As Stapleford explains, however, "these restrictions had gender and racial consequences that undercut other efforts by the New Deal staff to make the survey and the cost-of-living index
If we divide money income by a cost-of-living index
, the real income rises if and only if utility rises.
If they do not, changes in income level and its distribution can drive a wedge between the true cost-of-living index
and the Tornqvist index.
number theory proceeds from the proposition that a consumption price index should measure the change in the cost of maintaining a fixed, or constant, standard of living.
Estimating this virtual price requires estimation of a demand function, which in turn provides the expenditure function, which allows exact calculation of the cost-of-living index
We also calculate Fisher indexes, which are theoretically closer to a true cost-of-living index
and which employ more recent information on expenditures.
That paper provides theoretical justification for the index formulas the Bureau of Labor Statistics uses to measure multifactor productivity, and for research estimates by BLS of how much a cost-of-living index
that accounted for commodity substitution effects would differ from the Consumer Price Index.
Lott declared that President Clinton lacked the courage and leadership to deal with one of the principal issues, saving billions of dollars by recalculating the cost-of-living index
in a way that would reduce inflationary increases for Social Security and other benefit programs.
One source of concern continues to be substitution bias, which arises from the use of a fixedweight Laspeyres index formula rather than a true cost-of-living index
A true cost-of-living index
, the commission's report said, should adjust for the changes in what people buy and where.
Therefore, the price of beef should be reduced to the current price of chicken, thus ratcheting down the cost-of-living index
and the CPI.
If a new cost-of-living index
led to cuts in all federal and private payments by the 1.