Initiatives and Related Projects
Some practical applications of our research
Inflacion Verdadera Argentina
A daily inflation index for Argentina. Published from 2007 to 2018 as an alternative to the official CPI which was manipulated by the government during the period 2007-2016. This is how we first started using online prices to measure inflation.
Inflacion Verdadera Venezuela
Our latest project using mobile phones and crowd-sourcing to measure Venezuela’s inflation rate
An attempt to validate online data and better understand how offline pricing behaviors are being affected by the web and mobile browsing/price‐checking technologies.
PriceStats Daily Inflation and PPP Statistics
PriceStats is the company that collects the online prices used by the BPP. It currently publishes daily inflation and PPP indices in over 20 countries. Click here for a historical comparison of the US Online Index and the CPI.
What we do
The Billion Prices Project is an academic initiative that uses prices collected from hundreds of online retailers around the world on a daily basis to conduct research in macro and international economics. It was founded in 2008 by Alberto Cavallo and Roberto Rigobon. This page shows our most recent research and links to related projects.
More than 1000
Countries with Data
From 2008 on
News and Media
A May 2019 study by economists from Harvard University, the University of Chicago and the Federal Reserve Bank of Boston on the impact of tariffs on the U.S. economy found that the cost of tariffs “has fallen largely on the U.S.”
President Trump’s trade truce with China may have temporarily cooled tensions between the world’s two largest economies. Anew paper by researchers at Harvard University, the University of Chicago and the Federal Reserve Bank of Boston suggests that businesses and consumers in the United States are feeling an impact from the trade fight and that the pain could escalate.
Amazon is used to fielding accusations: that it has killed off physical retail business, that it mistreats warehouse workers, that it abuses its dominant platform in online sales. So perhaps it is not a surprise that some people also blame it for low inflation. In 2017 Janet Yellen, then chair of the Federal Reserve, wondered aloud if cut-throat online competition might be stopping goods-producers raising prices even in a world of rising demand. Alberto Cavallo of Harvard Business School has found that Amazon’s prices are 6% lower than those of eight large retailers, and 5% lower than on those retailers’ websites.
Donald Trump has threatened to impose a sweeping new round of trade tariffs against imports from China. According to analysis by Reuters, it would mean 92% of hardware sold by Apple would face levies.
If the tariffs are indeed imposed in December, it could mean several outcomes – none of which Apple will be particularly keen on, explained Alberto Cavallo, an associate professor at Harvard Business School.
The reality is that offline and online price levels are identical about 72 per cent of the time. The figure is based on a study by Harvard Business School’s Associate Professor Alberto Cavallo, whose research covered 24,000 products in 10 countries, including Australia, China and Japan.
Drugstores and office-product retailers have the lowest share of identical prices, while electronics and clothing stores have the most.
Weimar! Zimbabwe! These were the historical precedents genuinely expressed a decade ago about what an unprecedented experiment in monetary policy would do to advanced industrial economies. A huge expansion of the money supply, through quantitative easing, and near-zero interest rates might be an immediate palliative in a deep recession but they’d spark an inflationary crisis later on. And high inflation wipes out savings and destroys living standards.
A study published last year by Alberto Cavallo, a Harvard Business School marketing professor, found that price changes across the U.S. retailing industry have become more frequent over the last decade because of online competition.
US exporters have been slashing the prices of goods they sell to China to offset higher trade costs, but Chinese exporters are passing those costs to American companies, research by Alberto F. Cavallo says.
Retailers are now shifting prices every 3.6 months, Harvard Business School research shows.
While e-commerce is driving retailers to change prices more frequently, it is also leading to more uniform pricing across online and offline retailers.
A paper by Alberto Cavallo of Harvard University found evidence that the algorithms used by internet-based retail giants like Amazon to constantly change and adjust prices have led to greater price fluctuations in response to various macroeconomic shocks. This so-called ‘Amazon Effect’ not only forces brick-and-mortar outlets to respond in a similar manner but also
-> Continue reading The Amazon effects and monopsony
The influence of a growing online retail industry increases consumers’ exposure to the fluctuations of energy prices and exchange rates.
According to Harvard Business School professor Alberto Cavallo, e-commerce is flatlining competition.
Prices for groceries sold by Walmart vary less from one store to another when Amazon markets the same references.
Russell Lynch: Topsy-turvy world of rising interest rates and falling mortgage costs won’t last for ever
Amazon Effect: researcher claims web giant’s low prices keep inflation in check
Retailers adjusting prices more frequently and uniformly across locations should react faster to economic shocks, shows a recent study
Competition between Amazon and traditional retailers is causing prices to become more uniform
A discussion on creating measures of the true inflation in Argentina and Venezuela
MIT Sloan professor Roberto Rigobon and Harvard University professor Alberto Cavallo are the co-founders of the Billion Prices Project. The project collects prices — it has around 15 million prices today — provided by online retailers around the world. The public data is used to conduct research in macroeconomics and international economics. The professors say
-> Continue reading Measuring the Facts: Using Data to Tell the True Story of Inflation
A new study argues that the growth of Amazon and other online retailers has kept inflation and prices low in the U.S. Will Israel and other Middle Eastern economies follow suit and allow e-commerce to take off?
Online competition increases the frequency and uniformity of price changes at brick-and-mortar retailers.
Alberto Cavallo, who works as an associate professor in the Harvard said that in the last 10 years, the competition in the online retailing has increased the price change frequency along with the uniform pricing degree across all the location.
Last week, the Federal Reserve Bank of Kansas City held its much anticipated annual central banking conference in Jackson Hole. This year’s topic “Changing Market Structures and Implications for Monetary Policy” garnered even more attention than usual.
Harvard Business School found that the average duration for regular price changes fell to 3.65 months in 2014 to 2017 from 6.7 months in 2008 to 2010. It also investigated how prices at Amazon, Walmart, Best Buy and Safeway vary across geographic locations. Harvard’s Alberto Cavallo concludes that the paper’s most important finding is that
-> Continue reading Under ‘Amazon effect’ retailers could be more exposed to supply shocks
A discussion of competition and “superstar” firms at an exclusive economic policy conference in Jackson Hole, Wyoming, threw up a spirited defense of global trade, while central bankers were also warned of the low level of trust they have among the public.
When thinking about the “Amazon Effect,” one may think invariably about retail, and the impact the eCommerce giant has on the sector — changing the very nature of how everything from books to clothes are bought and brought to end customers.
Harvard University professor Alberto Cavallo presents a paper at Kansas City Fed’s annual economic symposium
The increase in popularity and decrease in prices from Amazon may be to blame for the rise in inflation over the last few years, reports Reuters.
Retailers’ prices have grown more uniform across locations, finds a paper presented at Jackson Hole
It is an area rich in data waiting to be mined–and the results could bring more clarity to India’s perennial inflation debates.
Desbordado por las alzas, salidas de quicio, el gobierno de Maduro abandonó informes sobre precious.
For nine years, from 2007 to 2015, the Argentine government manipulated economic statistics in an attempt to fool the public into believing inflation was lower than it actually was. Citizens, however, didn’t buy it. In fact, they showed a remarkable aptitude for seeing through the claims.
Organisations like the Bank and the Office for National Statistics can now draw on exponentially more data to produce their assessments of how the country is performing.
The goal of mapping economic activity in real time, just as we do for weather or traffic, is “closer than ever to being within our grasp”, according to Andy Haldane, the Bank of England’s chief economist.
PriceStats, based on MIT’s Billion Prices Project, takes a daily temperature using online sales.
Mining digital information for accurate, up-to-date economic snapshots could help officials make quicker and better decisions
Economics in central banking: Alberto Cavallo and Roberto Rigobon – Billion Prices Project/PriceStats – Central Banking
Through a vast and ongoing data-collecting exercise, PriceStats has helped central banks overcome many of the drawbacks inherent in traditional inflation series.
The growth of e-commerce is well understood, tracking the smartphone’s ubiquity and a global supply chain that delivers consumer goods quickly and cheaply. Its impact on inflation—the so-called Amazon effect—is still being explored by economists.
In public debates about economic policy, it can be hard to separate real insights from political posturing. But a few simple rules of thumb can help.
The recent financial crisis, and the euro area sovereign debt crisis that followed, were characterised by periods of increased heterogeneity, market fragmentation and sudden turns in economic activity. This often made it difficult for economic policymakers to understand and assess in real time the underlying forces driving economic behaviour. Both traditional statistical datasets and our
-> Continue reading Policy analysis with big data -ECB Press
Alberto Cavallo ajudou a elaborar uma pesquisa de preços on-line e criou portal que mede as variações na Argentina e Venezuela .
La inflación venezolana es de tal magnitud que da para experimentos. En el Instituto Tecnológico de Massachussets, en Estados Unidos, comenzaron uno hace tres meses: medir la inflación, esa que descose los bolsillos de los ciudadanos, con ayuda de los mismos que la padecen.
The purchasing power of one dollar is worth more online, according to software company Adobe’s Digital Price Index, which looked at online and offline spending. If consumers had shifted all of their offline spending last year to online, that difference would have meant saving about $2.2 billion, it estimated.
New price data from Adobe Systems Inc., released today, show that online increased its price advantage vs. offline over the past two years. Logically speaking, though, the gap can’t keep widening forever. And there are some hints in the data that online’s edge is already—well, not going away, but approaching its limit.
Big Data se define como la masividad de datos producidos por interacciones electrónicas a través de teléfonos celulares, transacciones online o redes sociales. Lleva el nombre de “big” por la enorme cantidad de datos que se generan a partir de las interacciones electrónicas entre personas.
En épocas en las que la Argentina atravesaba el “apagón estadístico”, con cifras oficiales adulteradas sobre inflación, pobreza o PBI, el sitio InflaciónVeradera.com fue una referencia para determinar la evolución real de los precios de la economía.
Do you know your country’s current inflation rate? What do you think it will be in the future? And how do you, personally, try to plan your finances accordingly?
Those are important questions for economists and policymakers, because central bankers generally assess future expectations of inflation when setting interest rates.
Tomorrow’s Prices – An interview with Alberto Cavallo on why consumers have such a hard time thinking about inflation – AEA Web
We see prices every day. Whether we are grocery shopping, going to the movies, or filling up our cars with gas, we notice the prices of what we buy and how they change over time.
Adrian Ash, of BullionVault, writes exclusively for What Investment on the outlook for the gold price as inflation and interest rates rise.
Alongside Russia-US tensions and crisis-driven spikes in the oil price, suddenly inflation is back making headlines.
Everyone knew something was wrong. Between 2007 and 2011, the Argentine government claimed inflation was running at an average of 8 per cent but the numbers did not tally with what households were experiencing.
Statistics imply that real wages may be falling by 0.6% annually – compared with the 0.9% growth rate indicated by official data.
Prices in the UK are now rising at an annual rate of more than 3% in the latest evidence of economic fallout from the EU referendum, according to figures seen by Sky News.
In the dying days of 2015 came news to set any geek’s pulse racing: the declaration of a “statistical emergency” by Mauricio Macri, the new president of Argentina. Macri’s move enabled Jorge Todesca, head of the statistics bureau, to suspend publication of some basic economic data.
Online shopping is supposed to be a click away from bargains and cheap goods, but this is all a myth, says new research.
A study by the Massachusetts Institute of Technology of 10 countries, including South Africa, has shown that most firms sell their products at the…
The Trump administration has some very optimistic economic targets. It should resist messing with the statistics.
The Soviet Union had a reputation for presenting fake economic statistics to the world, in order to avoid having its dysfunctional system look…
In an average of 72 percent of the cases, there is no price advantage to shop online instead of in the shop – or vice versa. This is the result of a recent study by the Massachusetts Institute of Technology (MIT) after analyzing online and offline prices in ten countries.
Alberto Cavallo, Associate Professor of Applied Economics at the MIT Sloan School of Management, explains how online and offline prices compare. Everyone has their own personal opinion, but Prof. Cavallo and his team wanted to collect data in a large number of countries to answer the question with objective evidence.
(Newsroom America) — When you buy products online, do you imagine you could get better prices in a store? Conversely, does in-store shopping lead you to wonder whether you are missing better prices online?
Inflation is an average. Prices in some areas are growing quickly, while others fall. That’s the way it has to be in a broadly diversified economy. The broadest measure of inflation – the personal consumption deflator – measures everything that consumers buy, and weights it by how much, then spend on those items.
Como esta tecnología ofrece un gran volumen de datos, pero poca información sobre un aspecto particular, se demoró su adopción
“Cuando tenés un martillo todos los problemas se parecen a un clavo”, reza la así llamada ley del instrumento, enunciada por el filósofo americano Abraham Maslow allá por los sesenta en relación a la sobreconfianza en una herramienta, ya sea porque el analista invirtió demasiado en ella o porque está de moda.
Data is finance’s new currency, healthcare’s latest wonder drug, and the energy sector’s new oil.
Another day, another Big Data analogy.
All of the hype doesn’t change the fact that businesses across nearly every industry are gaining competitive advantage by extracting value from large datasets.
Alberto Cavallo y Robert Rigobon, economistas del MIT, comenzaron con la web Inflación Verdadera tras la intervención del Indec, pero ahora estiman la suba de precios todos los días en más de 60 países.
La intervención del Instituto Nacional de Estadísticas y Censos (Indec) produjo un giro académico para dos economistas a más de 8.500 kilómetros de distancia.
Big Data es una de esos conceptos que suenan muy bien pero que son muy complejos y requieren de amplios conocimientos para su aplicación. Por eso, MIT Y Avanxo se unieron para traer Big Data, Shaping the Future of Latin America a Bogotá el 26 de mayo.
Common sense isn’t so common when retail is still experiencing its fair share of upheavals from each new disruptor to make it to market, but the decade-plus of online and in-store retail operating side by side has established a few new ground rules that almost everyone can agree on.
Online prices are generally the same as prices in the store, survey finds
If you’re a bargain hunter, it’s common to spend time researching prices before making purchases. After all, you wouldn’t want to buy a washing machine at your local Lowes store only to find a lower price offered on Lowes.com.
Devoted shoppers may spend hours hunting for bargains online. But new research from the Massachusetts Institute of Technology finds that much of the time — about 72%, in fact — prices are identical to those in stores.
Earlier this month, Argentina issued $16.5 billion in bonds in the largest emerging market debt deal on record, effectively returning to international capital markets for the first time after a following a plague of defaults over the past 15 years under the Christina Kirchner administration.
Many shoppers assume that online prices are lower than in-store prices. However, a recent study by MIT Sloan Prof. Alberto Cavallo found that prices are actually identical about 72% of the time for products sold both online and offline.
MIT Sloan study reveals information of use to consumers and economists
Sure, online shopping is generally more convenient than going to the store for your purchases, but prices are pretty much the same three quarters of the time, according to a new MIT study.
Technically Incorrect: An MIT professor conducts a worldwide analysis of prices online and off. The results might surprise some.
Amazon has educated me in so many ways.It’s taught me that the “Lord of the Flies” was an excellent management book.It’s also taught me to believe that online prices are cheaper than those in stores.
You find lower prices online than at bricks-and-mortar stores, right? Wrong.
Alberto Cavallo of the Massachusetts Institute of Technology displayed resourcefulness and ingenuity by producing a wide-scale international comparison of online and offline prices at “brick-and-motar” stores.
Coles shoppers are paying a hefty premium on some groceries when they shop online and use the supermarket’s supposedly free “click and collect” service or home delivery.
Fairfax Media compared in-store and online prices on 10 popular brand label items at Coles and found eight of them were 10 per cent more expensive for online shoppers.
Shopping online is cheaper right? Think again. Big data has helped challenge that conventional wisdom.
Alberto Cavallo, an economist at the Massachusetts Institute of Technology, has undertaken a huge, international comparison of the “online and offline” prices charged by big retailers.
You find lower prices online than at bricks-and-mortar stores, right? Wrong.
Alberto Cavallo of the Massachusetts Institute of Technology displayed resourcefulness and ingenuity by producing a wide-scale international comparison of online and offline prices.
Public debt in a court of (dumb) law
The parallels between Greece and Puerto Rico, which we have noted before, continue to evolve, but now a political dimension has been added to the economic one. The economic problem has to do with the combination of a public debt overhang and a shrinking population and economy.
Economists, policymakers, and business leaders need better data on which to base their forecasts. Fortunately, new sources of information about the economy have recently emerged: the vast collections of private data collected by search engines and other Internet companies.
Company scans Internet data to produce real-time indicators
The Federal Reserve updates its economic forecasts every quarter. Many economists update their estimates monthly. Some forecasters run their models daily to incorporate new information.
Argentina’s macro-economic policy has been accused of being incoherent, inconsistent, and out of control. Analysts blame ‘populist handouts’ for President Cristina Fernández de Kirchner’s popularity. Yet that cannot explain approval ratings around 50 per cent after nearly 8 years in power.
As Greek banks re-open today after a 3-week closure and as the European state works toward reaching a new deal with creditors, it’s still unclear what the full effect of the run on Greek banks has been on the macroeconomy in both Greece and the rest of Europe.
Monthly reports for February included new home sales, which set a new post-recession high, and existing home sales, also higher, and a higher CPI. Durable goods were down for the 4th time in 6 months, and the University of Michigan sentiment indicator improved from its first March reading, but has continued to back off its January post-recession high.
It’s rare to find academic economists in the Ivory Tower creating new technologies that generate waves of interest jointly from policymakers, Wall Street and Silicon Valley. Roberto Rigobon and Alberto Cavallo, two professors at the MIT Sloan School of Management, make an exception.
One of the biggest economic questions facing the U.S. economy in 2015 is this: will measures of inflation veer into deflationary territory, or will prices firm?
The Consumer Price Index for Urban Consumers (CPI-U) released this morning puts the January year-over-year inflation rate at -0.9%, the lowest since the eight-month deflationary period that ended in October 2009. It is substantially below the 3.85% average since the end of the Second World War and its 10-year moving average.
Russia’s economy looks eerily similar to the 1998 Russian financial crisis which was also characterized by significant declines in the price of oil, a significant decline in the Ruble, sharp hikes in the central bank’s key rate, and now a significant run-up in inflation according to data from PriceStats which tracks daily inflation in 22 countries including Russia by monitoring online prices.
onsumer prices around the world are pulling back so rapidly, along with the collapse of oil prices, that official measures of inflation have yet to capture the magnitude of the decline. But the Billion Prices Project, which scrapes the Internet daily to capture changing prices online, is recording a significant and broadening plunge in consumer prices.
I’m in Argentina for the day — literally (stuff came up, forcing me to make this a very quick visit; sorry, no time for media interviews or anything not already booked). And I thought it might be worth telling people something they may not know about the history of MIT’s Billion Prices Project.
The prices of houses in the Hamptons and high-end art are the “leading edge of hyperinflation.”
Never underestimate the ingenuity of inflation truthers. Every time it seems like they’ve hit rock bottom intellectually, they manage to come up with new and even more ridiculous reasons for why inflation is supposedly higher than the official numbers say it is.
Lower inflation could threaten global economies, and set investors on edge. Are there better ways to supply information on the crucial variable, ahead of government agencies?
The Fed shouldn’t worry too much about the recent surge in consumer prices. It’s most likely a catch-up after a tough winter.
U.S. inflation has been accelerating in recent months, presenting the Federal Reserve with a tricky question as it decides how quickly to remove stimulus from the U.S. economy: Is the rise in prices a precursor of things to come or simply a “catching up” phase as people begin to spend again after a brutal winter?
Beginning in 2008, a pair of economists at the Massachusetts Institute of Technology began tracking prices across the Internet to see if they could beat the Labor Department at its own game.
The Consumer Price Index (CPI) was unchanged in November. Declines in energy prices have been dragging the headline number lower. The Core CPI, which excludes food and energy, was up 0.2% for the month.
By now, chances are you’ve heard the term “big data.”
It refers to the gobs of information being collected about us and our world through things like Twitter, Facebook, Google, smartphones, GPS locations, and tiny sensors built into everything.
Ever wonder how the government calculates inflation? Meet George Minichiello. He’s searching through the meat aisle of a Brooklyn grocery store.
“Here it is,” Minichiello announces, “pork roast. And the pork roast today is $3.99, I’m sorry, $3.49 per pound. Same as last month.”
Hasta la década pasada, Kendall Square, un barrio de Cambridge, Massachusetts, en las afueras de Boston, era un espacio más bien bohemio, con edificios intervenidos por artistas, bares, restaurantes étnicos y su complejo de cines especializado en películas independientes.
A recent tweet by Jack Welch alleging that Friday’s jobs report was manipulated has sparked a ton of interest government data, and whether or not it is manipulated, or can be.
In a recent Fiscal Times piece (via Reuters), economist Mark Thoma makes a good defense of US data quality, while noting at the end that there are countries where manipulation does in fact happen.
The global economy is moving into a good old fashioned slowdown with the developed world’s policy options limited and investors nervous, putting the spotlight firmly on U.S. Federal Reserve Chairman Ben Bernanke in the coming week to point the way ahead.
Falling price pressures around the world will allow central banks to increase their use of monetary stimulus to boost growth, according to MIT economics professor, Albert Cavallo.
In an interview with Business Spectator, Cavallo said the world was now witnessing global disinflation. Indeed, there are now only three countries where inflation is not on a downward trajectory – Russia, South Africa and Brazil.
For some reason I seem to be seeing a resurgence of inflation scare stories, despite the fact that — gas prices aside — inflation remains quiescent. And along with the scare stories come assertions that the inflation numbers are faked, that the government is hiding the true rate.
An extraordinarily elaborate deception may come back to haunt the government as the economy deteriorates
HISTORY has left Argentines with more than their share of economic trauma. Having twice suffered destructive bouts of hyperinflation in the late 1980s, they are sensitive to rising prices.
IMAGINE a world without statistics. Governments would fumble in the dark, investors would waste money and electorates would struggle to hold their political leaders to account. This is why The Economist publishes more than 1,000 figures each week, on matters such as output, prices and jobs, from a host of countries.
Online retailers offer an immediate measure of inflation
IF THE inflationistas are right, where should they look for signs of accelerating price growth? Many are suspicious of official numbers: John Williams, the boss of an inflation-statistics website called ShadowStats.com, claims American inflation has been underestimated for decades because the Bureau of Labour Statistics (BLS) regularly changes its basket of goods on the ground that consumers shy away from expensive items. And official data are slow to come out.
When it comes to planning for your financial future, inflation is a huge issue. In fact, given the historic annual inflation rate of 3.75% a million dollars today will be worth just over $190k in 50 years. Moreover, using that historic rate along with the rule of 72, we can further conclude that prices will double every 19.2 years.
Between official government statistics, industry surveys, and Wall Street forecasts, it often seems like we’re drowning in data, often of uncertain value. But consider the alternative. In the early years of the Great Depression, it was clear that things were awful, but the government had few good figures to go on; there was no official G.D.P. number, and no solid information about unemployment.
Even in the information age, the U.S. Bureau of Labor Statistics still gathers much of its data the old-fashioned way. Workers make phone calls to find out what dentists charge for pulling teeth, and they visit stores to write down the prices of CDs and Russet potatoes.
Even in the information age, the U.S. Bureau of Labor Statistics still gathers much of its data the old-fashioned way. Workers make phone calls to find out what dentists charge for pulling teeth, and they visit stores to write down the prices of CDs and Russet potatoes. In the end, the data are accurate but take a month or so to compile and analyze.
One indicator I’ve been tracking lately is the MIT Billion Price Index; it basically tracks the goods component of the CPI, but of course has higher frequency, so it’s kind of an early warning indicator.
And the BPI has, of course, showed a bump in short-term inflation lately. My prediction was that this bump would prove largely temporary, just as previous blips — both positive and negative — have.
What happens when commodity prices rise by 30% in just 6 months and you have an environment with high unemployment, stagnant wages, and generally weak end demand? According to the Billion Prices Project you get a modest year over year increase in inflation rates. According to the most recent real-time reading the BPP is up 2.83% versus last year.
A mediados de 2009, los economistas Vernon Henderson, Adam Storeygard y David Weil sorprendieron al ambiente académico con una idea disparatada y original: las fotos de la superficie terrestre tomadas por satélites desde el espacio exterior podían aportar un muy buen “proxi” para medir los incrementos de PBI en los países, prestando atención a las imágenes nocturnas de zonas iluminadas con luz artificial.
Where are the inflationary pressures?
The BLS reported on Thursday that the inflation rate as measured by the headline CPI has been 1.6% over the last year. Excluding food and energy, the inflation rate would be 1.0%.
The MIT Billion Prices Project is recording a slightly higher inflation rate for the U.S. of about 2.5%.
Some commenters have been claiming that the MIT Billion Price Index is telling a very different story from the official Consumer Price Index. So I guess it’s worth pointing out that it really matches pretty well.
What you need to realize is that the Billion Price Index, inevitably, only covers goods — not services. So it’s got a narrower focus than the CPI.
To track inflation, each month the Bureau of Labor Statistics canvasses businesses and records the price of, say, a 4.4-pound bag of golden delicious apples, among hundreds of other items. The agency dials land lines to survey how consumers spend their money. It’s essentially the same process the BLS has used for half a century.
How a new online tool can help measure inflation as accurately as — and more quickly than — traditional methods.
Inflation is a crucial economic indicator, since rising prices can hurt consumers and trigger political discontent. It is also hard to measure. In the United States, Bureau of Labor Statistics employees track over 20,000 prices in person or via phone, which are then aggregated into the Consumer Price Index, a monthly gauge of price levels.
At 23,000 retailers and businesses in 90 U.S. cities, hundreds of government workers find and note prices on very precise products. And I’m not kidding when I say “very precise.”
Measuring inflation is a time-consuming business: at the beginning of each month, government researchers across the country amass troves of data on prices for everything from shoes to milk to phones. Two weeks after the end of the month, the government releases gauges of inflation like the Consumer Price Index. But inflation hunters may now get an advance glimpse of the data, thanks to a real-time inflation calculator devised by two economists at M.I.T., Alberto Cavallo and Roberto Rigobon.
The Billion Prices Project (BPP), an initiative started by a pair of alumni who are MIT Sloan School of Management professors, collects prices from hundreds of online retailers around the world on a daily basis to create an Internet-based resource that measures price changes from around the world and gives real-time inflation estimates.
Justin Lahart is among those calling attention to the Billion Prices Project of MIT Professors Roberto Rigobon and Alberto Cavallo.
The basic idea of the Billion Prices Project is to automate search of websites around the world that report prices at which various vendors are offering to sell specific items.