The Boskin Commission, formally called the "Advisory Commission to Study the Consumer Price Index", was appointed by the

United States Senate The United States Senate is the upper chamber of the United States Congress, with the House of Representatives being the lower chamber. Together they compose the national bicameral legislature of the United States. The composition and pow ...

in 1995 to study possible bias in the computation of the

Consumer Price Index A consumer price index (CPI) is a price index, the price of a weighted average market basket of consumer goods and services purchased by households. Changes in measured CPI track changes in prices over time. Overview A CPI is a statistica ...

(CPI), which is used to measure

inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reductio ...

in the United States. Its final report, titled "Toward A More Accurate Measure Of The Cost Of Living" and issued on December 4, 1996, concluded that the CPI overstated inflation by about 1.1 percentage points per year in 1996 and about 1.3 percentage points prior to 1996. The report was important because inflation, as calculated by the

Bureau of Labor Statistics The Bureau of Labor Statistics (BLS) is a unit of the United States Department of Labor. It is the principal fact-finding agency for the U.S. government in the broad field of labor economics and statistics and serves as a principal agency of t ...

, is used to

index Index (or its plural form indices) may refer to: Arts, entertainment, and media Fictional entities * Index (''A Certain Magical Index''), a character in the light novel series ''A Certain Magical Index'' * The Index, an item on a Halo megastru ...

the annual payment increases in

Social Security Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specificall ...

and other retirement and compensation programs. This implied that the federal budget had increased by more than it should have, and that projections of future

budget deficits The government budget balance, also alternatively referred to as general government balance, public budget balance, or public fiscal balance, is the overall difference between government revenues and spending. A positive balance is called a '' ...

were too large. The original report calculated that the overstatement of inflation would add $148 billion to the deficit and $691 billion to the national debt by 2006. The report highlighted four sources of possible bias: * ''

Substitution bias Substitution bias describes a possible bias in economic index numbers if they do not incorporate data on consumer expenditures switching from relatively more expensive products to cheaper ones as prices changed. Substitution bias occurs when price ...

'' occurs because a fixed market basket fails to reflect the fact that consumers substitute relatively less for more expensive goods when

relative price A relative price is the price of a commodity such as a good or service in terms of another; i.e., the ratio of two prices. A relative price may be expressed in terms of a ratio between the prices of any two goods or the ratio between the price o ...

s change. * ''Outlet substitution bias'' occurs when shifts to lower price outlets are not properly handled. * ''Quality change bias'' occurs when improvements in the quality of products, such as greater energy efficiency or less need for repair, are measured inaccurately or not at all. * ''New product bias'' occurs when new products are not introduced in the market basket, or included only with a long lag. The members of the Boskin Commission were: *

Michael Boskin Michael Jay Boskin (born September 23, 1945) is the T. M. Friedman Professor of Economics and senior Fellow at Stanford University's Hoover Institution. He also is chief executive officer and president of Boskin & Co., an economic consulting com ...

, Stanford University (Chair) * Ellen R. Dulberger * Robert J. Gordon *

Zvi Griliches Hirsh Zvi Griliches ( ; 12 September 1930 – 4 November 1999) was an economist at Harvard University. The works by Zvi Griliches mostly concerned the economics of technological change, including empirical studies of diffusion of innovations and ...

Dale Jorgenson Dale Weldeau Jorgenson (May 7, 1933 – June 8, 2022) was the Samuel W. Morris University Professor at Harvard University, teaching in the department of economics and John F. Kennedy School of Government. He served as chairman of the department ...

The Boskin Commission was the first extensive evaluation of inflation measurement since the

Stigler Commission Formally known as the Price Statistics Review Committee, the Stigler Commission was convened in 1961 to study the measurement of inflation in the United States. Headed by economist George Stigler, its mandate was to conduct research into all types ...

in 1961. Griliches was also on that commission.

External links

The Boskin Report"Final Report of the Advisory Commission to Study the Consumer Price Index"
* {{cite journal , first=Robert J. , last=Gordon , authorlink=Robert J. Gordon , title=The Boskin Commission Report and its Aftermath , journal=NBER Working Paper No. 7759 , date=June 2000 , doi=10.3386/w7759 , doi-access=free
"Commercial Knowledge On Innovation Economics, A Report"
As quality change is a required component of innovation measurement a commercial solution had to be found. The resulting biased and unbiased indices are charted from 1952 to 1996, affirming Stigler and Boskin but with an average upward bias in the period of ~ 0.6% per year. Economy of the United States