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About Oregon daily emerald. (Eugene, Or.) 1920-2012 | View Entire Issue (July 21, 1981)
Economist says inflation measurement inaccurate By TOM VISOKY Ot tw Emaratd Measuring inflation is a tricky business because - like all forms of measurement — the final figures depend on whose yardstick is used According to Jack Triplett of the U S Bureau of Labor Statis tics, economists have not yet decided on a suitable yardstick Triplett, an expert in measure ment economics and a former University professor, addressed the question "How should we measure inflation'?" at a Wed nesday campus seminar Currently, inflation is mea sured by calculating changes in either the Consumer Price Index compiled by the BLS or the Per sonal Consumption Expendi ture index compiled by the Department of Commerce Triplett said BLS measures inflation by gathering reams of information on the prices of a wide range of consumer goods from steaks and gasoline to housing These prices are as signed a specific "weight" and then are plugged into a formula to compute the CPI Triplett noted that the press, m is efforts to calculate the cur rent inflation rate, often incor rectly compares the CPI and the PCE These indexes use the same formula, but they assign different weights to the various parts of the index he said In addition, Triplett said the press often reports a compo nent of the PCE index known as the implicit price deflator” as a measure of inflaton "But that deflator really has no meaning he said The implicit deflator in the PCE index only tells the differ ence between current prices and those of the 1972 base year, he said To illustrate the differences between the various indexes Triplett pointed to the effects housing costs had on the final figures In the PCE index and one CPI index housing costs are cal culated on a "rental equi valency" basis, he said That is, the costs of owning a single-family house are based on the average current rental value of all single-family houses In the official CPI index, Tri plett said, housing costs are calculated on a "user cost" ba sis that includes such things as maintenance and depreciation costs, as well as monthly mort gage payments "These two alternative ways of treating housing make quite a bit ot difference in the index ing,” he said Triplett said that during most Photo by Erich Boekelheide Jack Triplett, an economist with the U S Bureau of Labor Statistics, said at a Wednesday seminar that current formulas used to measure inflation are inaccurate of the 1970's the differences in computing housing costs amounted to a variation of less than 1 percent in the index figures However, in recent years the "housing effect” has lead to a variation of more than 2 per cent "It has distorted the indexes considerably in the last few years," he said While admitting that both sys tems have their drawbacks, Tri plett said he favors the rental equivalency method because it has fewer unstable components than the user-cost method Triplett said massive swings in housing prices caused by speculation, combined with other volatile variables makes the average cost of owning a house difficult to compute "It's conceivable using a user-cost index that you could get a negative cost for living in a house," he said In addition to the discrepan cies caused by the housing ef feet, some economists point out that the indexes' different weighting systems are unable to account for changes in con sumer's buying habits, Triplett said For example, he noted that because of a drastic increase in price people are buying less housing, sirloin and gas ” "But the index doesn't take account of substitution,” he said Nevertheless, Triplett said that weighting differences have a minimal effect on the overall figures Triplett said that the BLS is considering making changes in its indexing system to make it more efficient But because a number of organizations such as labor unions and government employers use the CPI to make their own calculations and ad justments for inflation, those changes will be slow in coming, he said “We don't slip in changes in the middle of the process.” I elescope needs repair work The University's Pine Mountain Observatory is in need of financial aid again — this time to help pay for repairs of its 32-inch diameter teles cope James Kemp, a University physicist and researcher at the observatory, is trying to raise $7,600 to repair the largest of the three mam telescopes at Pine Mountain Last spring Kemp was involved in a battle with state legislators to renew the observatory's $25,000 oper ating budget Pine Mountain Observa tory, located 36 miles southeast of Bend, is acknowledged by local scientists as the best as tronomical facility in the North west Since 1967 it has served as both a research site and an educational tool for school groups as well as amateurs According to Kemp, a bearing went out in the drive system of the telescope, and the instrument has been returned to the makers in Richmond, Wa shington The company plans to not only repair the damage, but also to modify the structure so that similar mishaps will not oc cur in the future Kemp says he was author ized bs the University to raise funds for the telescope So far, he has collected about a third of the money needed from individuals and businesses in central Oregon Donations for money to repair the telescope can be sent to the Pine Mountain Fund in care of “U of O Foundations ” —Bamboo Pavilion Serving: Fast Lunch, Best Chinese Food, Inexpensive. 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