The Consumer Price Index (CPI) is wrong.  Among other things it doesn’t measure product improvement or life style improvement.  Paul Krugman the Princeton professor turned New York Times columnist uses CPI data to argue that the middle class is getting poorer.  He wants the government to do something.  Many people believe this myth about how we are getting poorer even though empirical data shows the opposite.

For Example:

• The expected life of a car has more than doubled in the past twenty years.  The CPI hasn’t adjusted for this fact so it overstate the cost of transportation.
• Cell Phones didn’t exist when the CPI was designed in the 1970’s.  Our lives have changed because of them the CPI measurement hasn’t noticed.
• Email and social media didn’t exist fifteen years ago.  Now they are ubiquitous.  They save time, money and improve communications the CPI doesn’t even know they exist.
• Flat monitors and HD TVs have made the TV experience much better while changing the configuration of our living rooms.  Remember that beige CRT.  How much is the extra two square feet of space on everybody’s desk worth? I estimate about a billion dollars.  These changes aren’t reflected in the CPI.
• How much is it worth to have the internet at you finger tips?  The CPI says zero.

Most of us are living much better than we did in 1980 and we would be living even better if the economic elitists would leave us alone to enjoy all of this neat new stuff.