Thursday, 2 February 2017

lies damm lies and methodological problems

There always used to be two inflation measures RPI and CPI.  Basically RPI is calculated differently, represents more of what inflation really feels like to ordinary people and generally comes out higher. 
It was always the quoted number on TV news and in the papers.  Public sector pensions were based on it and it was generally accepted as reality. 
CPI was a bit more obscure calculated differently and underestimated real inflation.  (I could bore you with the statistical theory because l studied this at University but I'd rather not.  It has to do with the CPI being based on geometric rather than arithmetical means and the difference between Paasche and Lasperes price indices).
At the moment CPI is 1.6% but RPI is 2.5%.  You generally expect around a 1% difference so a world without RPI is one with unions negotiating 1% smaller inflation proofing pay rises and the government paying out 1% less on pension increases.
Although drawing paralells with George Orwell's 1984 is going a bit far I now find that the RPI is no longer an official quoted statistic.  In statistical terms this is a bit like it has been 'rubbed out' in a mafia style hit.  It has been 'withdrawn' due to 'methodological problems'.
If you believed in conspiracies you would say the hatchet job on the RPI is now complete, the real rate of inflation is an inconvenient truth that has been eliminated.

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