Real-Time Inflation Calculator

[Gumby]

Interesting new approach to calculating inflation in real-time.

The Billion Prices Project @ MIT

Here's a short write-up about it that appeared in the New York Times magazine a few weeks ago:

Measuring inflation is a time-consuming business: at the beginning of each month, government researchers across the country amass troves of data on prices for everything from shoes to milk to phones. Two weeks after the end of the month, the government releases gauges of inflation like the Consumer Price Index. But inflation hunters may now get an advance glimpse of the data, thanks to a real-time inflation calculator devised by two economists at M.I.T., Alberto Cavallo and Roberto Rigobon.

Cavallo and Rigobon devised software that scans Web sites for prices, using a method similar to the one that Google uses to index Web pages. Whenever a new page containing a product and a price appears, the software begins tracking it. The initial results are promising: the price index has anticipated the government’s inflation data with remarkable precision, even though the software can’t track things sold offline. Data on prices, once monopolized by government gatekeepers, are now up for grabs.

And, here's a write up about it from the Wall Street Journal:

A Way, Day by Day, of Gauging Prices

[craigr]

Very cool. Back in 2007 I was seriously considering starting my own website to do something similar. It just seemed too boring though!

Google had talked about doing their own CPI as well using data from the Google price search engine.

These ways of tracking prices are a great thing and will hopefully keep the CPI honest against political pressure to understate it.