I was arguing about this at law school today with some fellow students, and I am genuinely unsure of the answer, so I am throwing it to the masses. Hello, masses!
So we were arguing about taxation to begin with, which in turn led to the various costs of living in the United States and Canada as a measure of comparison purposes – me maintaining that they were higher in the USA, someone else that they were higher in Canada. Now, there’s no such thing as a “median cost of living” – well, I suppose there is, but due to regional variation it’s kind of useless as a statistic. So we turned to consumer price indexes.
Consumer price indexes, for those who do not know (and I want everybody to at least be able to follow the thrust of the conversation) are a method of tracking increasing costs of items as a way of partially measuring cost of living. You set a “year zero” – say, 1984. You buy $100 worth of goods in that era with 1984 dollars. Then you track the costs both backwards and forwards – so how much does it cost to buy that same $100 cost of goods in 1974, and 1994, and 1964, and 2004, and so on and so forth.
Now, when we were Googling for this sort of information, we couldn’t find a good CPI for both countries for the same year zero, so – and this is where the argument begins – I suggested instead using math to create a new year zero on the larger (American) CPI for comparison purposes. Now, I’m not going to pretend that this is exactly scholarly and I wouldn’t use it for a paper, but if, say, you want to turn 1996 into your year zero, and in 1996 it took $153 to buy whatever you bought in the previous year zero for $100, then it follows that if you divide every figure on the table by 1.53 you’ll get at least a rough estimate, suitable for back-of-the-envelope type calculation, of what things look like with 1996 as a year zero.
Needless to say, my friends disagreed. They also kind of disagreed with the concept of cross-comparing CPIs from Canada and the United States because you couldn’t guarantee that the same items would be in the $100 “basket.” My counterargument here is that Canada and the United States, in terms of culture and especially merchandise, are at least relatively equivalent in our shopping patterns – not perfectly homogenous to be sure, but close enough, as they say, for government work. Again, I’m just talking for back-of-the-envelope here, not for any real study.
So, my question is – which of us is right? Or right-er?