chapter  V
2 Pages

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.