(本文翻譯自 陳冲 看不見大象也要摸象 2022.03.29.)
Recently, there was an interesting and livelihood-related news that unfortunately got only little attention in the UK. The Office for National Statistics released the new “shopping basket”, which is used for measuring CPI and includes 733 items this time. The British media paid more attention to excluding items such as men's suits, donuts and adding things like men’s formal jacket, crop top and pet collar. It’s not surprised that the media focused more on men’s suit since it is the national symbol of the United Kingdom and even dubbed the “Uniform of capitalism”. However, the great mind behind the adjustments that the agency wanted the CPI figures closers to people’s feeling about the rising inflation deserves more attention.
I remembered that in two large speeches at the end of last year, I mentioned that in the first half of 2021, the IMF, ECB and Fed all said that the inflation was temporary and even denied there was one happening. After September, however, major institutions had changed their minds. Fed Chair Jerome Powell even plainly confessed that the “inflation may run into next year”. Reviewing the monthly inflation figures in the United States after August, the Fed seemed to have known at the time that the situation was unstoppable. After the speeches, the media reported that “Sean Chen says that inflation is already here and will last to be a new normal”. At that time, the Russian-Ukraine war hadn’t occurred and the officials said in unison that Taiwan's prices were stable and inflation would not happen. As expected, the CPI for the whole year released in early January showed 1.96, barely passing the test. Interviewed on the radio at the beginning of the year, I said that if a person's blood pressure is high (and getting higher and higher) every day in the second half of the year, it is not appropriate to comfort oneself as normal with the annual average blood pressure. CPI is only a statistic. Mark Twain once said “There are three kinds of lies: lies, damned lies, and statistics.” We should more carefully interpret these statistics and think about whether these numbers truly reflect the sentiments of current society.
The aforementioned adjustments of the British CPI including 19 additions and 15 removals are to reflect the real economic situation of people's livelihood and social trends. For example, the additions of six items such as antibacterial surface wipes, climbing session, and crop top reflect public needs during the pandemic. Removing coal and reference book like atlas and dictionary reflect the changing living habits. We can see that the ONS hopes the figures to be not just cold numbers but ones that could mirror people’s daily life. Taiwan CPI figures showed no inflation since the second half of last year, but it seems that people feel the opposite and the hidden reason may be the correctness of the selection, additions and deletions, and weights of CPI items. That UK government quickly adjusts the statistic for a fitted one could be a lesson to us when conducting CPI price checks.
As we all know, CPI is an indicator commonly used for measuring inflation and the main data central banks analyzed when formulating monetary policy. Officials even use the Core CPI ( CPI excluding volatile food and energy prices ) more to explain economic phenomena. But in the wave of global inflation this time, these arguments seem not that convincing.
In late March, Fed Chair Powell said in public that the Fed had “widely underestimated rise in inflation”, and the recent international situation has further accelerated the rise. While, it is not shameful to reword statement or even an about-turn. After the revision of the CPI, the UK announced last week that inflation exceeded 6%, and it received praise for pragmatism.
There’s a western idiom” elephant in the room”, meaning obvious major problem or issue that people avoid acknowledging. You are either blind or pretending to be blind so you don’t see that big thing. Even if you are indeed blind, there’s also a fable in the Tittha Sutta talking about six blind men trying to describe the elephant after touching different parts of it that can give you some inspiration: grope it, and you may at least find that some CPI items do need adjusting for the calls from the fast-changing society.