.00/month. And, that's as damned cheap as I can make it for a SPECIALIST. I already go to a sliding scale clinic 35 miles one way from my home. There's no public transportation, believe me, I tried when my car broke down last month and I couldn't get there! Taking DialARide, a MARTA train, another MARTA train, and a bus, still left me 4 MILES from the Dr. office. Sorry, too old and sick to walk 8 miles after a full 8+ hours on public transportation, round trip. And, since DialARide closes at 3:00, and my appointment was for 2:45, there was simply no way home. THAT end of the trip would have been 17 miles of walking. Dr. bills are not a part of CPI. Fuck you, Seniors.

I've already cut my living expenses to the bone - buying a house with a 535.00/month mortgage rather than 750.00/month rent, owning a single level, 2 bedroom home, easier to heat and cool than the 2 level, hot as hell in the summer, warm in the winter house I was renting. Buying a house that includes monthly trash service rather than having to pay for that separately, buying a house on a sewer instead of a septic tank that requires upkeep.......the list is absolutely infinite.

None of those things are included in the CPI. When they go up, the money has to come from somewhere. In the meantime, I am raising my daughter alone - husband died in 2011. Since I'm on survivor benefits, if I make one dime over $14,400.00 in ANY year, I lose every penny of social security.

No matter how you look at it, I am REQUIRED by my own government to live in poverty already. I've substituted all I can already. I've had one tank of gas in my car since March 15th. I can't afford another tank until May. Thank heavens I live close in enough to walk to most places and my daughter can walk to school since I bought a house 2 blocks from her school.

Oh, and before you ask, I cook EVERY meal at home. Including breakfast and lunch, since my daughter can come home for lunch. We don't DO fast food. We don't DO junk food. We don't DO treats. We DO eat lots of beans and rice already. You'd be amazed what I can do with rice!

My internet access is a legitimate business expense, since I sell products online. My business pays for it.

How much more blood do you expect to get from this turnip?

[LooseWilly]

57. The "substitution effect" is itself an assumption that underlies the theoretical math you speak of.

And, as an assumption, it is itself rather theoretical.

It is based on the theory that, if a consumer can't afford X, then they will purchase Y... and the truly insidious aspect of this assumption is the theory that Y is a perfectly suitable substitution... and Consumer-Widget Alpha will carry on no worse for wear with the substitution in place.

The example of chicken for beef assumes no allergies, and no concern with "intangibles" such as quality of life. When both become too expensive and the theory would have Consumer-Widget Alpha give both up for tofu, we then come to another set of allergy concerns... but the issue of Quality of Life will start to resonate at a much less pleasant frequency throughout society, as I doubt that half the Midwest, for example, would consider that substitution effect to be satisfactory.

Theoretically, however... it is an "equal" substitution and satisfies the theoretical underpinnings of the "substitution effect" that you would have people accept as axiomatic... while you try to misdirect them, like some sort of right-wing-shill stage magician, into thinking that the whole affair is mathematics (with, of course, the connotations of that making it just "too complicated" for those who are "foolish enough to question it", reinforced by your use of adjectives such as "disappointing" or "like denying evolution&quot .

Of course, considering your screen name, maybe it is simply a matter of you yourself just being too distracted with the mathematics to even think of examining the supposed axioms upon which the mathematics is worked out.

The "substitution effect" underlying CPI has a political foundation, which embraces the idea of a sliding standard of living, and implies that the goal of Social Security, rather than being to enable seniors to live with dignity, instead implies that the goal of Social Security is simply to assure that seniors can afford some enough foodstuffs so that they won't starve, probably... and might even have enough to get something nice if they can find a lucky sale.

[mathematic]

62. The substitution effect is not theoretical, nor is it what you described

-The substitution effect for thousands of goods has been measured. It's real. No amount of cutesy denying it will change that.

-You have not just discovered the concept of an "imperfect substitute".

-The substitution effect has nothing to do with the quality of the goods. It is a relationship between prices. That's why I said that if the price of chicken rises faster than the price of steak you will eat MORE steak relative to chicken. Personally, that would improve my quality of life.

-Including substitution effects in an inflation index makes it a BETTER cost of living index. Thus chained CPI is better than regular CPI, for the purposes where regular CPI is appropriate.

I guess you're trying to be ironic by italicizing words you think are related to my screen name. Kudos. You really got me. I guess I'm not really so smart after all. Foiled by folk wisdom yet again.

[reteachinwi]

67. "imperfect substitution"

Pick it up on your walk.

[LooseWilly]

91. Well, thanks for providing such a "rigorous" proof of the "not-theoretical"ness-

Although, when I answered "self-evident" on my mathematics midterms, I didn't even get partial credit.

I would counter with as rigorous a proof (-Yes, it is theoretical), but I don't see any need to be repetitive.

If I have not just discovered the concept of an "imperfect substitute", and I never really supposed I had, maybe you would care to share the "disproof" of the concept? More importantly, would you care to discuss why the imperfection of substitutes should be adopted as a policy to be enforced upon seniors' standards of living?

You can argue, oddly, that the substitution effect has nothing to do with the quality of goods, but rather the relationship of prices all you want... but I would like to hear your argument for why the quality of goods is, somehow, not going to be one of the determinant causes of the relationship of prices.

Are you really trying to argue that the quality of goods is completely unrelated to the prices for those goods?

Only a theoretician who doesn't have to shop for him/herself would ever believe that to be true.

Including substitution effects in an inflation index makes it a better index only of what an animate sack of meat needs, dollar-wise, in order to continue to be an animate sack of meat, rather than an inanimate sack of meat. As for living standards... it is simply a rationalization for diminishing the standard of living of what might otherwise be people with some dignity... based on a presumption that these people are as flexible with their consumption habits as dumpster divers who can get by on whatever happens to be most conveniently available.

(To make the allusion explicit: If the availability of bread products in a dumpster is greater, then the dumpster diver will switch to a primarily bread-product diet... just as, when the availability of tofu is greater, as reflected in the theoretical relationship of supply and demand which theoretically sets the prices upon which Chained CPI is relatively based, then the Chained CPI tethered benefits recipients will switch to a tofu based diet... and there you have it, the theory of the substitution effect! That's so much BETTER...)

Ohh and... are you really trying to say that mathematics aren't "related" to the screen name "mathematic"? Or, were you just trying to lead in to a "folk wisdom" jab meant to try to demean my arguments by associating them, completely spuriously, with some sort of "un-science"?

I would like to read the exposition of your theory that someone is using "folk wisdom" to foil you. I'm not involved with any truck with "folk wisdom", I'm just pointing out that you are using language disingenuously, and that you seem to be employing mathematics as a smokescreen to cover your disingenuousness— whether you realize it or not. Your turn to smarminess as a retort, rather than actually addressing anything that I said, is kind of amusing though. Cheers.

If you'd care to really engage though, please do explain that theory that the prices of goods has nothing to do with the quality viz a viz substitutes... theoretically, sure... quality is not being considered. Quality of life, however, makes the quality an issue that needs to be addressed.

Please, do address it.

[jeff47]

60. The reason you're wrong is the CPI already contains the substitution effect.

What substitutes for chicken? Steak, for one. If the price of chicken rises faster than the price of steak, people will buy more steak relative to chicken.

Thus reducing the inflationary pressure on chicken. Which makes "chaining" the CPI redundant - the price of chicken is going to rise less because fewer people are buying it. And that will be reflected in the "normal" CPI.

I don't think I've seen a single non-fringe economist (think gold-shilling ron paul types as the exception) argue otherwise.

Apparently you haven't been looking very hard.

With respect to the appropriateness of a specific cost of living index, the argument against using chained CPI for SS is the same argument against using regular CPI for SS.

Um, no.

The argument for CPI-E is the 'basket' of goods bought by the elderly is different than a general consumer, and is heavily weighted towards healthcare products. The price of those products are going up faster than other goods.

The argument for Chained CPI is that you need to count substitution twice so as to get a lower number.

Chained CPI is solid theoretical math combined with the extensive empirical economic work done at the BLS.

If that were true, no one would be proposing ways to protect poor seniors. Protection would not be necessary - we'd just be using a more accurate number. So it could not cause harm.

Instead, the Obama administration is falling all over itself explaining how it's going to protect people from the damage of chained CPI.

[mathematic]

63. You're the first person I've seen claim that chained cpi is double counting substitution

So forgive me if I don't count that as the argument against using chained CPI for seniors.

BTW, I don't follow your argument about how substitution is double counted. Perhaps you can direct me to a more thorough writeup of the argument?

[jeff47]

69. Seriously? The example is trivial.

Week 1: 100 people buy chicken. Drives price of chicken up.
Week 2: 80 people buy chicken, 20 people buy beef.

20 fewer people are buying chicken. That means the price of chicken in week 3 will rise by less than if 100 people bought it during week 2, right? Basic economics - demand has gone down, so the price will go down (or not rise as much).

Well, that lower inflation in week 2-3 is represented using the traditional CPI. There's no need to chain it to capture the substitution effect.

[muriel_volestrangler]

79. Can you try again? That is unrelated to reality

Your example comes from the 'perfect' world of economic theory that concentrates on just one thing at a time. Chained CPI (and unchained CPI) comes from actual measurements of what people buy, and what companies charge, which doesn't involve an immediate "the more people buy chicken, the more it will cost". In the real world, the more people buy chicken, the larger the farms become, with economies of scale, and the more people look for ways to sell their chicken, and prices frequently come down.

[jeff47]

94. The fact that it's only one good does not make it invalid

That larger economy is based on the sum of all these individual goods and services. And the argument I'm making applies to each and every one of them.

In the real world, the more people buy chicken, the larger the farms become, with economies of scale, and the more people look for ways to sell their chicken, and prices frequently come down.

Because expanding a farm takes no time at all, right?

If you're going to make a claim that my example is unrealistic, instant expansion of farms isn't a good example to use.

And even if we still assume instant expansion is possible, that's still not a reason to chain CPI - the effects of that expansion would still be measured using the traditional CPI.

[muriel_volestrangler]

99. The thing is, your 'example' is irrelevant, as well as unrealistic

You claimed "the CPI already contains the substitution effect". You haven't attempted to show this at all - instead, you've described a theoretical change in the price that you think will occur if people buy less chicken. But that is a prediction (which we all know is a bad description of reality, because increases in volume tend to decrease prices, not increase them) of what will happen to prices - which has nothing to do with whether chained or unchained CPI measure substitution effects properly.

Now, I admit I got diverted by the red herring - I find the trotting out of "increased demand means an increase in price", when that is an absurd simplification that anyone in the real world would go broke believing as a law, infuriating - but it remains you have not even attempted to show "the CPI already contains the substitution effect".

Here's an example to show how substitution can throw off an unchained index. The goods are chicken and beef; both eventually go up by 20% in 2 years, and so people buy the same proportions after 2 years; but the beef price rise mostly happens later, so, after year 1, people have switched a bit from chicken to beef.

Year 0: chicken 10 units bought @ 10, beef 10 units @ 20
Year 1: chicken 9 units @ 11, beef 11 units @ 21
Year 2: chicken 10 units @ 12, beef 10 units @ 24

Year 1 CPI: inflation = (10*11+10*21)/(10*10+10*20) - 1 = 320/300 - 1 = 6.6%
Year 2 CPI: inflation = (9*12+11*24)/(9*11+11*21) - 1 = 372/330 - 1 = 12.73%

True inflation in the 2 years = (10*12+10*24)/(10*10+10*20) - 1 = 1 - 360/300 = 20%

But, 1.0667 * 1.1273 = 1.2024. Take the 2 years CPIs, put them together (as would happen if you used each year's CPI), and it looks like 20.24% - which is incorrect. That's why an unchained CPI gets thrown off by substitution.

[jeff47]

112. You're argument is not what I'm saying.

instead, you've described a theoretical change in the price that you think will occur if people buy less chicken.

Nope.

The only prediction I have made is that supply-and-demand is valid. I make no claims about what exactly will happen with the price of either chicken or beef.

If demand goes down that will reduce the upward price pressure on chicken. That doesn't mean the price will actually go down - there's a million things that could drive the price up on the 'supply' side of the equation. For example, drought could make it more expensive to produce chicken and that pressure could overwhelm the effect of demand reduced by substitution.

Your math example falls from that error - I have no reason to believe the price of chicken will go down in week 3 due to substitution. What I know is it won't go up AS MUCH as if there was no substitution. Which is where chained CPI fans and I agree. The disagreement comes from whether or not we need to add additional math to the traditional CPI to capture that.

And it's quite ironic you're attacking me for making a prediction - that's the entire reason people are pushing for chaining CPI!

CPI is backwards-looking. It isn't a prediction. Chaining the CPI is making a prediction - that actual inflation will be lower than the traditional CPI and so chaining would make it more accurate. However, their claims are just that substitution exists. They make little-to-no effort to show that substitution causes the traditional CPI overestimates inflation. If substitution did as much as they claim, people living on Social Security would have far better quality-of-life today than 20 years ago. And that's utterly false.

Finally, the fact that fans of chained CPI think changing to it requires protecting low-income people demonstrates they don't think it's more accurate.

[muriel_volestrangler]

117. Your argument is nothing to do with chained CPI, or unchained CPI

It's you who are making predictions - with phrases like "that will reduce the upward price pressure on chicken" or "I have no reason to believe the price of chicken will go down in week 3 due to substitution". This has absolutely nothing to do with any prediction of what will happen to prices. Remember, this is about measuring the entire cost of living, including fuel, food, housing, etc. It's just about measurement, not prediction. It's got nothing to do with how substitution will affect future prices.

Neither is there any claim that prices of items are affected by substitution. "Chaining the CPI is making a prediction" - no, it's not. Not in the slightest. It's a method of producing an index that uses the relative amounts of purchases at both the start and end of the period - unlike the traditional one, which just uses the weights from the start. It's not 'predictive' at all.

Did you really read the paper linked to in reply #81? You seem to have a completely different idea of what chained CPI is, and why it was created, from reality.

The point is that traditional CPI measures inflation for an average earning person, who makes no substitutions. Some argue that, since the average earning person does make substitutions, then their cost of living would be better measured by an index that accurately tracks substitution - is a chained one. And, thanks to substitution, earning people have gradually been able to buy some things cheaper, compared to the unchained CPI index (eg from the advent of new technology). But the main problem is that retired people have different spending patterns, which do not contain as much substitution as the average earner. So switching them to a chained CPI designed for earners would mean they would definitely fall behind - and they may well already be falling behind, even when using the unchained CPI.

[jeff47]

118. So supply and demand is wrong?

with phrases like "that will reduce the upward price pressure on chicken" or "I have no reason to believe the price of chicken will go down in week 3 due to substitution".

You are seriously arguing that supply and demand doesn't exist.

You should probably stop trying to argue economics by claiming one of its most fundamental concepts is wrong.

Remember, this is about measuring the entire cost of living, including fuel, food, housing, etc.

And again, having a whole lot of chicken-like things doesn't mean the chicken example is wrong. Heck, it's the example chained CPI supporters use, by stopping at week 2.

It's just about measurement, not prediction. It's got nothing to do with how substitution will affect future prices.

CPI is just a measurement of the current price for the items in the basket. That's a measurement. There's no value applied to the numbers as "better" or "worse". They're just numbers.

Chained CPI supporters claim these numbers are too high due to substitution. That's a prediction.

Neither is there any claim that prices of items are affected by substitution.

Um....yeah, that's the entire fucking point!

If substitution doesn't affect prices, then CPI is accurate. No chaining required if substitution has no effect on prices.

It's a method of producing an index that uses the relative amounts of purchases at both the start and end of the period

And it's based on the assumption that substitution affects prices. Otherwise, why bother with the extra step of chaining? It would have no effect.

Did you really read the paper linked to in reply #81? You seem to have a completely different idea of what chained CPI is, and why it was created, from reality.

You claim supply and demand doesn't exist, and that we need to chain CPI because of substitution, which has no effect on prices (thus destroying the reason to chain it).

And you want me to trust your analysis of someone else's paper?

Can you hear the laughing from there?

The point is that traditional CPI measures inflation for an average earning person, who makes no substitutions. Some argue that, since the average earning person does make substitutions, then their cost of living would be better measured by an index that accurately tracks substitution - is a chained one.

Go read back a couple paragraphs in your own post. It's where you say substitution has no effect on prices.

You should probably not argue based on two contradictory positions.

And, thanks to substitution, earning people have gradually been able to buy some things cheaper, compared to the unchained CPI index

And if that were true, people on CPI-indexed benefits like Social Security would be living much better today than 20 years ago - 2 decades of over-measuring inflation would mean they have a whole lot more real income today. And that has utterly failed to happen.

But the main problem is that retired people have different spending patterns, which do not contain as much substitution as the average earner.

And that's the argument for using CPI-E. It's not the argument for chaining.

In fact, it's the argument against chaining - if retired people can't substitute, why are you measuring them using an index that uses substitution?

So switching them to a chained CPI designed for earners would mean they would definitely fall behind - and they may well already be falling behind, even when using the unchained CPI.

Ok, so now you want to argue that the chained CPI is a bad idea?

Perhaps you could get back to us when you're done arguing with yourself. Your position at the beginning and end of this post contradict each other.

[muriel_volestrangler]

119. There's no point it trying to explain this to you

You really haven't grasped the basic meanings of the words involved, let alone what this is about. When you add to that your liberal use of strawmen, this has become a pointless exchange.

I'll point out a few of your basic problems, and leave it at that.

"You are seriously arguing that supply and demand doesn't exist. "

No, I'm not. I'm saying that this is not about supply and demand. It's about measuring the cost of living. If you can't see that, then you're wasting your time.

"Chained CPI supporters claim these numbers are too high due to substitution. That's a prediction. "

No, it's not a prediction. You just don't understand the meaning of 'prediction', it's clear.

"Go read back a couple paragraphs in your own post. It's where you say substitution has no effect on prices.

You should probably not argue based on two contradictory positions. "

There's a difference between prices, and how much people spend. Again, this is very basic. If people change what they buy, they change what they spend, but they don't change the prices.

No, I don't contradict myself. You seem to think that I was saying using chained CPI for the Social Security rises was a good thing. I've never said that. But I don't think you've tried to read what I've said, or what anyone trying to explain this to you has said, so it's not surprising you've got that wrong too.

Bye.

[mathematic]

81. I usually ask for clarification when something seems trivial when it shouldn't be

The substitution effect and prices changes are measured between week 1 & week 2.

The regular CPI says that the inflation between 1 & 2 is rise the price of chicken.

Chained CPI says the inflation is slightly less than rise in the price of chicken due to some beef substitution.

20 people preferred beef at the old price compared to chicken at the new price. The value (utility) from these purchases are higher than if they bought chicken. Since a cost of living index is supposed to measure constant utility, this additional utility must be factored in by reducing the inflation rate.

At week 2, neither CPI nor chained CPI make any statement about inflation or substitution effects in week 3.

I doubt this has done much to convince you. Internet posts are not a great format for that. Have you read this paper from the bls? http://www.bls.gov/cpi/super_paris.pdf

[jeff47]

95. Except the CPI isn't forward-looking.

Your argument requires that the CPI is somehow forward-looking. You want to chain the CPI from week 1-2 so that the week 1-2 number matches the week 2-3 number.

CPI, chained or not, is not a forecast.

I doubt this has done much to convince you. Internet posts are not a great format for that. Have you read this paper from the bls? http://www.bls.gov/cpi/super_paris.pdf

Yes, and I think their position is wrong. They again try to make CPI a forecast.

In addition, the BLS proposes all sorts of tweaks and adjustments to counteract the effects of the chained CPI. That destroys the argument they make in this paper. If the people proposing the chained CPI actually believed the story they're telling, then there is no need for the 'birthday bump' or other adjustments they are proposing along with it.

If they wanted to calculate the chained CPI in order to start building a track record, then that would be fine. Even though I don't think it's correct, I'd be thrilled for them to study it and see if it's more accurate over time. But they're not proposing to just study it, they're proposing to start using it without proving their model is correct. We only need to look at all the economists touting expansionary austerity to know models are not always correct.

[markpkessinger]

103. And what, pray tell, do they substitute when essential health care costs rise? n/t

[southernyankeebelle]

53. Well maybe they want us to eat cat or dog food. I remember years ago some

people did actually eat cat food. It's pretty sad the greed on the top of the chain. Heartbreaking if you ask me. This should be a no brainer.

[slackmaster]

55. Pork: The Other Chicken

[Fearless]

58. How about the price of rent

Or the price of health care. Or the price of heat.

Oh right, they don't care. I forget. Silly me thinking we elected someone looking out for the average American.

[winter is coming]

59. What the hell is wrong with raising SS so people can still buy chicken?

Seriously, millionaires have the nerve to propose that seniors should give up chicken? When are they going to downgrade their lifestyle?

[slackmaster]

68. I think laws that limit people raising their own chickens should be loosened

They're inexpensive and easy to take care of, and the fresh eggs are great!

[KamaAina]

71. Meow, meow, meow, meow...

meow, meow, meow, meow...

[pediatricmedic]

100. Glad you weren't suggesting roof rabbit

[gateley]

76. If the cost of hip surgery goes up, people can get hernia surgery instead.

[PDJane]

78. The absolute fact of the matter is that have lost any right to expect our opinion to matter.

We are, if we are no longer productive, going to be dying in record numbers, we are going to have a very low standard of living, and we are not going to have necessities like infrastructure. The powers that be have been dictating what we earn and what we do for a long time, and they are ramping up the military and police structure that will deal with us when we make our opinion known.

They don't understand that what we are doing to our environment and our social systems WILL backfire, and they won't get much out of it either. It takes a functioning government to make a fiat currency work, and that is going to fall.

[LiberalLoner]

83. Exactly. +1

[jsr]

87. It is a scam

[srican69]

96. Tofu flavored to taste like chicken .. there you go.

[Chan790]

101. Tofu is already more expensive per-Lb than chicken.

My guess is that instead of chicken they'll buy chicken-flavored cat-food.

As far as I am concerned, any supporter of the chained-CPI is an enemy of the people. They deserve our shame in them.

[XRubicon]

97. Soylent green... mmmm mmmmm good.

[srican69]

105. No chicken ??... let them eat foie gras in that case ...

[madrchsod]

106. well there`s squirrels and rabbits in my back yard

i did notice that the birds are to small to eat

[AnotherMcIntosh]

110. I'm not making this up. In one Chicago suburb, a candidate ran on a platform of allowing residents

to raise chickens in their backyards.

She won.

This is not a joke.

I wonder how some of the residents will feel about waking up at sunrise when roosters start crowing and getting ready for their daily chores?

http://2.bp.blogspot.com/_j0Y2sVVnsps/TFCXU_B46dI/AAAAAAAAAZU/HyRqb6rK0kM/s400/images[3].jpg

[NYC_SKP]

113. There are chickens in many large cities, NY and Chicago among them.

The super had chickens in my building on the Lower East Side and a friend of mine in Chicago has them-- a DU member no less!

[AnotherMcIntosh]

114. Legally?

Are these raised for eating?

[NYC_SKP]

115. Yes, I believe so, and not sure about eating but for eggs for sure.

Possibly not all boroughs of NYC, I'm not sure.

http://www.victorychickenco.com/

http://redhookchickenguy.com/

In Chicago, legal for eggs only, it seems.

http://forcechange.com/60592/allow-residents-to-raise-chickens-in-chicago/

http://www.chicagochickens.org/

Cluck, Cluck!!!

[AnotherMcIntosh]

116. Maybe this is what the suburban candiate was relying upon. Chicago used to have a special aroma

during the hot-weather months from the Chicago stockyards. The stockyards are gone. It could be that chickens do not produce the same problem.

[eShirl]

111. eggs