Does A Faulty CPI Make the U.S. Look Good? Final Stabs on Living Standards

While I am reluctant to perpetuate the debate on living standards and the accuracy of the consumer price index (CPI), I just can�t resist holding economists and pundits to the things they claim to believe.

My last post featured the claim that living standards had improved substantially despite the stubborn refusal of the CPI to support this claim. When median family income is deflated by the CPI, then real family income was just 14.4 percent higher in 2004 than it was in 1979. This increase is explained largely by an increase in working hours per family, as the median hourly wage rose by even less over this period.

The stagnation deniers (SD) argue that the CPI has missed the benefits of all the new goods that have appeared on the market in the last quarter century � cell phones, the Internet, and the great gains in health care over this period. Life expectancy in the United States increased by 3.5 years over this period, from 73.7 years in 1980 to 77.2 years in 2003.

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