The Changing Definition Of CPI

Below is the definition of the Consumer Price Index (CPI) by the U.S. Bureau of Labor Statistics:

“The CPI represents changes in prices of all goods and services purchased for consumption by urban households. User fees (such as water and sewer service) and sales and excise taxes paid by the consumer are also included. Income taxes and investment items (like stocks, bonds, and life insurance) are not included.” – U.S. Bureau of Labor Statistics

However, the definition was different 20 years ago. Shadowstats goes into more depth here. Current CPI is simply based on a basket of goods, as defined by the BLS; it does not directly reflect inflation because there are many other assets that hold the money supply. So, the basket of goods on which the CPI is based seems to be a bit arbitrary. To explore this, we will examine the old ways in which CPI was calculated before 1980.