I guess charitably you could say eggs have roughly tripled in price since 2019? But their price swing certainly doesn’t seem to be part of a broader trend in food prices, just one good that had an unusually swingy price the last few years.

@earthmoonlotus

Anon is so full of shit, like we are not making twice as much. Wages have stagnated while everything else has gone up. The federal minimum wage has not been raised in decades.

This may be true for some individuals, but this is broadly not true for the American economy. The exact details vary depending on the graph you look at, but by almost every relevant metric, income growth has been outpacing price increases for several years now, and this growth has been fastest among the lowest wage earners. Every few days there's a huge knock-down drag-out fight on twitter where some people say "that's not true, that can't be true, because (reasons)", someone gets accused of being a fascist for quoting BLS statistics, and it ends in cursing and hurt feelings all around.

But the long and short of it is, the US is a big country; for every macroeconomic trend there will be millions of exceptions; general improvement in economic conditions doesn't mean some people aren't struggling and their struggles aren't valid; but the plural of anecdote is not data, people routinely misremember how much they spent on groceries a year ago (and the basket of goods they buy tends not to be stable), and U.S. government economic data tends to be both very good and fairly exhaustive, so we can (for instance) calculate quite accurately how much wages and prices have changed and changed with respect to each other over time.

I don't wanna import the whole dynamic from Twitter over here, and you can quibble about what the best measure of income vs wages are or what your personal best theory of why economic sentiment has become uncoupled from economic indicators in the last couple of years (some say it's housing prices alone, which have been a big problem in a lot of areas; others say it's social media; others have other theories), but in general, wages have indeed been rising faster than prices. (Also, note only about 1.3 percent of workers in the US make at or less than federal minimum wage. So the federal minimum wage, even though it has stagnated, is not representative of incomes for the vast majority of workers, even the majority of, say, the bottom quintile or the bottom decile of wage-earners.)

(but also consumer sentiment might be catching up to economic indicators!)

Here's the problem. This isn't actually about inflation, and proving inflation is fine is swinging at the umpire rather than at the baseball. And let's talk about that.

So this is true if you measure inflation in terms of total price increases across the entire economy. If you measure inflation as some averaged percentage of price increases over all consumer goods and services, it has actually been fairly moderate for the last few years, anywhere from 3 to 5% depending on how you measure it, and everything is fine. Especially if you shuffle rent and housing off into their own separate category.

But people don't spend their money on an evenly distributed index of goods and services in the economy. They mostly pay rent, buy specific types of groceries like eggs and milk and bread, pay for health care insurance and expenses, etc. And so the specifics of what is going up in price and how people respond to that is what determines perception of inflation. And frankly I would argue the lived reality of 'inflation' is. So let's start by looking at food.

Food spending increases were relatively moderate over the last few years, which can lead to a false perception that food inflation has been relatively moderate. After all the amount of extra money being spent didn't increase all that much, and if you do a purely numerical comparison of wages and food prices it looks fine.

But look at how food prices skyrocketed at the same time that people weren't spending all that much extra money. That indicates that people made massive changes in what food they are consuming in response to price increases which never went down. In other words people stopped consuming as much high quality and luxury food and started consuming more survival food. And I shouldn't have to tell you that finance-driven constriction of food consumption, that thing we all do multiple times a day which serves as a primary social function, is going to have a huge goddamn psychological impact! And it is not going to be possible to reverse that psychological impact until the food prices go down enough to relieve that pressure. Not just stop inflating, go down, and stay down. Which they have not.

And frankly I would argue that this isn't just a psychological impact, that this is a real world quality of life measure which should be prioritized. We can after all imagine very different lived experiences which are tied to wage increase which outpaces the total cost of goods and services purchased in the economy. That could be representative of a positive growth economy where people's incomes are growing so fast that it outpaces increases in expenditures. Or it could be representative of an economy where prices skyrocketed so hard and so fast that people started consuming fewer and inferior goods, and the anxiety and instability was so extreme that people cut expenditures beyond the degree necessary to normalize their spending, choosing to prioritize saving in an uncertain environment over spending.

One of those scenarios is the scenario the statistical of reports you mentioned like to imagine. The other one is reality and it is incredibly grim.

You also can't just look at increase in wages versus generic increase of prices in the economy. Because often where people are getting those increased wages is from moving into more urban areas which have higher wages ... but not to the degree of compensating for the increased local cost of living.

What you actually want to analyze is the cost burden of households. That is, the fraction of money they are spending on cost of living expenditures or economic ladder expenses like college for their children. People don't feel like prices are going up because of some aggregated percentage increase of all goods and services relative to their wages, they feel like prices are going up when the fraction of money they have to spend and save goes down.

Now the strange thing about modern industrial economies is that ongoing automation improvements mean that the effective purchasing power in goods of a dollar increases fairly quickly in a way which means even people with static incomes, let alone steadily increasing incomes, experience fairly rapid increases in luxury purchasing power. But the thing is that this increase in luxury purchasing power, while it weighs very heavily on official measures of things like inflation (because the cost of consumable goods is depressed), does not necessarily represent an improvement in financial security.

Because what determines whether you experience a sudden catastrophic quality of life decrease is not really the purchasing power of the dollar in consumable goods, it's whether you can make rent. It's whether a healthcare cost cripples you financially. It's whether you end up homeless, and how close to that bleeding edge you feel you are.

As an example, let's say we have a household that spends 25% of its income on cost of living necessities and a household that spends 90% of its income on cost of living necessities, but these households exist in differently industrialized economies. The 75% leftover income of the first household can only buy a third of the goods that the 10% leftover of the second household can purchase. By the statistics being mentioned earlier, net wage purchasing power and aggregated inflation over goods and services, the second household would be incomparably better.

But that's not how this works in practice, not at all. Because the first household could experience a 20% rent hike and shrug it off. If 2/3 of their cost of living expenditures are rent and that goes up 20%, the change in their purchasing capacity and their fiscal security is a rounding error. But if the second household experience is a 20% rent hike, on rent that is similarly 2/3 of their cost of living, they might be homeless. That fully wipes out every single bit of spending money they had and then some.

This is also why housing market volatility, as opposed to net increase, is such an important factor. Both of these households would likely complain if their housing expenditures increased substantially year after year, though obviously the impact would be very different. But an economy made out of households like the first one could fully ignore a fairly large amount of volatility, if that volatility occurred in the context of minor net increases. But an economy made up of households like the second one is going to see large chunks of the population experience massive Financial insecurity in a volatile market, hell even of volatile market which has net decreasing prices.

And this is what I think so many statistics about inflation are missing. Yes, inflation is not actually increasing relative to wages as much as people think it is, but that is not and has never been the problem!!! That is the thing that politicians and news figures have seized on as the cause of an angry public sentiment, and which has become the colloquial term to describe an increasing financial anxiety. And of course people who are feeling incredibly financially anxious, constrained and insecure, who are told that is happening because prices are increasing relative to wages, are going to believe that. Especially when they just saw the price of eggs triple at their local grocery store. But that people are wrong to be anxious if you can prove they are technically wrong about inflation in that sense.

Because the actual problem is insecurity and cost burden. Even as consumer purchasing power in the economy goes up as a function of modest relative wage increases and dollar power improvements, actual fiscal security is going down at the same time that cost of living volatility is going up.

it doesn't matter if grocery prices have stabilized for now, because people know that they could be jacked up at any point in time to catastrophic effect on their lives and there's nothing they could do about it. So they tighten their belts and spend the same amount and resent it deeply. And the government hasn't fixed the first increase, or done anything to prevent another, and people's belts are still tightened, but it's still declaring victory, and that makes people fucking furious.

It doesn't matter if somebody can manage to afford rent right now despite their rent getting jacked up 25% a few years ago. What matters is that another increase like that would put them underwater and they couldn't do anything about the last one. The economic precarity of that is emotionally debilitating and it limits people's inclination to move or seek better, because it puts them in a defensive crisis mode.

People whose costs of living make up very large proportions of their household budget want, above all else, security and control. When momentary volatility creates a huge shock to their basic financial solvency, they don't just want the market to stabilize into something survivable. They want to take control of their environment in a way that ensures it will not happen again.

This has not happened and I think it's the fundamental misunderstanding of governments and a lot of economists that's leading to them declaring victory over inflation and then being baffled by a viciously angry public response to that.

And it frankly baffles me the degree to which financial institutions refuse to recognize this basic fact. Because it is the foundation of the modern economic engine. It was housing insurance and stable banking savings accounts and social security and regulated mortgage contracts and business insurance and all of those stability creating fiscal inventions which created the modern consumer economy. It was the ability of the financial economy to normalize spikes in critical spending, allowing people to spend or invest money with confidence as opposed to constantly hunkering down and saving against the specter of annihilation, which formed the backbone of all modern economic growth. It is the foundational reason that Karl Marx was wrong about whether net yearly economic growth is possible, in ways that were impossible in the previous manorialist system.

People's grounded financial security and reasoned ability to predict future cost of living expenditures is the foundation of the modern economy. But modern economic health analyzes seem absolutely determined to gloss over that and only look at purchasing power of goods.

But then again, it makes a sad amount of sense. These financial reports are being collated for institutions primarily concerned with how much monetary value is available for extraction in the economy, which think of financial success as the capture of more monetary value. And the people and the institutions, governments and banks and hedge funds, talking about this stuff do not personally experience the specter of physical anxiety in the same way most people do. These are large institutions with widely distributed economic portfolios, run by people who make very good money (even in government where people don't get paid as much, whoever is running the department at any given time is probably independently wealthy or looking forward to a very nice sinecure when they retire). It may simply not occur to them that what matters to most people is not how many units of a distributed consumer goods portfolio they could purchase if they liquidated their assets, but how much anxiety you feel over the prospect of your landlord jacking up the rent.

Here's the problem. This isn't actually about inflation [huge list of reasons]

Yes, like I said, they have this discussion every week over at twitter dot com, and I do not want to have it here; "economic indicators are actually useless" is certainly one of the many hypotheses people advance, and there's a lot of speculation and never any good hard evidence for it, and I really, really don't want to try to re-hash this discussion on Tumblr.

These financial reports are being collated for institutions primarily concerned with how much monetary value is available for extraction in the economy, which think of financial success as the capture of more monetary value.

I keep running into this meme, and my kneejerk reaction is that it's conspiracy-inflected at bottom. Look, Goodharting is absolutely a thing, but the U.S. government collects statistics for the U.S. government to use, and politicians and policymakers care about accurately capturing economic measures relevant to ordinary consumers and accurately capturing consumer sentiment because they like winning elections. I don't really know how you could make the incentives any more aligned here. Ordinary citizens can phone up government offices and ask questions about the statistics and the economists and statisticians who run these offices are happy to talk to you, because they're run as part of a public service, not as a shadowy circle of nefarious evildoers in the pay of Wall Street. Reporters do it all the time, in fact.

If you think there are manifestly better ways of measuring economic performance, I am sure there are any number of economics journals who would be happy to receive your paper, but generally I think this criticism amounts to a suspicion that people far away, whose names you do not know, are doing something out of sight that must somehow be nefarious, and I am very cynical about that sort of thing.

I'm not saying that economic indicators are actually useless, I'm saying it's possible to focus on the wrong ones. That's not contentious, that is the foundational basis of using economic indicators. Like, there is a reason we don't use average income as an economic health indicator. It's not because economic health indicators are a useless concept, it's because average income specifically is a very fraught indicator to use for economic health.

What I am saying is that we are seeing economic indicators of purchasing power capacity being used to argue that people shouldn't feel the politically relevant financial anxiety and lack of control that they do. I think there are very good economic indicators for the latter, that's why I cited them. I just don't think that the ones you mentioned actually indicate a lack of a problem the way you said they do, because you are neglecting more important ones.

And yes of course the US government has very good macro scale incentives to collate data that is meaningful. They also have incentive to contextualize current events in ways that allow them to declare success. Like, the US obviously has macro scale incentives to have a clear-eyed view of war, but that sure didn't prevent George W Bush from making an aged like milk declaration of victory on an aircraft carrier. The argument you are making is that it is impossible for democratic governments to be wearing blinders because blinders make it difficult to win elections, when that is manifestly not even a little bit true.

I mean for the love of sanity, just look at how the US government defines unemployment. It has created a ton of exceptions to define people who can't find employment as not unemployed, in a way which makes it actually genuinely difficult for the government to grapple with real unemployment because it's not keeping collating that data. The incentive structure of democracies towards producing good public outcomes as opposed to bribing a narrow winning coalition is a tendency, not a law of nature, and strongly dependent on particulars and the health of the democracy to boot. Of course it's possible for a democratic government to focus on the wrong things when evaluating its own success, it's frankly absurd to claim otherwise.

And individual people within institutions are obviously not immune to bias stemming from their backgrounds, and so institutions are not immune to bias stemming from structural factors in the backgrounds of the individuals which comprise them. I don't think it's controversial to say that people trained in finance, a field thats practical output is largely about capturing monetary value and whose practitioners tend to be fairly wealthy, who are in the financially privileged position that comes with running organizations (particularly in a government where such people are often rewarded with sinecures), might systematically undervalue the importance of financial instability.

I mean for crying out loud your counterpoint here is basically that the American government can't make mistakes and that the way economic institutions evaluate the economy is always correct, so why even bother engaging with the statement that people are more financially insecure than the specific economic indicators you were citing reveal.

i have heard all of these arguments before. I think they’re all bad! you should @ will stancil, he actually likes arguing about this stuff.

@earthmoonlotus

Anon is so full of shit, like we are not making twice as much. Wages have stagnated while everything else has gone up. The federal minimum wage has not been raised in decades.

This may be true for some individuals, but this is broadly not true for the American economy. The exact details vary depending on the graph you look at, but by almost every relevant metric, income growth has been outpacing price increases for several years now, and this growth has been fastest among the lowest wage earners. Every few days there's a huge knock-down drag-out fight on twitter where some people say "that's not true, that can't be true, because (reasons)", someone gets accused of being a fascist for quoting BLS statistics, and it ends in cursing and hurt feelings all around.

But the long and short of it is, the US is a big country; for every macroeconomic trend there will be millions of exceptions; general improvement in economic conditions doesn't mean some people aren't struggling and their struggles aren't valid; but the plural of anecdote is not data, people routinely misremember how much they spent on groceries a year ago (and the basket of goods they buy tends not to be stable), and U.S. government economic data tends to be both very good and fairly exhaustive, so we can (for instance) calculate quite accurately how much wages and prices have changed and changed with respect to each other over time.

I don't wanna import the whole dynamic from Twitter over here, and you can quibble about what the best measure of income vs wages are or what your personal best theory of why economic sentiment has become uncoupled from economic indicators in the last couple of years (some say it's housing prices alone, which have been a big problem in a lot of areas; others say it's social media; others have other theories), but in general, wages have indeed been rising faster than prices. (Also, note only about 1.3 percent of workers in the US make at or less than federal minimum wage. So the federal minimum wage, even though it has stagnated, is not representative of incomes for the vast majority of workers, even the majority of, say, the bottom quintile or the bottom decile of wage-earners.)

(but also consumer sentiment might be catching up to economic indicators!)

Here's the problem. This isn't actually about inflation, and proving inflation is fine is swinging at the umpire rather than at the baseball. And let's talk about that.

So this is true if you measure inflation in terms of total price increases across the entire economy. If you measure inflation as some averaged percentage of price increases over all consumer goods and services, it has actually been fairly moderate for the last few years, anywhere from 3 to 5% depending on how you measure it, and everything is fine. Especially if you shuffle rent and housing off into their own separate category.

But people don't spend their money on an evenly distributed index of goods and services in the economy. They mostly pay rent, buy specific types of groceries like eggs and milk and bread, pay for health care insurance and expenses, etc. And so the specifics of what is going up in price and how people respond to that is what determines perception of inflation. And frankly I would argue the lived reality of 'inflation' is. So let's start by looking at food.

Food spending increases were relatively moderate over the last few years, which can lead to a false perception that food inflation has been relatively moderate. After all the amount of extra money being spent didn't increase all that much, and if you do a purely numerical comparison of wages and food prices it looks fine.

But look at how food prices skyrocketed at the same time that people weren't spending all that much extra money. That indicates that people made massive changes in what food they are consuming in response to price increases which never went down. In other words people stopped consuming as much high quality and luxury food and started consuming more survival food. And I shouldn't have to tell you that finance-driven constriction of food consumption, that thing we all do multiple times a day which serves as a primary social function, is going to have a huge goddamn psychological impact! And it is not going to be possible to reverse that psychological impact until the food prices go down enough to relieve that pressure. Not just stop inflating, go down, and stay down. Which they have not.

And frankly I would argue that this isn't just a psychological impact, that this is a real world quality of life measure which should be prioritized. We can after all imagine very different lived experiences which are tied to wage increase which outpaces the total cost of goods and services purchased in the economy. That could be representative of a positive growth economy where people's incomes are growing so fast that it outpaces increases in expenditures. Or it could be representative of an economy where prices skyrocketed so hard and so fast that people started consuming fewer and inferior goods, and the anxiety and instability was so extreme that people cut expenditures beyond the degree necessary to normalize their spending, choosing to prioritize saving in an uncertain environment over spending.

One of those scenarios is the scenario the statistical of reports you mentioned like to imagine. The other one is reality and it is incredibly grim.

You also can't just look at increase in wages versus generic increase of prices in the economy. Because often where people are getting those increased wages is from moving into more urban areas which have higher wages ... but not to the degree of compensating for the increased local cost of living.

What you actually want to analyze is the cost burden of households. That is, the fraction of money they are spending on cost of living expenditures or economic ladder expenses like college for their children. People don't feel like prices are going up because of some aggregated percentage increase of all goods and services relative to their wages, they feel like prices are going up when the fraction of money they have to spend and save goes down.

Now the strange thing about modern industrial economies is that ongoing automation improvements mean that the effective purchasing power in goods of a dollar increases fairly quickly in a way which means even people with static incomes, let alone steadily increasing incomes, experience fairly rapid increases in luxury purchasing power. But the thing is that this increase in luxury purchasing power, while it weighs very heavily on official measures of things like inflation (because the cost of consumable goods is depressed), does not necessarily represent an improvement in financial security.

Because what determines whether you experience a sudden catastrophic quality of life decrease is not really the purchasing power of the dollar in consumable goods, it's whether you can make rent. It's whether a healthcare cost cripples you financially. It's whether you end up homeless, and how close to that bleeding edge you feel you are.

As an example, let's say we have a household that spends 25% of its income on cost of living necessities and a household that spends 90% of its income on cost of living necessities, but these households exist in differently industrialized economies. The 75% leftover income of the first household can only buy a third of the goods that the 10% leftover of the second household can purchase. By the statistics being mentioned earlier, net wage purchasing power and aggregated inflation over goods and services, the second household would be incomparably better.

But that's not how this works in practice, not at all. Because the first household could experience a 20% rent hike and shrug it off. If 2/3 of their cost of living expenditures are rent and that goes up 20%, the change in their purchasing capacity and their fiscal security is a rounding error. But if the second household experience is a 20% rent hike, on rent that is similarly 2/3 of their cost of living, they might be homeless. That fully wipes out every single bit of spending money they had and then some.

This is also why housing market volatility, as opposed to net increase, is such an important factor. Both of these households would likely complain if their housing expenditures increased substantially year after year, though obviously the impact would be very different. But an economy made out of households like the first one could fully ignore a fairly large amount of volatility, if that volatility occurred in the context of minor net increases. But an economy made up of households like the second one is going to see large chunks of the population experience massive Financial insecurity in a volatile market, hell even of volatile market which has net decreasing prices.

And this is what I think so many statistics about inflation are missing. Yes, inflation is not actually increasing relative to wages as much as people think it is, but that is not and has never been the problem!!! That is the thing that politicians and news figures have seized on as the cause of an angry public sentiment, and which has become the colloquial term to describe an increasing financial anxiety. And of course people who are feeling incredibly financially anxious, constrained and insecure, who are told that is happening because prices are increasing relative to wages, are going to believe that. Especially when they just saw the price of eggs triple at their local grocery store. But that people are wrong to be anxious if you can prove they are technically wrong about inflation in that sense.

Because the actual problem is insecurity and cost burden. Even as consumer purchasing power in the economy goes up as a function of modest relative wage increases and dollar power improvements, actual fiscal security is going down at the same time that cost of living volatility is going up.

it doesn't matter if grocery prices have stabilized for now, because people know that they could be jacked up at any point in time to catastrophic effect on their lives and there's nothing they could do about it. So they tighten their belts and spend the same amount and resent it deeply. And the government hasn't fixed the first increase, or done anything to prevent another, and people's belts are still tightened, but it's still declaring victory, and that makes people fucking furious.

It doesn't matter if somebody can manage to afford rent right now despite their rent getting jacked up 25% a few years ago. What matters is that another increase like that would put them underwater and they couldn't do anything about the last one. The economic precarity of that is emotionally debilitating and it limits people's inclination to move or seek better, because it puts them in a defensive crisis mode.

People whose costs of living make up very large proportions of their household budget want, above all else, security and control. When momentary volatility creates a huge shock to their basic financial solvency, they don't just want the market to stabilize into something survivable. They want to take control of their environment in a way that ensures it will not happen again.

This has not happened and I think it's the fundamental misunderstanding of governments and a lot of economists that's leading to them declaring victory over inflation and then being baffled by a viciously angry public response to that.

And it frankly baffles me the degree to which financial institutions refuse to recognize this basic fact. Because it is the foundation of the modern economic engine. It was housing insurance and stable banking savings accounts and social security and regulated mortgage contracts and business insurance and all of those stability creating fiscal inventions which created the modern consumer economy. It was the ability of the financial economy to normalize spikes in critical spending, allowing people to spend or invest money with confidence as opposed to constantly hunkering down and saving against the specter of annihilation, which formed the backbone of all modern economic growth. It is the foundational reason that Karl Marx was wrong about whether net yearly economic growth is possible, in ways that were impossible in the previous manorialist system.

People's grounded financial security and reasoned ability to predict future cost of living expenditures is the foundation of the modern economy. But modern economic health analyzes seem absolutely determined to gloss over that and only look at purchasing power of goods.

But then again, it makes a sad amount of sense. These financial reports are being collated for institutions primarily concerned with how much monetary value is available for extraction in the economy, which think of financial success as the capture of more monetary value. And the people and the institutions, governments and banks and hedge funds, talking about this stuff do not personally experience the specter of physical anxiety in the same way most people do. These are large institutions with widely distributed economic portfolios, run by people who make very good money (even in government where people don't get paid as much, whoever is running the department at any given time is probably independently wealthy or looking forward to a very nice sinecure when they retire). It may simply not occur to them that what matters to most people is not how many units of a distributed consumer goods portfolio they could purchase if they liquidated their assets, but how much anxiety you feel over the prospect of your landlord jacking up the rent.

Here’s the problem. This isn’t actually about inflation [huge list of reasons]

Yes, like I said, they have this discussion every week over at twitter dot com, and I do not want to have it here; “economic indicators are actually useless” is certainly one of the many hypotheses people advance, and there’s a lot of speculation and never any good hard evidence for it, and I really, really don’t want to try to re-hash this discussion on Tumblr.

These financial reports are being collated for institutions primarily concerned with how much monetary value is available for extraction in the economy, which think of financial success as the capture of more monetary value.

I keep running into this meme, and my kneejerk reaction is that it’s conspiracy-inflected at bottom. Look, Goodharting is absolutely a thing, but the U.S. government collects statistics for the U.S. government to use, and politicians and policymakers care about accurately capturing economic measures relevant to ordinary consumers and accurately capturing consumer sentiment because they like winning elections. I don’t really know how you could make the incentives any more aligned here. Ordinary citizens can phone up government offices and ask questions about the statistics and the economists and statisticians who run these offices are happy to talk to you, because they’re run as part of a public service, not as a shadowy circle of nefarious evildoers in the pay of Wall Street. Reporters do it all the time, in fact.

If you think there are manifestly better ways of measuring economic performance, I am sure there are any number of economics journals who would be happy to receive your paper, but generally I think this criticism amounts to a suspicion that people far away, whose names you do not know, are doing something out of sight that must somehow be nefarious, and I am very cynical about that sort of thing.