Conclusion: Is the CPI the Best Measure of Consumer Inflation?
The idea that well-being is relative is directly at odds with conventional economic theory, which assumes that individuals are only concerned about their own consumption, not the consumption of others. This assumption un derlies virtually all of modem economics, and for this reason economists have been reluctant to consider the possibility that welfare really is relative. How ever, researchers in other social sciences such as psychology and sociology routinely develop theoretical models and carry through research in a frame work that assumes that well-being is relative. Certainly economists cannot rule out this possibility a priori. But if well-being is relative, and a cost-ofliving index can have no real meaning, then economists should stick to a price index.