DIFFERENT WAYS OF MEASURING PRICES.

DIFFERENT WAYS OF MEASURING PRICES. Kids, whenever you see economic numbers, you have to think about how they are constructed before you use them. (Occasionally, but rarely, a writer will help you with this.) Consider the prices in measures of inflation like the Consumer Price Index. Annie Lowry has a good article on Slate which contains this example of how a government worker might collect a price for a motel room: “Occupancy—two adults; Type of accommodation—deluxe room; Room classification/location—ocean view, room 306; Time of stay—weekend; Length of stay—one night; Bathroom facilities—one full bathroom; Kitchen facilities—none; Television—one, includes free movie channel; Telephone—one telephone, free local calls; Air-conditioned—yes; Meals included—breakfast; Parking—free self parking; Transportation—Transportation to airport, no charge; Recreation facilities—an indoor and an outdoor pool, a private beach, three tennis courts, and an exercise room.” If you think about it, all of those factors would influence what you would expect to pay for a room—as well as, perhaps, the time of year. You can imagine the amount of judgment that goes into assembling, compiling and boiling down masses of price data into one number. Annie Lowry’s article describes two new ways of measuring prices. One is the “Billion Prices Project, an inflation measure based on 5 million items sold by 300 online retailers in 70 countries.” The Billion Prices Project (link here) apparently permits looking at prices on a daily basis. And Google is also working on an index of prices. I think that perhaps the biggest advantage of the new measures is that they may promote the idea that are lots of ways of measuring prices—and other economic variables.