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Posts Tagged ‘AARP’

AARP is Wrong About Inflation

I’m getting a 3.6 percent increase in my Social Security retirement benefits on January 1. This reflects the rise in the “cost of living.” I’m happy for the money, but it’s wrong: every economist who has studied the issue knows that the Consumer Price Index (CPI-U) used for this adjustment overstates inflation by failing to account for the fact that people substitute away from goods and services whose prices rise relatively rapidly.

For a decade the U.S. Bureau of Labor Statistics has published a measure that accounts for this substitution, the chained CPI (C-CPI-U). Over the last 10 years it has risen 24.4 percent, while the CPI-U has risen 27.4 percent (and 3.7 instead of 3.9 percent this past 12 months). The C-CPI-U is a better measure of the cost-of-living, and it should be used (although even it overstates inflation because it doesn’t account fully for improvement of products).

Unsurprisingly, groups claiming to represent us greedy geezers are vehemently against even this change, “This so-called ‘chained CPI,’ through compounding, would cut seniors’ benefits by thousands of dollars over their lifetimes ….,” said AARP Executive Vice President Nancy LeaMond.

Of course, nobody’s benefits would be cut. Rather, their future benefits would rise less rapidly and would reflect better the prices of the goods they consume. My advice to other geezers: suck it up—this is the right thing for society and the right thing logically.

Maybe Our Tastes Don't Calcify As We Age?

I had an interesting exchange recently while interviewing Tim Westergren, co-founder of the (just-public) internet radio company Pandora for our Freakonomics Radio hour called “The Folly of Prediction.” (We argue in the show that Pandora represents a narrow but worthy example of our ability to predict the future — unlike most realms, like politics, the economy, and so on.)

DUBNER: You know, there’s a neat body of research that shows that people’s tastes in the kind of stuff they consume — whether it’s food, or music, or art, and so on — tend to get fairly frozen in time by the time you hit your mid-thirties or so. Do you know anything about that — about the speed and variance at which people adopt new musical tastes, or are at least willing to experiment, versus their ages?
WESTERGREN: You know, it’s funny, someone said to me a long time ago when I embarked on this, “Why are you doing this? People don’t want new music. I look at my friends and they have the same CD’s they’ve had for 20 years — what problem are you trying to solve?” And I think the truth is the reason that people’s music tastes atrophy is not because they don’t long for discovery. It’s because the don’t have time anymore, and what are they going to do? I know there’s actually a biologist who literally studied this, a fellow at Stanford who studied this, because it seemed like such a strong correlation, but it’s basically when you get busy. When you have a job and you have a family you don’t have time to do anymore. But if you look up behavior on Pandora, the level of enthusiasm, and intensity, and discovery that’s happening is just as rich for folks in their seventies and eighties as it is for, you know, teenagers.