Friday, March 28, 2008

Cannabis To Be Included In CPI

A humorous look at the calculation of the Consumer Price Index, courtesy of News Biscuit.

"Crysta
l meth, crack and skunk have all been added to the typical basket of UK goods used to measure inflation, the Office for National Statistics has announced. Speed, bennies, glue and chewing tobacco are all to be removed from goods used to measure the Retail Price Index.

Increased consumer spending on crystal meth and crack reflects changes in modern shopping habits says the government department, which updates its 650-strong basket of goods and services every year, to better reflect public spending trends. ‘Crystal meth and skunk have been added as the popularity of make-at-home drugs continues to rise.’ said an ONS spokesman.

The bureau’s website explained that skunk was being included for the first time to reflect the fact that rolling your own is now more popular than smoking illegally imported foreign cigarettes and because in volume terms it is thought to outsell most breakfast cereals."
Source: News Biscuit

The interesting thing is that it does raise an issue of how the official measurement of inflation ignores the real cost of living. Clearly goods consumed on the black market are not going to be included in the CPI, but, this does mean the CPI is more limited as a measure of the actual cost of living.
More standard criticisms of CPI focus on the fact CPI ignores housing costs and other common living costs.
Also inflation rates can vary significantly between different sections of society. E.g. old people disproportionately affected by rising energy prices

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