
Current Inflation Has Different Effects on Different Age Groups - betahiker
https://macroaffairs.com/inflation-per-generation-avocado-index-millennials/finance-economics/
======
araes
The claim of a difference is 'slightly' exaggerated (~1%) However, the overall
inflation data is quite interesting.

\- Best tracker of inflation - drinking

\- Most inflated - Learning and having a roof over your head

\- Least inflated - Changing location and playing dress-up (you or your home)

As always, rent seeking behavior is an issue (or a good investment area).

Getting smarter is getting more difficult (or at least more costly) and
unfortunately compounds. If you are already educated and ahead, you don't have
to pay those costs, and you have a higher vantage point from which to choose
opportunities (like charging other people rent).

Not sure if I believe food - or else probably has a huge amount of spread
within it. Some food has dramatically risen, others not (tuna - high, bread -
low). Noisiness of food line probably reflects this. An unlikely friend in
bulk negotiators like Walmart / Kroger / Amazon. "-> Tyson, Coke, Gen. Mills,
keep your prices low."

Transportation is opportunity. Don't like where you are? Leave. Potential
foraging range - up. Go live in India, where food is $4 a day, and rent is
$100-200. Course, this helps baby boomers too. Retire in Kathmandu, Tangier,
Santiago. Lots of money just goes further.

~~~
asfasgasg
> rent seeking behavior

So many people are confused about the meaning of this term lately, to the
point where I think we might need to scrap it and come up with a new one. In
traditional economics, rent-seeking is a bad thing, because it involves
lobbying the government to increase one's revenues without performing any
economically beneficial function. This is why the term has a negative
connotation. Almost all economists think this type of behavior causes
inefficiency.

Buying a house and renting it out does not fall under this category. In this
case, you are performing a beneficial economic function (i.e. you are
providing someone a dwelling, in exchange for money). There are related rent-
seeking behaviors, such as lobbying the government to prevent building new
housing stock for the purpose of increasing the value of your dwelling and the
amount of your rents. But the act of investing itself? Not rent-seeking. Not
considered bad by most economists.

~~~
uiri
"Rent" in the colloquial sense of payments pursuant to a residential lease is
a different meaning from "rent" in the economics sense of the word. The use of
this word falls into the trap of many words with differing colloquial and
technical meanings. I don't see how abandoning a word's technical definition
because of a competing colloquial definition helps anyone.

~~~
fanzhang
The problem is that rent seeking, in the colloquial sense, is an attempt to
paint a normal activity, like getting paid rent for housing, with the same
brush as bribery type behavior.

It's very similar to say, how Trump co-opted fake news to just mean any news
he disagreed with. Original creators of the term fake news are rightfully mad
because technically it should refer to news that is clearly factually untrue,
like pizzagate.

~~~
uiri
I've never seen "rent seeking" used with the colloquial rather than technical
meaning of the word "rent".

Can you point to an example of this usage?

~~~
asfasgasg
[https://news.ycombinator.com/item?id=17269230](https://news.ycombinator.com/item?id=17269230)

------
WhompingWindows
This strikes me as lazy data science and full of overreaching conclusions,
because nowhere is uncertainty/spread/variance discussed. What are the
errors/variance on these estimations for each year and each spending category?
Are these inflation differences statistically significantly different?
Comparing 7% vs 8% is already cutting it close without even knowing this
crucial information. The headline vastly oversteps the analysis itself, there
is simply not enough information presented to make these conclusions.

This is one reason why peer-review is essential. This author can throw out a
claim like millenials get inflation 14% worse than everyone else, failing to
mention it's a difference of 1% over 7-8%, and moreover he did not even look
at variance or statistical significance. This would not pass muster in a
statistics 101 course, never mind a reputable journal.

~~~
repiret
In general I agree that more reporting should include measures of uncertainty.
But I also think there are cases when talking about inflation where
uncertainty measures are inappropriate.

You can have uncertainty in the average price of avocados, or in the number of
avocados that millennials consume on average. But those aren't very holistic
views of inflation.

If I define my holistic measure of inflation to be the CPI, then there's no
margin of error. Its just a number that the Bureau of Labor Statistics
publishes every month. I can say, for example, that the CPI for June 2009 was
exactly 215.693. Or that the CPI increased by 1.47%, exact to the nearest
0.01%, between March 2012 and 2013.

On the other hand, if you want to ask whether the CPI is any good as a measure
of inflation, then in general inflation isn't precisely enough defined to talk
about that with a simple margin of error. There is no exact definition of
inflation that we're trying to approximate, so we can't say things like "we're
95% confident that the actual inflation value was between 1.4% and 1.5%".

~~~
skybrian
It looks like there's a principled way to compute it:

"Variance is a measure of the uncertainty caused by the use of a sample of
retail prices, instead of the complete universe of retail prices. Each month
the U.S. Bureau of Labor Statistics collects prices from a sample of
approximately 77,400 commodities and services (C&S) quotes in approximately
21,500 outlets around the United States for the Consumer Price Index (CPI). In
addition, we collect approximately 5,100 housing quotes each month."

[...]

"Margins of error are usually expressed as a statistic’s point estimate plus
or minus two standard errors, so the margin of error on this CPI’s 1-month
change is approximately 0.15 percent plus or minus 0.06 percent."

[https://www.bls.gov/cpi/tables/variance-
estimates/home.htm](https://www.bls.gov/cpi/tables/variance-
estimates/home.htm)

------
taurath
I wonder how much higher it would be if medical costs were taken out. Housing
is the biggest problem for my generation, but it gets almost no traction nor
solution.

~~~
3pt14159
Housing is largely a problem to do with interest rates and mortgages inflating
the land. The actual construction materials themselves (at least here in
Canada) aren't too bad.

I keep wondering why someone doesn't kickstarter a town. It has all the right
incentives. Make guidelines that enforce density in the core and do common
sense things from day 1, like wire fibre to every domicile.

~~~
majormajor
There are already quite a few cheap places people could move to. But the
demand is increasingly geographically concentrated, instead.

~~~
throwaway2048
there are few jobs or opportunities in cheap places, its not like everyone
lives in large cities because they are unwilling to entertain alternatives.

~~~
mhuffman
I call bullshit!

More than 50% of companies have positions that could telecommute and 24%+ of
people telecommute fully or partly now.[2]

People do want to live in large cities because of all the cool shit there to
do, and that convenience costs money.

You can afford a two-bedroom house in the south-eastern part of the US on
$15/hour, which wouldn't even cover the costs of being homeless in SF or NYC.

I understand people want convenience and people want to be close to friends
and family, but many of them (not all) could easily solve this problem by
simply moving. People seem to think they are "owed" affordable housing
regardless of where that housing is -- which is absurd!

[1]
[https://www.forbes.com/sites/karstenstrauss/2017/06/22/the-g...](https://www.forbes.com/sites/karstenstrauss/2017/06/22/the-
growing-army-of-americans-who-work-from-home/#391b29cd4ff7) [2]
[https://www.bls.gov/opub/ted/2016/24-percent-of-employed-
peo...](https://www.bls.gov/opub/ted/2016/24-percent-of-employed-people-did-
some-or-all-of-their-work-at-home-in-2015.htm)

~~~
DoreenMichele
So, in order for that 24 percent to be free to move where they please, that
needs to be a figure where they can telecommute full time or where going to
the office occasionally from farther away costs less than the amount saved by
moving farther away. On top of that, all other household members would need to
be equally portable, such as a working spouse or children attending school.

I got myself off the street in part by developing portable earned income and
moving someplace cheap. It is something I am willing to recommend as a method.
But my entire household was free to move. That isn't always the case.

------
ojbyrne
"Over the past five years" \- I feel that in order to formulate "a historical
price index per generation" you need to look at inflation over the entire life
of the generation. Baby boomers went through the seventies, when inflation was
significantly higher than now.

~~~
refurb
I was coming here to say that. Inflation rates in the double digits is
something millennials have never gone through.

~~~
A2017U1
My parents "suffered" through 14% interest rates, wages were rising at
breakneck speeds and their mortgage was largely inflated away before they even
paid any of it off.

By historical standards it was actually a great time, a single wage family
could afford their own house. Such similar circumstances is impossible today
in the same city.

~~~
refurb
There is a reason they called it stagflation. It wasn’t a good time at all in
the US.

------
j-c-hewitt
This is a great example of how you can make up anything by aggregating
unrelated statistical measures and then mislead people with a new definition
on top of another woozy commonly used definition.

~~~
smallnamespace
We can certainly argue the technical merits of how they created their
'generation-weighted price index', but differential impacts of inflation seems
plausible on the face of it.

If you are looking for work in a big city, and big city real estate prices are
growing much faster than nationwide, that is a real effect.

~~~
j-c-hewitt
Well... sort of, but why call it 'inflation'? That certain age groups tended
to act in certain ways and were impacted by differences in price trends in
different ways -- that's accurate. What's misleading or confusing is to then
redefining the already-muddled term of 'inflation' from an absolute index to
multiple indices and then trying to say that because Index B went up more than
Index A that some group of people were much more impacted by Index B than
another people were by Index A.

The Fed has a price index that most entities in the US use to measure what it
calls inflation. There are plenty of arguments out there that go into detail
about how that index can be misleading and how certain institutional
prerogatives encourage the people who maintain that index to keep it
misleading (e.g. many entities are obligated to increase salaries and pension
payouts tied to the CPI).

~~~
smallnamespace
> why call it 'inflation'

Sibling comment also asks this question, so I'll just respond here: inflation
measures the purchasing power of some nominal currency, but that measurement
is _always relative to a basket of goods_.

CPI is a basket of 'typical' consumer goods that an average person might buy.
But if you're not the average consumer, then in what sense is CPI relevant to
you, rather than to a macroeconomist?

I agree that there's a risk of confusion, but I think the confusion is
inherent in what we're trying to measure (I have some dollars, how much stuff
[that I care about] can I buy with them?), and not mainly a function of
terminological confusion.

You could imagine a service like Mint that has all your spending data and
calculating your own 'personal CPI', privacy considerations notwithstanding.

~~~
throwaway2048
not to mention CPI dosent include costs like education, housing or healthcare,
which is completely absurd.

------
PaulHoule
Expensive health care is worst for older people (until you hit 65 and qualify
for single payer)

Expensive education is worst for younger people, unless you are an older
person who wants to pay for your children's education.

Expensive housing is (mostly) good for the old and bad for the young. If an
oldster got settled in Palo Alto back in the 8-bit era, they've paid low taxes
since they've never sold their house and will take a stupendous capital gain.

------
aphextron
I feel like technology has led to such an efficient form of capitalism over
the past 20 years, that there's no room left for any possibility of social
mobility. It's this system where there is just enough room for you to live and
get by, but never get ahead. Prices for everything are so efficiently
optimized at this point that there is no more "wiggle room" for a working
person to build wealth. The basic necessities of life have risen to perfectly
match your income. It's a new kind of slavery. As a single male with no family
or debt, making 3x the median wage, I am _just barely_ doing ok. I literally
can't even imagine how other people are still surviving.

~~~
mobilefriendly
High marginal income tax rates are designed to keep you from building wealth--
the capital-holding classes don't want the competition for assets.

~~~
moorhosj
Income tax rates are not the problem, stagnating wages are the problem.

~~~
WalterBright
High marginal tax rates create a major barrier for building wealth.

------
peter303
Medical care, especially drugs, greatly increasing in price for old. 2/3rds of
over 65 have at least one cintinuing prescription.

~~~
pkaye
Not all prescriptions are for expensive medicines. I'd say many of them are
generic drugs which cost pennies per day.

~~~
organsnyder
In many cases, drug companies come up with ways to keep prices high. For
instance, asthma drugs are reconfigured with different delivery mechanisms
that allow them to get new patents for what are essentially long-ago-
discovered drugs.

For instance, the CFC ban in 2008 caused generic albuterol to go off the
market: [https://www.scientificamerican.com/article/unlikely-
victims-...](https://www.scientificamerican.com/article/unlikely-victims-of-
banning-cfcs/)

~~~
drunken-serval
I can't use albuterol due to side-effects. The CFC ban caused the medication I
used to disappear completely. The alternative is half as effective.

------
maerF0x0
The government has all kinds of built in incentives for inflation to be
reported as low, whilst simultaneously being high.

This kinda points at the ideas, though I don't actually agree with all the
content: [https://dailyreckoning.com/revealing-real-rate-inflation-
cra...](https://dailyreckoning.com/revealing-real-rate-inflation-crash-
system/)

------
skybrian
You could slice up inflation in all sorts of ways: by city, state, homeowner
versus renter, how long ago the home owner bought their house, singles versus
families, where they want to college (if anywhere), and so on.

Remember that inflation is supposed to measure the prices paid by the average
person, but most people make some purchases that aren't average.

------
goldenkey
This result shouldn't be surprising to anyone who has thought about what the
construct of money/debt actually does.

Every bubble in the history of finance has always been the overvaluing of one
asset in exchange for the devaluing of other assets. By overvaluing houses
today, we are screwing over every field that requires property/land, retail
stores for example. And renters which are predominantly youth. Now, the
overvalued houses don't actually consume value directly - they give money to
the people who have these assets or are employed in their use - home owners,
property management companies - construction companies - etc etc.

Money has always allowed for bias and inequality in resources and work
allotted. One sector like housing in exchange for sacrificing other sectors.
Or sacrificing one nation/locale's wealth in exchange for another - ie. many
3rd world countries/ exchange rates. Or sacrificing young peoples' prosperity
in exchange for old peoples' \- inflation / housing / medicare / social
security / stock market inflation.

Money is a tool for giving value, and hence prosperity, unequally for any kind
of sociological category of people by way of empirical categories of
valuables.

I don't hate capitalism but it is unavoidably discriminatory.

The very act of a loan is essentially an exchange of value temporally - why
shouldn't the natural consequence be to see money as a way of moving allotted
value around both spatially, sociologically, and temporally?

------
ww520
I don't buy this. Medical cost has risen faster in recent years. Older aged
boomers surely spend more in medical needs than millennials.

------
olfactory
Official inflation numbers are based on a basket of goods that are thought to
be representative for the purpose of broad economic policy.

But it's certainly true that inflation is not the same for all goods or for
the basket that is highly relevant to one person or to one firm or industry.

So like any economic policy it has winners and losers. Just because the policy
may be reasonable does not mean that the winners and losers are irrelevant.

During the startup boom many developers saw their _wages_ inflating rapidly in
spite of little skill growth. Some also saw their rent increasing if they
lived in the bay area.

Landlords in the bay area saw their income increasing, and firms hiring
developers in the bay area saw the cost associated with wages inflate rapidly.

The mistake this article makes is that it puts all its eggs into the young vs
old theme when really this is a fairly obvious consequence of a dynamic
economy.

