About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

129 Monthly Lab. Rev. 10 (2006)
Price Measurement in the United States: A Decade after the Boskin Report

handle is hein.journals/month129 and id is 538 raw text is: Prc Mesrmn Price measurement in the Unted States: a decade after the Boskin Report Since the 1996 Boskin Report, BLS has made some important changes to improve the Consumer Price Index (CPI), such as the implementation of the geometric means formula to calculate basic indexes and the creation of alternative indexes to serve various user needs David S. Johnson, Stephen B. Reed, and Kenneth J. Stewart David S. Johnson is chief of the Division of Housing and Household Economic Statistics, Bureau of the Census. Stephen B. Reed and Kenneth J. Stewart are economists in the Division of Consumer Prices and Price Indexes, Bureau of Labor Statistics. The report by the U.S. Advisory Commission to Study the Consumer Price Index (known more commonly as the Boskin Report), issued on December 4, 1996, addressed the broad conceptual question of whether a cost-of-living index (COLI) should be the measurement objective of a price index and focused attention on three key problems inherent in the calculation of consumer price indexes: consumer substitution, quality change, and new goods. These issues received further attention in the 2002 report produced by an 11-member panel convened by the Committee on National Statistics entitled At What Price? Conceptualizing and Measuring Cost-of-Living and Price Indexes (known as the CNSTAT Report).1 Subsequent to the Boskin Report, the Bureau of Labor Statistics (BLS) reaffirmed its cost-of-living conceptual framework and, building on prior research, introduced methodological changes that have addressed the /substitution, quality, and new-goods issues. These include the following: 1) the introduction of the geometric means formula to account for lower-level substitution, 2) the introduction of the Chained Consumer Price Index for All Urban Consumers (C-CPI-U) to provide an index that accounts for upper-level substitution, 3) expansion of the use of hedonic models to improve the measurement of quality change, and 4) the institution of procedures to introduce new goods into the index more quickly by more frequent updates to the item samples. This article details these methodological changes and provides some estimate of their quantitative impact. Conceptual basis of the CPi Decisions about particular cPI issues are rooted in the fundamental conceptual goals of the CPI. BLS remains committed to using a cost-of-living index (COil) as its theoretical goal for the CPI, The updated (online) version of the BLS Handbook of Methods asserts the following: As it pertains to the cpi, the COLI for the current month is based on the answer to the following question: What is the cost, at this month ' market prices, of achieving the standard of living actually attained in the base period? This cost is a hypothetical expenditure-the lowest expenditure level necessary at this month's prices to achieve the base period's living standard. The ratio of this hypothetical cost to the actual cost of the base-period consumption basket in the base period is the COLI. Unfortunately, because the cost of achieving a living standard cannot be observed directly, in operational terms a COLI can only be approximated. Although the cPI cannot be said to equal a cost-of-living index, the concept of the COLI provides the cPI's measurement objective and the standard by which we define any bias in the CP1. BLS long has said that it operates within a cost-of-living framework in producing the cp'i. That framework has guided, and will continue to guide, operational decisions about the construction of the index.2 This approach is explicitly endorsed by the 10 Monthly Labor Review May 2006

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most