January 11, 2008


X-File Economists Gone Wild: The truth about inflation is out there. Who are you going to believe? (Jerry Bowyer, 1/11/08, National Review)

This “inflation lies” thing has gone viral, and now it’s pretty much anywhere unfiltered comments about economics can be posted on the Internet. It’s traveled quickly, but that’s no surprise: Ron Paul supporters are out in droves, and they can post on all sorts of topics since they’re already cruising the side streets of the information superhighway.

But the problems with this theory are as legion as its carriers.

For starters, how does one get so many people to lie about inflation at the same time? Gathering inflation stats is personnel-intensive stuff. I’ve met some of these price-gatherers, and there are a lot of them. They check prices all around the country, and they report to people who report to other people, and the data set is built from the bottom-up. There’s no guy in Washington who gets a call from a mysterious price-underestimating stranger (let’s call him Deep Discount) and then takes out a pen and attempts to make a 9 look like an 8.

And just how is this price secret being kept? Washington in the Bush era isn’t exactly a hostile environment for whistle-blowers. If you can make a remotely plausible claim that you tried to “speak truth to power” and power didn’t listen, you’re practically guaranteed a book deal and a roll-out on 60 Minutes. Don’t you think that would appeal to any of the hundreds of bureaucrats who toil in the CPI salt mines?

The X-File Economists also skip over the fact that multiple inflation measures are in operation today. Along with the department that measures CPI, there are departments for things like implicit-price deflators and PCE (personal consumption expenditure) deflators. Are all these folks in on the lie, too? Not even Karl Rove could exercise this kind of political control.

The $2,500 Car: Exactly a century after Henry Ford introduced the Model T, Tata Motors of India has launched a new people’s car. Is another revolution ahead? (Ralph Kinney Bennett, 1/11/08, The American)
The automotive world is abuzz about what might be the next Model T Ford or Volkswagen Beetle—an entry-level sedan to be built in India by Tata Motors Ltd. for about $2,500. [...]

Many have said Tata’s goal is impossible. The so-called “One Lakh” (equaling 100,000 rupees) car is a four-door compact sedan with a small luggage compartment under the front hood and a rear engine producing 33 horsepower. It will be a base model by all means, but it will not be one of those go-kart or jitney-like vehicles so com­mon throughout India and Southeast Asia. “It is not a car with plastic curtains or no roof—it’s a real car,” Ratan Tata, chairman of Tata Motors and the dreamer behind the One Lakh, assured Forbes magazine.

Two thousand five hundred dollars? For a new car? Adjusting prices to 2007 U.S. dollars, Ford’s Model T would have cost just under $20,000 and the Volkswagen Beetle just over $11,000 when they were introduced.

Sure, the new Model T costs a seventh of what the original did, but I spent $60 on a tank of gas yesterday, so THERE MUST BE INFLATION!

Posted by Orrin Judd at January 11, 2008 8:51 AM

I saw another interesting adjusted-for-inflation factoid on an automotive website:

In 1909, Ford’s entry-level Model T cost $850. In 2008, the Ford Focus’ base price is $13,715. Priced in 1909 dollars, Ford’s entry-level U.S. model would cost $633. That’s a net savings of $217 in 1909 dollars compared to the Model T, or about 26 percent. And that’s without considering the vast improvements in safety, comfort, reliability, performance, etc.

Posted by: Mike Morley at January 11, 2008 10:01 AM

Should we worry about the Indians' carbon foot prints?

Posted by: ic at January 11, 2008 4:42 PM

Of course the economy has to be bad. We've been told it's that way since 2001 and won't recover until the St.Hillary! or BarryO coronation next year. If it's not bad, then what other held beliefs might be wrong? Nope. Don't wanna go there.

When people want to believe, and when the facts refuse to support your fantasies, expand the fantasy to include a conspiracy which is hiding The Truth™, even if the conspiracy requires millions of willing participants.

Posted by: Raoul Ortega at January 11, 2008 6:21 PM

Of course the economy is terrible - the NYT closed Wednesday at $15.63.

If it goes down to $12.00, Richard Scaife Mellon should offer to buy at $18.00. Wouldn't that be fun?

Posted by: ratbert at January 11, 2008 11:21 PM