One wonders when the education system/media will accurately inform and report that inflation is "too many dollars chasing too many goods" and not "an increase in the price level."

This simple truth would go a long way to educating the populace that a "price rise" is NOT "inflationary" per se.

Alas, this is too much to ask.

Much too much.

This argument is deceptive. Sure, the base model of today's car may have more standard features and be better engineered than the base model of a 1970's car. But the main purpose of a car is transportation, not looking at the Moon, and you still need a whole car to satisfy that need. You can't buy 1/2 of today's car to get the same benefit than you received with the 1970 model. If the price of the base model is higher than the price of the 1970 model, then the cost of personal transportation has gone up, and that is inflation.

A foolish notion today is that housing appreciation does not equate to inflation. Housing is a necessity, it is not just an investment option. A colleague of mine will soon be moving to Washington DC as her husband got a new job in that area. Due to housing inflation in the DC area, their housing expenses will be much higher there than in Minneapolis. But the core CPI won't indicate that.

Robert is mostly correct about Housing. I remember reading fascinating article in the late 80s that theorized that housing prices actually were an indicator of the rich "storing" value - similar to the way Gold rises w/ inflation. It makes sense. Land and space is far more useful than baubles - and with financing, liquid as well.

On the other hand, the cost of building a new house on the outer rings of large metro areas has dropped precipitously.

Further, you can buy up entire small towns in Iowa for the price of 3000 sq. ft. house in Chicago's better neighborhoods.

Another thing to keep in mind is that "costs don't determine prices, markets determine prices."

This simple tenet, along with the "chasing too many dollars" tenet, if taught properly, would educate most Americans about macro economics in one three hour course.

Robert:

Keep in mind the economically useful lifetime of a contemporary car is about twice that of a car built in the 70s.

JD Powers recently rated Hyundai's line of autos as being at a quality level equal to, and in many cases better than, any US auto manufacturer's.

Kelley Blue Book pricing on a 2000 Hyundai Accent GL Sedan with 60K miles is only $ 5,000.
That's with auto trans and A/C.

That comes to about $ 1,300 1970 dollars.

Michael, what would a like model have cost in 1970? To quote its cost in 1970 dollars proves that we have had price inflation since 1970. Since we've also had wage inflation since then, then the relative cost may have stayed the same or have gone down. But that has always been an assumption about inflation, that wages will follow prices, but with a global sabor glut we can not assume that this will continue.

Robert:

Your example is simply false. You work fewer hours today to buy a like car to the one you got in 1970.

Robert:

True enough, but since auto manufacturers already charge about 20% less in Canada, due to a lower ability to pay by the average Canadian, I'd expect that stagnant wages would be met with lower or stagnant prices.
Mexicans can afford new cars even less than the average American or Canadian, so they got the same VW Beetle model for 35 years. It worked for them, and can work for us.

After all, elasticity of demand is an American tradition; it's why Americans drink coffee, and Great Britain tea, dating back to the Boston Harbor incident.