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Doctor Hammer's avatar

I notice your discussion and charts about the rate of price changes relative to CPI over time are a little bit misleading. If I understand correctly, you are comparing the rate of change in CPI over each time period to the rate of change of each process' price during the same period, setting up %changeCPI -%changeProcessPrice to get the over/under percentages. However, you then say that most of the changes are about zero, with histogram buckets of -.3 to 1.7%. That is actually a huge range considering the data you are looking at, because the CPI change is in single digit percentages.

From 1954-1985 the CPI grew ~8.8%, and from 1985-2022 ~5.2% (according to https://www.rateinflation.com/ and my quick math.) Therefore a changing price 1% greater than CPI between 54 and 85 is growing at a rate 11% faster than CPI; 1% above CPI 85-22 is a 19% greater rate. In other words, a bucket spanning roughly 2% absolute range around zero should definitely hold the vast majority of your data, because it would be shocking to have points far outside there.

To look at it another way, at 5% inflation prices double roughly every 14 years, but at 6% inflation they double every 11.6 years, 17% less time from an addition of 1% to the rate (adding 20% of the base rate).

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Noah's avatar

Another consideration:

Perhaps this points to an increase in the total number of tasks being inserted into housing.

Let's say a very simple and humble SFH in the 50's was put up - they might not even have put insulation in the walls in a temperate environment or be required by a permitting office to do so, or only installed 1 outlet per room.

If the number of tasks to build a modern home has twice the number of steps or tasks that alone could explain increases in costs, even if each individual task had gotten significantly more cost effective over time.

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