Can We Rely on the CPI Inflation Calculator?

Can I or can’t I rely on the Consumer Price Inflation Calculator?

Let’s take a look.  When I was 16 years old and starting to drive my car, a gallon of regular gas where I lived was 24.9 cents.  Given that, I can use the CPI Calculator to find out what I should be paying for a gallon of gas now (1965 then, 2014 now) – correct?  NO!  Why not?  Well, one reason is the United States deregulated oil in 1973.  Before that, they kept oil prices falsely low.  So, in 1973 oil prices jumped.  Since then, we have been gas has been controlled by OPEC and the cost of their oil.

gas

Can we rely on this calculator, then?

So let’s try another test.  How about the cost of a gallon of gas after the deregulation.  Gas prices in 1975 were 56.7 cents.  So, according to the CPI calculator we should be paying $2.47 per gallon but an average gallon of costs $3.46 today – about $1 more than indicated by the CPI calculator.

post 75 gas

Let’s try something other than gasoline which obviously does not compute!  Let’s try 5 pounds of flour.

In 1950, 5 lbs of flour costs 49.1 cents and today costs $4.78.  Let’s test the CPI Calculator:

flour

Well that worked.  The CPI Calculator says $4.77 and the grocery store says $4.78 for 5 pounds of flour.

So, let’s do one more test.  Let’s try a bushel of corn.  In 1950, corn was selling for $1.13 and $5.10 in 2014.   Again, let’s test the CPI Calculator:

  corn

Still does not work!  Probably affected by farming techniques and increased yields.

One more test.  The minimum wage in 1950 was $0.75/hour.  It is now $7.25/ hour.  Let’s do one more test of the CPI Calculator:

 min wage

This one works.

User beware!

 

Gary

About Gary

I am retired, but not tired. I still want to be valuable to others. I know that others are valuable to me. After looking back on six decades, I have asked myself this question: “What do I believe?” My mind filled up. My heart started beating faster. My spirit soared. I post blogs to share what my mind is working on, what my heart believes would help others and, what my spirit is communicating to me. What do I believe, you ask? Decisions dictate your path In love, not hate In tolerance, not prejudice In health, not sickness In wealth, not poverty In kindness, rudeness In happiness, not sadness In encouragement, not discouragement In faith, not doubt In courage, not fear I have been and will be challenged in each one of these beliefs, but the biggest belief is to stay positive and not turn negative. This belief helps me maintain all of the others.

Leave a Reply