Why Has the Inflation Calculation Changed Over Time?

Consumer prices increased in April at the fastest pace in about 40 years.

Critics argue that the sky-high inflation figure is being undercounted as popular anger about rising costs mounts.

The Consumer Price Index, one of the government's standard measures of inflation, has been altered by economists over the past several decades in ways that understate how quickly prices are rising, according to the critics. The lower inflation figures give the government some economic breathing room, they claim.

Tucker Carlson, the host of Fox News, said during a segment on inflation late last year that the numbers are not accurate. He said that the rise in inflation is not close to the 7 percent Washington claims.

The reported rate is a more accurate depiction of how much prices are rising for shoppers because of the changes to calculations over the years. The rate under a different methodology might be higher, but the effect would be small, and the alternative number would do a poorer job of reflecting the costs consumers were grappling with. The overall numbers are not incorrect because inflation affects different people differently.

The concept of what people are paying for consumption is something Alan Detmeister, who was formerly head of the prices and wages section at the Federal Reserve, said you have to understand.

There have been two major changes to inflation since the 1980s.

People who are skeptical about America's inflation measures often cite a change to how home costs are measured in the Consumer Price Index, a closely watched metric produced by the Bureau of Labor Statistics.

In 1983, the government switched from using home prices to using rental prices to gauge the cost of housing.

The owners' equivalent rent is how much a house would cost to rent if they did not own it.

The idea is that homes are investments. You may eventually be able to make a profit on the property that you have purchased. Rent is a representation of consumption. It doesn't leave you with an asset that you can sell down the road.

Critics argue that by leaving home prices out of the equation, the inflation metric underestimates the cost of living at times when home prices are increasing and when first-time buyers are more likely to get a foothold in the market. The old methodology would lead to a higher inflation rate than it was during the 1980s, according to some.

Omair Sharif, founder of the research firm Inflation Insights, said that inflation isn't perfectly comparable over time because of the change in how housing was measured. The change wouldn't be enough to make inflation go up like it did 40 years ago.

"Yes, inflation today would be higher, but by roughly 1.25 percentage points, not the 4 to 5 percentage points people say," said Mr. Sharif, who pulled home price, mortgage costs and home repair data from the 1970s.

He said that it wasn't a mind-blowing number like a lot of people think it is.

Adding home prices and interest rates would have pushed the inflation rate to 11 percent in February, according to calculations used in a paper for The Quarterly Journal of Economics and updated for the newsletter Full Stack Economics. That is more than Mr. Sharif's estimate, but still less than the 1980s.

Others argue that the C.P.I.'s rent measure understates the cost of other types of shelter, pointing out that real-time rent trackers tend to capture rising prices much more quickly. The C.P.I. tracks a sample of existing rents, while the new rents are tracked by them.

Jeff Tucker, a senior, said that the C.P.I. doesn't do a good job telling the story of how expensive housing is in a new city. The point is to better reflect what prices look like for all consumers, not just those looking for a new home.

Economists used to collect a basket of items and track how much they cost over time. The measure was criticized for ignoring the fact that consumers adjust their spending as prices increase.

The weights are reset every two years to reflect what people actually spend their money on, as economists began to update the basket more regularly about 20 years ago.

They tried to account for the changes. Imagine if the price of cupcakes went up. If a consumer buys cookies instead of paying more, their monthly costs wouldn't go up.

They could buy a container with fewer cupcakes, switch to a cheaper brand, or shop at a discount store where cupcakes are cheaper. The government adjusted how it calculates inflation in some categories in 1999 to account for that behavior.

Critics often point out that product swaps are made between different categories, like using chicken when the price of steak increases. The larger substitutions are not included in the normal C.P.I. calculation. The Chained C.P.I. rose 7.8 percent in April from a year earlier.

Think those changes aren't enough? There will be more. The Labor Department tries to make C.P.I. a more accurate reflection of reality.

It is a good long-run method, according to Mr.