Every November brings the same headlines about the price of dinner—but the real story in today’s inflation report is the cost of travel and a paycheck that’s falling behind.
Dear Professor Wolfers. Nice article. Conjecturing from your analysis, is it safe to project ending the Iran war will trigger multiple events that would reduce inflation and perhaps consumer pricing? If so, this should be the top item of the new Congress’ agenda, combined with an amendment to overrule Citizens’ United and the development of an equitable tax system. A good start, but not a final product.
Remember how long it took to get out of Afghanistan? Before Trump tore up Obama’s nuclear inspection agreement, oil flowed from Iran and the usual Gulf suppliers and no refineries, pipelines, ports or tankers had been blown up. Pretend you’re Iran, and the US leaves. What do you do? Charge tolls on Gulf tankers to fund rebuilding and your nuclear program.
The war has spiked the already rapid EV adoption in the rest of the world. How much will anyone invest in rebuilding expensive, 20-30 year life refineries that Iran can blow up again and that will oversupply the global market as EV share and hybrid MPG both grow.
Trump supporting Russia instead of supplying Ukraine with Patriots resulted in Ukraine blowing up Russian refineries to limit Russia’s ability to fund the war. Until that war ends, those aren’t coming on line.
Well, I will admit, our American name for autumn isn't as pretty, but "fall" definitely describes what happens to the leaves on many trees in our country, though here in southern Arizona, it usually describes just the temperatures this time of year! (We do have a few trees that change color, especially in the nearby mountains.) Most of our native trees, shrubs, cacti, and flowering plants have other ways to cope with cooler temps. Soon it'll be hygge time. We love Platypus Economics!
If the U.S. headline Consumer Index (CPI) were calculated today using the methodology from the 1970s and early 1980s, the current inflation rate would be roughly 10% to 11.5%. This sits approximately 7 to 8 percentage points higher than the officially reported Bureau of Labor Statistics (BLS) headline.
What comes to my mind is the phrase "Lies, damned lies, and statistics" is most famously popularized by the American author Mark Twain, who attributed it to the British Prime Minister Benjamin Disraeli.
Just want to chime in to say that this isn't right. There have been changes in the methodology over time, but they've been mostly minor, and don't create anything like this divergence. I know there are folks out there claiming this, but they're just not right.
National Bureau of Economic Research (NBER) working paper co-authored by economist Larry Summers successfully reconstructed a legacy CPI metric that factored back in historical mortgage and borrowing costs. That study confirmed that when using a consistent, 1970s-style calculation, modern post-pandemic inflation peaks closely mirrored the true consumer sentiment and historic highs of the Great Inflation era
Thanks for the convo Professor Wohlers. President Theodore Roosevelt saying "like trying to nail jelly to a wall" (or "like nailing Jell-O to a wall" seems to describe today the accurate measurements of inflation for everyday Americans that “feels” much higher than official CPI
In 2006, I had a Palm Pilot portable calendar, email and note taking device, a Motorola flip phone, a MP3 player, a digital camera and a wireless modem for my chunky and tiny processor 4 hour battery life laptop. Let’s just say that was $2k in 2006 dollars. A $1000 in 2026 dollars iPhone does all those things and more way better. How does that show up in the inflation stats?
I drove a 2000 Saab 9-3 5 door hatchback that got 20 city/32 hwy mpg.
In 2016, I bought an end of model year 3 row Toyota Highlander hybrid for about the same amount in real dollars, that has lane drift warnings, automatic emergency braking, ventilated seats, digital audio and gets slightly better mileage despite vastly more cargo room and towing ability. How does that show up in inflation figures? Wheat is wheat, flour is flour, gas is gas, but tech and cars deliver multiples of the value of cars and tech from 20-40 years ago (if the tech existed) for less in real dollars.
Justin is right about flying but only right about driving if he bought a gas guzzler. What matters is $/mile, not $/gallon. The 2026 Highlander Hybrid with a lower real $ purchase price than my 2016 gets an insane 41 mpg highway, better than the tiny 2 door Honda hatchback that was my first car decades ago.
I have solar panels, and as soon as the new BMW iX3s with 430 miles of range hit the used market, I’ll probably sell my old ICE sedan and buy one, lowering my fuel cost for round trips under 375 miles or so to 0.
I'm keen to play around with Stata just for fun! I can't seem to find a suitable option to purchase though - no ID card for student, education - im not doing a degree, business is too expensive! Any suggestions?
Dear Professor Wolfers. Nice article. Conjecturing from your analysis, is it safe to project ending the Iran war will trigger multiple events that would reduce inflation and perhaps consumer pricing? If so, this should be the top item of the new Congress’ agenda, combined with an amendment to overrule Citizens’ United and the development of an equitable tax system. A good start, but not a final product.
Remember how long it took to get out of Afghanistan? Before Trump tore up Obama’s nuclear inspection agreement, oil flowed from Iran and the usual Gulf suppliers and no refineries, pipelines, ports or tankers had been blown up. Pretend you’re Iran, and the US leaves. What do you do? Charge tolls on Gulf tankers to fund rebuilding and your nuclear program.
The war has spiked the already rapid EV adoption in the rest of the world. How much will anyone invest in rebuilding expensive, 20-30 year life refineries that Iran can blow up again and that will oversupply the global market as EV share and hybrid MPG both grow.
Trump supporting Russia instead of supplying Ukraine with Patriots resulted in Ukraine blowing up Russian refineries to limit Russia’s ability to fund the war. Until that war ends, those aren’t coming on line.
Well, I will admit, our American name for autumn isn't as pretty, but "fall" definitely describes what happens to the leaves on many trees in our country, though here in southern Arizona, it usually describes just the temperatures this time of year! (We do have a few trees that change color, especially in the nearby mountains.) Most of our native trees, shrubs, cacti, and flowering plants have other ways to cope with cooler temps. Soon it'll be hygge time. We love Platypus Economics!
If the U.S. headline Consumer Index (CPI) were calculated today using the methodology from the 1970s and early 1980s, the current inflation rate would be roughly 10% to 11.5%. This sits approximately 7 to 8 percentage points higher than the officially reported Bureau of Labor Statistics (BLS) headline.
What comes to my mind is the phrase "Lies, damned lies, and statistics" is most famously popularized by the American author Mark Twain, who attributed it to the British Prime Minister Benjamin Disraeli.
Just want to chime in to say that this isn't right. There have been changes in the methodology over time, but they've been mostly minor, and don't create anything like this divergence. I know there are folks out there claiming this, but they're just not right.
My source for 10% inflation today
https://www.shadowstats.com/alternate_data/inflation-charts
I'm afraid those folks are well-known purveyors of misinformation.
Read more here: https://www.fullstackeconomics.com/p/no-the-real-inflation-rate-isnt-14-percent
National Bureau of Economic Research (NBER) working paper co-authored by economist Larry Summers successfully reconstructed a legacy CPI metric that factored back in historical mortgage and borrowing costs. That study confirmed that when using a consistent, 1970s-style calculation, modern post-pandemic inflation peaks closely mirrored the true consumer sentiment and historic highs of the Great Inflation era
Official and Estimated CPI using pre-1983
https://photos.app.goo.gl/Ww41BsdLZEjKK2rR8
Thanks for the convo Professor Wohlers. President Theodore Roosevelt saying "like trying to nail jelly to a wall" (or "like nailing Jell-O to a wall" seems to describe today the accurate measurements of inflation for everyday Americans that “feels” much higher than official CPI
In 2006, I had a Palm Pilot portable calendar, email and note taking device, a Motorola flip phone, a MP3 player, a digital camera and a wireless modem for my chunky and tiny processor 4 hour battery life laptop. Let’s just say that was $2k in 2006 dollars. A $1000 in 2026 dollars iPhone does all those things and more way better. How does that show up in the inflation stats?
I drove a 2000 Saab 9-3 5 door hatchback that got 20 city/32 hwy mpg.
In 2016, I bought an end of model year 3 row Toyota Highlander hybrid for about the same amount in real dollars, that has lane drift warnings, automatic emergency braking, ventilated seats, digital audio and gets slightly better mileage despite vastly more cargo room and towing ability. How does that show up in inflation figures? Wheat is wheat, flour is flour, gas is gas, but tech and cars deliver multiples of the value of cars and tech from 20-40 years ago (if the tech existed) for less in real dollars.
Justin is right about flying but only right about driving if he bought a gas guzzler. What matters is $/mile, not $/gallon. The 2026 Highlander Hybrid with a lower real $ purchase price than my 2016 gets an insane 41 mpg highway, better than the tiny 2 door Honda hatchback that was my first car decades ago.
I have solar panels, and as soon as the new BMW iX3s with 430 miles of range hit the used market, I’ll probably sell my old ICE sedan and buy one, lowering my fuel cost for round trips under 375 miles or so to 0.
I'm keen to play around with Stata just for fun! I can't seem to find a suitable option to purchase though - no ID card for student, education - im not doing a degree, business is too expensive! Any suggestions?