We should change the inflation basket as tastes and incomes and spending change. But we must understand what we’re doing when we do so. What we’re not doing, by definition, is measuring the change in the price of the same lifestyle over time.
It’s the answer to those people who say that 50 years ago one wage could support a family. Sure, but the basket of goods, the standard of living being supported, was very different from what is the average we’re measuring today.
It wouldn’t surprise me at all if olive oil was in the CPI basket in the UK today. Back then it was sold in pharmacies, in dropper bottles, to cure earache.
There’s actually a project in that. If anyone would like to bung me a decent advance, say £30k, I’ll get right on it. How much would it cost today to live as the average in 1980, 1970, 1960…..we’ve got the CPI basket going back to 1945 I think and I’m sure someone has the weights around as well. I think people would be astonished at how cheaply, today, you could live as our grandparents did when they were bringing up their children.
Just think of the housing costs savings of shared bedrooms and no central heating…..