ABSTRACT
Despite seemingly low inflation in recent years and because of official recalculations of the inflation rate that reduce it even further, our measures of “inflation” underestimate the true increases in the cost of living. The official measures of inflation are market-oriented, that is, measuring only the decrease in our money’s power to purchase products currently available for sale. This chapter presents an alternative measure of inflation, the cost-of-living (COL) inflation rate, which takes into account nonmarket elements of people’s cost of living such as pollution and crime. These elements raise our need for money income to keep our standards of living from falling.
