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1 1 (1981)

handle is hein.amenin/aeiaast0001 and id is 1 raw text is: The Consumer Price Index: Issues and Alternatives, by Phillip Cagan and Geoffrey H. Moore, assesses the merits and demerits of the Con- sumer Price Index in view of widespread criticisms that it has over- stated the rate of inflation, especially as an index for escalating wages, social security, and federal pension payments. The authors describe the purpose, uses, and construction of the CPI and compare it with various alternative measures of price changes. Many criticisms, they find, are misdirected or exaggerated because of inadequate knowledge of the rationale underlying the construction of the CPI. The authors believe, nevertheless, that the CPI can be improved. Their suggestions pertain to the construction and measurement of the housing component and particularly mortgage interest, which are the cause of much recent dissatisfaction with the CPI. They also recom- mend that the weights of the index be updated on a more frequent basis. They explain why they do not recommend various other pro- posals for extending or changing the CPI. In particular, they argue that escalation agreements themselves are the appropriate place to specify adjustments for certain changes in the cost of living that the CPI does not allow for. Phillip Cagan is professor of economics at Columbia University and served on the senior staff of the Council of Economic Advisers from 1969 to 1970. Geoffrey H. Moore is director of the Center for International Business Cycle Research at Rutgers University and was commissioner of labor statistics from 1969 to 1973. Both authors are adjunct scholars at the American Enterprise Institute and contribute to the AEI's annual volume Contemporary Economic Problems. US $12.00 9I7BM84139lA4 471 4~f American Enterprise Institute Studies in Economic Policy Issues and Akematives Phillip Cagan and Geoffrey Moore

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