A friend once vent frustration at the government statistics issued by the Central Statistics Agency (BPS). He was angry and said that nonsense BPS data and BPS did not see the field conditions.
“Read in the paper what? He said, inflation rate fell, from 0.84 percent in January 2010 to 0.30 percent in February 2010. In fact, the market prices keep rising. If you do not believe, let’s go to the market! “I tried to calm my friend. I said to the friend that it was entered in March 2010. BPS announced data for February 2010.
That way, we can not reconcile it with the BPS data that is now happening in the market. “Fine. If so, you trust me. Almost every week I go to the market. Last month I was also into the market. Even last month and I see that the price increase. Now, does this fit with BPS data? “I asked the friend, what he bought last month.
My friend rather inflamed with my question. “Of course I buy rice. Also chili sauce, which became my hobby. “You buy fresh fish and eggs or not?” I said. “Of course not, I’m a vegetarian.” Then, what is it? You buy cooking oil? “I stated again. “I follow a healthy lifestyle I rarely fry.” “Last month, you buy clothes or not?” “I am a simple person. Berhobi not buy clothes. Months ago I did not buy clothes. Your question just getting weird! “” Buy gold! ”
“What question is this. I do not have the money to buy gold. “Seeing my friends getting upset with my question, I was later told him that just so happens that the things he did not consume (fresh fish, eggs, cooking oil, clothing, and gold) were price decline in February.
Unfortunately, the price of rice and chili sauce, which he consumed, it increases a lot. I told him that he was upset at the BPS data because he consumed the goods whose prices rise. He also happens to rent a house and rent the house was up in February.
My friend was silent, but he looked very dissatisfied. He understood that the inflation rate at 0.30 percent in February 2010 that the average rate. Which fell from January to February is the average number. Suddenly he turned the issue. “You remember that in 2009 the inflation rate is much lower than the inflation rate in 2008?” “Yes, remember. Inflation reached 11.06 percent in 2008, then fell sharply to 2.78 percent in 2009. “” So, the average price in 2009 was much lower than in 2008 is not it? “Asked my friend with a half-mocking laugh. “Oh.Tidak.” “Then, am I right that the BPS nonsense,” my friend said with a grin.
I then explained that the inflation figures showed the average price increase. Inflation rate is not the average price, but the average price increase. If inflation falls, the fall is the ascent. While still rising, although the increase down, the price would continue to become more expensive. That’s what causes seems there is a “discrepancy” in statistics and in the market.
Inflation is declining to say price is not declining. While there is inflation (as long as inflation is still positive), prices will rise still continues. My friend was silent.
Tried to reflect the difference between price increases and the price itself. Lower inflation means rising prices decline, while prices were still rising. Another example is very obvious that occurred in 2005 and 2006. Inflation rate fell very sharply from 17.11 percent in 2005 to 6.60 percent in 2006.
Prices fell dramatically? Increase people’s purchasing power? Because inflation is still positive, the average price in December 2006 nearly 25 percent higher than the average in January 2005. If there was no increase in income, purchasing power actually decreased. BPS is not wrong because of inflation around the world are showing price increases, not price itself.
My friend nodded. He understands about inflation statistics. BPS is not wrong. “But,” my friend is still wondering, “we should not provide other statistics so that we may better understand the prices and purchasing power?” He said that we need statistics other than inflation. So far he had always assumed that the falling inflation means that prices are falling.
According to him, many others who think like him. He said that, if not economists, would not have known this. I replied, “There are economists who do not know about it ……. But, should it just a coincidence.” “Tom, what if every month the government also said that prices continue to rise, and not just say if inflation falls or rises. Price said to come down, when inflation is negative. ”
“According to economic theory, prices down was a sign of economic doldrums. Thus, the price decline is not good for the economy, “I tried to explain to a friend. “Tom, you are saying? Each month prices go up. But, fee I get from teaching is not up every month. Even a year or even two years is often not up. If increased, it was not because of adjustments to the price increase. My income increased only if I teach more. Sorry, I’m not an economist. “I paused. Can not answer this question. I pondered again all the economic theories I have ever learned.
Indeed we need to learn more (re-learn) economic theory. We need friends who are not economists to provide a fundamental question for economists force (including me) reviewed the “dogma” that often we have learned, including statistics that we use.
Maybe if the economists tried to “socialize” the economic concept widely not to let the economists (and economists) do not misinterpret economic statistics. Any announcements of economic statistics need an explanation of what the statistics show that. Inflation is one example.
