part of the academic economist's rationalization for this is that if "inflation" is meant to measure ALL price increases in the economy, then labor costs should be reflected too. if everything went up by 5% except your paycheck, well then, not everything went up by 5%, did it? so for the ENTIRE economy, it went up by a bit LESS than 5%.

the problem with this, of course, is that the policy PURPOSE of inflation is to measure not price increases across the entire economy, but to measure price increases that consumers actually face. most consumers don't directly employ others, and so don't benefit from less inflation in labor costs.

the substitution effect in chained cpi measures not inflation, but the way people COPE with inflation when their paycheck doesn't grow as quickly as consumer prices.

I see the examples of folks who were buying beef changing to chicken and then to cheaper things as chained CPI follows this.

How does CPI know what I am buying?

It still sucks!

Have it set up to not actually reflect the true cost of living, they omit, food, and energy including gas from the inflation index, we got a 1.7% increase for 2013, gas has fluctuated more than that for the last several years. Gas has actually inflated almost 300% or more over the last 10 years, food costs are tied to cost of transportation so that goes up along with gas prices...BUT none of that is counted as "cost of living" although that is one of the biggest expenditures by most of us.
Also it depends solely on the ability to find cheaper prices than we already pay which is a fallacy in itself as most of us are already shopping at he bottom in order to actually have enough to make it through the month.

That's a huge component of a household's spending. In a country with an infrastructure built upon the assumption that energy is cheap and private vehicle ownership is the preferred method of travel, energy becomes a key component to most people's budgets.

The loaves of bread I buy used to be around a dollar back around 2000. They're at 2.50 or close now. While it's not an increase of three times, it's still pretty high. Meanwhile, people's wages have not kept up with that. Even if we took the George H.W. Bush methodology and not the Jimmy Carter methodology, a 2% "cost of living" raise from your employer isn't going to cover 5% or 6% inflation.

what this and all of the 'reformed' indices do is simply to remove the baseline by which to measure change. Inflation can never exceed whatever value they declare because they have only to change the value of comparison. The economic indicators can always be made to look rosy because all we have to do is limit the view to the last year (see all official reports on our economic recovery). Every 3 months we just cut out a large chunk of workers to be counted, so unemployment is always improving, and so on.

And they can do this because they know that there's always a sufficient number of sheeple that will nod their heads and, very seriously, bleat agreement.