Edward Conard

Top Ten New York Times Bestselling Author

  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
Upside of Inequality Oxford Unintended Consequences

AI Summary. Alternative measures of underlying US consumer price inflation — including versions excluding food, energy, shelter, and used vehicles, trimmed-mean measures, "sticky-price" indexes, and individual service categories such as restaurant meals and haircuts — tell a similar story about inflation that differs from headline figures, a divergence attributed to housing costs.

Matt Klein The Overshoot
Date Posted:

The CPI for shelter – ⅓ of overall CPI – lags behind market rents. Thus, receding rent increases from the Covid period are creating the “illusion of disinflation,” while measures other than overall CPI imply stable or accelerating inflation in 2025.

Do alternative inflation measures tell a different story than headline figures?

Core argument: Alternative inflation gauges — the BLS CPI excluding food, energy, shelter, and used cars and trucks, the Cleveland Fed's trimmed measure, and the Atlanta Fed's sticky-price CPI excluding shelter — tell a similar story that differs from headline CPI figures.

The BLS publishes a version of the CPI that excludes food, energy, shelter (housing+hotels, mostly), and used cars and trucks. The Federal Reserve Bank of Cleveland has a measure that recalculates the monthly change in the CPI excluding the components with the largest price increases and largest price decreases. The Federal Reserve Bank of Atlanta divides the CPI into two groups based on whether prices change frequently or not. They also publish versions of their “sticky-price” CPI excluding shelter. Another approach is simply to focus on select components that ought to be representative of the broader whole, such as “full service meals and snacks”, or “personal care services” (mostly haircuts). Tellingly, all of these measures tend to tell a similar story regarding inflation over the past few years—and this story is very different from what the headline figures have been showing, thanks to the impact of housing.

Takeaways by Macro Roundup® AI

  1. Alternative inflation gauges — the BLS CPI excluding food, energy, shelter, and used cars and trucks, the Cleveland Fed's trimmed measure, and the Atlanta Fed's sticky-price CPI excluding shelter — tell a similar story that differs from headline CPI figures.
  2. The divergence between headline CPI figures and alternative inflation measures over the past few years is attributed to the impact of housing.
  3. Select components such as "full service meals and snacks" and "personal care services," mostly haircuts, tell a similar inflation story to the broader alternative measures.

Related Articles:

  • Market Rents and CPI Shelter Inflation — Shelter, about 35% of the consumer price index, responds to market rents with a lag because of long-term leases, smoothing at lease renewal, and measurement using six-month rent changes. The authors' model reproduces the lagged, dampened response of shelter inflation to swings in market-rent inflation.
  • Inflation, Trump, and the Fed — Nominal wage income is growing about 1–1.5 percentage points faster than before the pandemic, implying somewhat more inflation than in 2017–2019 if most of that extra income is spent and businesses cannot ramp up production. Cutting interest rates enough to reverse the budget deficit increase, without offsetting fiscal tightening, would be extraordinarily inflationary.
  • When Is Shelter Services Inflation Coming Down? — A gap between housing demand and supply emerged after the COVID-19 pandemic that has likely put upward pressure on rents. Leading indicators including units under construction, the gap between completed units and net household formation, and market rents on new leases tend to foreshadow shelter inflation by about a year, and suggest it will keep declining toward more traditional levels.
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