i don't know if you missed this, but i trained as a sociologist. i know statistics quite well.
While commendable, you still need to be careful when using economic statistics, as it seems that you don't know the conventions with which they are prepared.
misleading? to whom? the problem with a lot of economics training is that it's overly focused on things from the top down; statistics are tools for answering questions, but statisticians rarely get to decide what questions are asked.
It was misleading because you were trying to show that the rich were getting richer while the poor were getting poorer. However, careful study of the graph shows that both groups are becoming better off.
actually, you're describing a recursive function.
It's both a recursive function and an exponential function. The function is (approximately) CPI = 1.02^year.
moreover, the CPI index itself is adjusted for inflation.
The CPI index is not adjusted for inflation, it's a measure of inflation, as you state later. I must not be understanding what you're trying to say.
why would anyone adjust inflation for inflation? inflation is an estimate on how much the cost of things should increase; the CPI shows you how much they they did
You are right about inflation and wrong about the CPI. The CPI does not show you how much prices increased in the economy, it simply lumps a bunch of consumer goods in a "basket," and sees how much that "basket" increases in price over time. This method is imperfect because not everyone buys the same basket of goods. Some people might see the prices of the goods that they buy going up by 5%, some might see it go up 1%. For example, if the price of food increases, the poor will see their basket of goods increase in price more than everyone else, because food is a proportionally larger portion of their expenditures.
the CPI isn't a perfect measure of the cost of living, for sure. if i had time (it's taken me hours to compose this response in the middle of my workday), what i'd really like to see would be:
-all figures adjusted to the same inflation level
-earned income less minimal cost of living (a figure representing disposable income, when positive, or the gap between income and need, when negative)
-broken down by SES, age, race, urban/rural, and region.
I agree, with reservations. However, how do you define "disposable income?" If you define disposable income as net income minus expenses required for living, then, well, how do you define what expenses are required for living? 1500 calories of food per day? 2000 calories? A 400 square foot home? A 600 square foot home? That is the fundamental flaw with this statistic, which is why it is not commonly used.
i'm not sure which graph you're referring to,
I was referring to the graph of average income over time for the various income percentiles in the US.
though closely related, historical CPI and inflation are not the same thing.
True, but they are very close.
if they were, adjusting CPI for inflation would result in a flat line graph.
Try regressing one against the other. This is exactly what it looks like. There are some minor fluctuations, but the trend is flat.
the point of posting both of those charts what to compare actual earned income to cost of living.
You can't use those two graphs to do that. Sorry. Comparing those two graphs is like comparing apples and oranges. The income chart was adjusted for inflation, while the CPI wasn't. If you wanted to compare that, you'd have to find the chart of average income against time, unadjusted for inflation.
inflation is actually a very abstract concept with no direct means of measurement. try looking up a definition of it, and you'll probably find something like "a mark of economic growth, except when there's too much of it, which means economic collapse." at best, that's an over-simplification. among many things, inflation represents the manipulation of supply and demand to ensure profitability.
Your definition of inflation is completely wrong, and your description of the causes of inflation are completely wrong. All I can do is recommend that you go read an economics textbook.
when the costs of production outweight any profits you'd make by allowing a product to be affordable by lower SES strata, the price is inflated. from a business point of view, it's a matter of optimization.
Again, no. Are you suggesting that businesses conspire to inflate prices for their own gain? That is absolutely false. Businesses are hurt by inflation more than anyone else. Inflation is introduced by central banks to keep unemployment low(er) and to maintain liquidity in the economy. Again, go read an economics textbook.
but there are other points of view. take bananas for example. argo-businesses in the U.S. grow a lot of bananas aborad, especially in central america. it's not uncommon around one of these facilities to see dumptrucks full of bananas dropping their loads into lakes, and only moments later villiage children rushing out into deep and often polluted waters scrounging for a meal. why on earth would they throw bananas away? to keep the costs up and make more money. the "unfortunate" side effect is that some people can't afford those bananas.
and to boot, i'm pretty damn sure they're lower quality than anything you could get locally grown (if you live in a climate that'll support banana trees).
I'm not sure how this is related to inflation. And I'm not sure where you're getting this from. I've never heard of food being dumped in developing countries, although I've certainly heard of it being dumped in the US and Europe for exactly the reasons you mentioned. Farmers are organized and have a strong lobby. In return, they get assistance from the government at the expense of everyone else. But it's your local farmer and his political representative that you have to blame, not any "greedy" corporation.
all those perks don't mean a thing to people who can't afford the car to begin with. it might not seem like it matters with things like food.
How is this relevant at all? I was just discussing how the CPI is created and giving you an example of how it doesn't take quality into account.
Anyway, my point still stands. Your original chart proves that the bottom 10th percentile had their real income increase by 40% over the last 30 years or so.
I'm not going to get into any arguments over whether the rich should help the poor or not. If I were poor, I would probably demand that the rich help me. If I were rich, I would probably say that the poor should stop demanding help from others, and go help themselves.
The reality of it is, everyone just wants a bigger cut of the pie. The economics of redistribution are primarily based on self interest.
Who deserves wealth? The person who needs it, or the person who works hard for it?
