Improving the CPI: The Record and Suggested Next Steps

The use of a cost-of-living concept as the basis for the Consumer Price Index and how such a concept should best be quantified in the technical calculation of the indexes are not new ideas. The 1961 report of the Price Statistics Review Committee headed by the late George Stigler was the basis for the establishment of the price research division at BLS, from which has flowed much of the research on the CPI and many of its technical improvements. The recent report of the Boskin Commission reemphasized that this is an on-going process with a continuing need for research and technical improvement, especially with respect to quantifying quality changes. A survey of consumers' use of time, an expanded point-of-purchase program and better ties to the scientific and academic communities would help toward that end. Serious consideration also should be given to the use of a household-weighted market basket as the basis for the sampling and weighting of the CPI as a better method of approximating a cost-of-living index.