<p>There is no single perfect universal measure of inflation. There are two main reasons for that.</p>
<p>First, different people purchase different goods in different proportions. Hence it is perfectly plausible that for the items that you personally purchase the difference in price compared to last year gives you a different inflation rate that the difference in prices for the items that I personally purchased.</p>
<p>Second, people adjust their purchases based on the changes of prices. If the price of one good stays mostly constant and the price of another one increases, people will buy more of the first and less of the second. Hence the change of price does not accurately reflect the value of the purchases they are able to make.</p>
<p>This is generally resolved by forming some kind of basket of goods that corresponds to the average consumer and this is what the US government consumer price index does. This may or may not be a good approximation for your personal inflation but presumably it is a much better approximation that the change of price in gold.</p>

CC BY-SA 4.0
2024-10-17T06:38:05.607Z
2024-10-17T06:38:05.607Z
quarague
<p>Investors, consumers and other people are natural concerned about the rate of inflation. As such, they want a good measure of it. The US Government has several reports that measure inflation, They include the Consumer Price Index and Producer Price Index. These are government reports, and I consider them to be reliable and accurate. However, I have some concerns that they may under report the rate of inflation for political reasons.</p>
<p>A good friend of mine, claims the best measure of inflation is the change in the price of gold. While I feel that is a good measure, it  is far from the only measure. It also gives a significantly higher value than the other measures of inflation given by the government.</p>
<p>What is the best way to measure inflation? Is the change in the price of gold a good measure of inflation?</p>
<p>Please comment.</p>

CC BY-SA 4.0
2024-10-15T14:39:05.380Z
Do you eat gold? The price of gold is useless unless a substantial amount of your transactions are in gold. What do you think happens to gold if a large new mine opens?
AKdemy
CC BY-SA 4.0
2024-10-16T10:46:56.853Z
I’m voting to close this question because it does not contain a question.
VARulle
CC BY-SA 4.0
2024-10-16T12:23:08.277Z
There is no single best way to measure inflation. What is best depends on the purpose. Any measure of inflation will have virtues and drawbacks. Your question seems naively US-centric.
Jesper Hybel
<inflation><united-states>
Measuring Inflation
Bob
# Measuring Inflation

(Asked by: username_0 on 2024-10-15)

Investors, consumers and other people are natural concerned about the rate of inflation. As such, they want a good measure of it. The US Government has several reports that measure inflation, They include the Consumer Price Index and Producer Price Index. These are government reports, and I consider them to be reliable and accurate. However, I have some concerns that they may under report the rate of inflation for political reasons.

A good friend of mine, claims the best measure of inflation is the change in the price of gold. While I feel that is a good measure, it is far from the only measure. It also gives a significantly higher value than the other measures of inflation given by the government.

What is the best way to measure inflation? Is the change in the price of gold a good measure of inflation?

Please comment.

**Tags:** inflation, united-states

> **Comments:**
> **username_1**: Do you eat gold? The price of gold is useless unless a substantial amount of your transactions are in gold. What do you think happens to gold if a large new mine opens?  
> **username_2**: I’m voting to close this question because it does not contain a question.  
> **username_3**: There is no single best way to measure inflation. What is best depends on the purpose. Any measure of inflation will have virtues and drawbacks. Your question seems naively US-centric.  

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## 1 answers

### Answer by username_4 on 2024-10-17. Score: 0 | Accepted answer

There is no single perfect universal measure of inflation. There are two main reasons for that.

First, different people purchase different goods in different proportions. Hence it is perfectly plausible that for the items that you personally purchase the difference in price compared to last year gives you a different inflation rate that the difference in prices for the items that I personally purchased.

Second, people adjust their purchases based on the changes of prices. If the price of one good stays mostly constant and the price of another one increases, people will buy more of the first and less of the second. Hence the change of price does not accurately reflect the value of the purchases they are able to make.

This is generally resolved by forming some kind of basket of goods that corresponds to the average consumer and this is what the US government consumer price index does. This may or may not be a good approximation for your personal inflation but presumably it is a much better approximation that the change of price in gold.


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