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Getting Prices Right: What Should Be Done?

Author

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  • Angus Deaton
Abstract
Much of the profession accepts that the CPI likely overstates the rate of increase of the cost-of-living. It is less clear that there are sound and feasible steps that the BLS can adopt to improve matters in the short run. There are unresolved conceptual and identification problems in the measurement of quality. Superlative price indexes are not feasible, and feasible approximations are not superlative, and may not even be better. The need for a single index that aggregates over heterogeneous consumers with different incomes, tastes, and needs casts serious doubt on the cost-of-living approach.

Suggested Citation

  • Angus Deaton, 1998. "Getting Prices Right: What Should Be Done?," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 37-46, Winter.
    • Handle: RePEc:aea:jecper:v:12:y:1998:i:1:p:37-46
    Note: DOI: 10.1257/jep.12.1.37
    as

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.12.1.37
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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