Wednesday, July 16, 2014

The price of conspicuous leisure is too high

Amity Shlaes, writing in National Review, leaps to the defence of CNBC elite agitator Rick Santelli --

The price today for talking about inflation is itself too high.

She then lays out a theory that inflation really is much more prevalent than it appears by citing some specific price increases taken from a ZeroHedge post, which she blends into a narrative about someone needing a holiday because the world isn't behaving according to their predictions -- like Rick Santelli. The prices discussed are revealing: a holiday rental on a cottage (sic), cinema, a $45 child haircut, and out-of-state public college.

These are items from a well-off middle class consumption bundle. There's a general point that actual inflation numbers are looking at nationally representative prices of everything consumed by all households and not just some selected items where some people are going to have sticker shock.  Shlaes also gives herself licence to ignore the patient explanations of government statisticians about why technology and quality improvements mean that the sticker price is not always the right thing to look at.

Finally, these specific examples that do seem to excite the upper middle classes -- summer house rentals, fancy haircuts, and college tuition fees -- are prices that go up because lots of other people like them also want them. That's not central banks printing too much money. That's the Bobo treadmill.