Signs of the Times - Henry Weinschenk Comments on the CPI and the Service Industries
March 2001
Letters to the Editor: Henry Weinschenk Comments on the CPI and the Service Industries
Search for:


Home

"Dear George:

Did I sense some whining -- pardon the pun -- about the high cost of dining out, especially in places like the C&O and the Old Mill Room at the Boar's Head? I hope no Republicans get wind of this, unless we get accused again of being, wine and cheese, limousine liberals.

I'm afraid you missed a major point of economics, namely that the CPI is just an average for a basket of goods and services, who's individual components vary independently, depending on the ability of different industries to achieve higher productivity or lower costs. Some industries such as restaurants which are labor intensive and were there have not been any technological breakthroughs to speak of, must increase their prices at a higher rate than the average represented by the CPI. At the same time many other manufactured items have actual decreased in price, remained at the same levels or increased at a lower rate than the CPI.

Apparel, toys, household goods, electronic gadgets, etc. --many produced in third world countries, battered by devaluations in their own currency-- fall in this category, making up for the increases above the CPI in restaurants, beauty salons, barber shops, full service carwashes, contractors, car repair shops and garbage haulers in the U.S. Some services, that benefited from new technology and competition, such as long distance phone services, have actually decreased prices even in nominal terms.

So, next time you dine out in your golf shirt made in Malaysia, after having called you sister in California to see if your nephews received those toys, made in China, you bough at Wal-Mart, don't get excited if that meal costs you 50 to 60% more than 10 years ago, even if the CPI only went up 36%. You saved big-time on all the other things that day."

Henry Weinschenk (electronic email, March 1, 2001)


Comments? Questions? Write me at george@loper.org.