Volume 44, Number 4 · March 6, 1997
The Cost of Living: A New Myth
By Jeff Madrick
Toward a More Accurate Measure of the Cost of Living Commission to Study the Consumer Price Index
Final Report to the Senate Finance Committee from the Advisory
94 pp.
Bias in the Consumer Price Index: What is the Evidence?
by Brent R. Moulton. Journal of Economic Perspectives
American Standards of Living, 1918-1988
by Clair Brown
Blackwell, 489 pp., $39.95
Getting Prices Right: A Methodologically Consistent Consumer Price Index, 1953-94
by Dean Baker
Economic Policy Institute, plus appendices pp., $10.00
When the Advisory Commission to Study the Consumer Price Index released its report in early December claiming that consumer inflation is being overstated by 1.1 percent a year, its findings were generally treated by the press as if they were technically irreproachable. The Boskin Commission, appointed by the Senate Finance Committee and named after its chairman, Michael Boskin, President Bush's chairman of the Council of Economic Advisers, was repeatedly described as 'blue-ribbon,' 'distinguished,' and 'bipartisan.' The report was said to have met the highest academic standards. Many people I spoke to, including economists, took it for granted that the Commission was at least approximately right, and recently Alan Greenspan, the Federal Reserve chairman, spoke approvingly of its conclusions.[1] All agreed that the consequences were enormous. To take one example: because the payments for many federal programs, the largest of which is Social Security, are linked to the Consumer Price Index (CPI), it would cost the government an unnecessary $1 trillion in additional spending between now and 2008 if the CPI were indeed overstated by 1.1 percent.
Review, 5729 words
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