I've long been concerned about the disconnect between the statistics we use to make social and political decisions, and the effect those decisions have on people. So this gets my attention right away.

[TS] What Happens if Inflation Is Overstated?
By FLOYD NORRIS

AMONG some Americans, it is almost an article of faith that the Consumer Price Index understates inflation — there are conspiracy theories about why that happens. After all, holding down the C.P.I. saves the government money in a variety of ways and hurts those with pension or Social Security benefits linked to the index.

But you don't have to be a conspiracy theorist to conclude that in the last decade, an important part of the index has been understated. That is the housing component.

Since 1983, the government has measured the price of homes not by looking at house prices but by computing what it calls "owner's imputed rent." That is the rental value of the house you own. It accounts for nearly a quarter of the entire Consumer Price Index.

Fortunately I read around before writing this morning. Brad DeLong explains why they use rental value. Basically, for a couple of reasons the price of a house doesn't track precisely with its cost. "Price" being in the name CPI, you'd think prices would be all that's in there, but given what the CPI is intended to track it makes sense to look at rental costs instead of house prices or worse, house values.

Saved me a lot of time.