I’m not sure what you mean. There’s plenty of the economy that isn’t factored into GDP, but that’s particularly those aspects that don’t have a market price and thus aren’t directly relevant to inflation.
If, for example, the quality of teachers is reduced by 50%, then the price of the same amount of teaching has effectively doubled. But unless their salary is also affected (which is not obvious), how would you actually notice this in the inflation or GDP figures?
GDP measures all goods and services produced. Inflation measures a basket of consumer goods which excludes a lot if not most of the economy. E.g. the whole of the B2B sector. Any price incease that’s not part of the CPI basket which did not reduce sales volume would result in increased real GDP.
GDP most assuredly does not measure “all” goods and services in an economy. I gave you an example that isn’t measured by GDP in the very post you responded to.
GDP is a rough estimate of the market value of a certain part of the goods and services produced in an economy. Those aspects that are not directly traded for money, or have indirect effects, are disregarded. This includes but is not limited to leisure time, child-rearing in families, and pollution, among many other examples.
The official inflation figure is strongly affected by the B2B sector. The cost of B2B transactions is passed onto the consumer in the final price. For example, an oil refinery (a business) buys oil from another business. The petrol that is sold to consumers will be more expensive if this oil is also more expensive.
I meant priced goods and services. But again, CPI misses a lot more than GDP measures even without touching externalities. Some believe it’s good enough. I don’t.
Good enough for what? The official inflation numbers say prices have doubled in the past 30 years or so, which fits decently with my subjective assessment. Any small discrepancies between the “true” inflation numbers and the official figures are irrelevant to consumers, and any large discrepancies are paranoid conspiracy thinking.
Thay may be the case where you are. Certainly isn’t the case where I am. Housing doubled in a decade between 2010-2020 while inflation was under 2% in that period. No amount of calling it conspiracy thinking can hide the material effects of that. Most Canadians would laugh at such suggestion. 😄
Well okay, if the inflation is X it doesn’t mean that every single commodity became X more expensive. It’s an average.
Real estate typically appreciates at a rate higher than inflation, partially because land is finite, and partially because taxes haven’t increased at the rate productivity has (so there is more money available to spend on housing).
And if the main expense of most Canadians is so far disconnected from the official inflation numbers then CPI is not a good measurement of inflation in Canada. So for me CPI as computed today, where I live, is not a good enough measure of inflation. Explanations to why that is don’t change that. I’m not saying I agree with the explanation either.
I didn’t say it was “so far” disconnected. As a major component of the CPI, housing inflation substantially influences the total inflation figure.
That said, there’s nothing stopping you from looking up inflation figures for housing specifically if you think those figures are more informative. Those figures are tracked and published, and you can find them with a modicum of detective work. However, that won’t tell you what the overall inflation figure tells you, i.e., the depreciation of money.
Keep in mind though that even this figure might not correspond to your personal experience, as it’s a figure for Canada as a whole, and not specifically for any particular rapidly growing urban centre.
The problem with the housing market (not just in Canada) is that there is a lot of upwards pressure on prices from 9%-ers who can easily afford anything. This is a taxation, not inflation problem.
I’m not sure what you mean. There’s plenty of the economy that isn’t factored into GDP, but that’s particularly those aspects that don’t have a market price and thus aren’t directly relevant to inflation.
If, for example, the quality of teachers is reduced by 50%, then the price of the same amount of teaching has effectively doubled. But unless their salary is also affected (which is not obvious), how would you actually notice this in the inflation or GDP figures?
GDP measures all goods and services produced. Inflation measures a basket of consumer goods which excludes a lot if not most of the economy. E.g. the whole of the B2B sector. Any price incease that’s not part of the CPI basket which did not reduce sales volume would result in increased real GDP.
GDP most assuredly does not measure “all” goods and services in an economy. I gave you an example that isn’t measured by GDP in the very post you responded to.
GDP is a rough estimate of the market value of a certain part of the goods and services produced in an economy. Those aspects that are not directly traded for money, or have indirect effects, are disregarded. This includes but is not limited to leisure time, child-rearing in families, and pollution, among many other examples.
The official inflation figure is strongly affected by the B2B sector. The cost of B2B transactions is passed onto the consumer in the final price. For example, an oil refinery (a business) buys oil from another business. The petrol that is sold to consumers will be more expensive if this oil is also more expensive.
I meant priced goods and services. But again, CPI misses a lot more than GDP measures even without touching externalities. Some believe it’s good enough. I don’t.
Good enough for what? The official inflation numbers say prices have doubled in the past 30 years or so, which fits decently with my subjective assessment. Any small discrepancies between the “true” inflation numbers and the official figures are irrelevant to consumers, and any large discrepancies are paranoid conspiracy thinking.
Thay may be the case where you are. Certainly isn’t the case where I am. Housing doubled in a decade between 2010-2020 while inflation was under 2% in that period. No amount of calling it conspiracy thinking can hide the material effects of that. Most Canadians would laugh at such suggestion. 😄
Well okay, if the inflation is X it doesn’t mean that every single commodity became X more expensive. It’s an average.
Real estate typically appreciates at a rate higher than inflation, partially because land is finite, and partially because taxes haven’t increased at the rate productivity has (so there is more money available to spend on housing).
And if the main expense of most Canadians is so far disconnected from the official inflation numbers then CPI is not a good measurement of inflation in Canada. So for me CPI as computed today, where I live, is not a good enough measure of inflation. Explanations to why that is don’t change that. I’m not saying I agree with the explanation either.
I didn’t say it was “so far” disconnected. As a major component of the CPI, housing inflation substantially influences the total inflation figure.
That said, there’s nothing stopping you from looking up inflation figures for housing specifically if you think those figures are more informative. Those figures are tracked and published, and you can find them with a modicum of detective work. However, that won’t tell you what the overall inflation figure tells you, i.e., the depreciation of money.
Keep in mind though that even this figure might not correspond to your personal experience, as it’s a figure for Canada as a whole, and not specifically for any particular rapidly growing urban centre.
The problem with the housing market (not just in Canada) is that there is a lot of upwards pressure on prices from 9%-ers who can easily afford anything. This is a taxation, not inflation problem.