““The reason the growth in the standard of living has been understated is that the Consumer Price Index (CPI) recorded price changes for each type of merchant separately and did not compare prices between types of merchants. Thus if the price of a box of Kellogg’s corn flakes remained fixed at twenty cents in March and April in a traditional store and was seventeen cents in a nearby A&P store newly opened in April, the price would be treated as fixed. This error in the CPI is called “outlet substitution bias” and has continued in the past three decades as Walmart has opened stores that charge less for groceries than traditional supermarkets do.””
