Cedric Wilson When Christopher Gonzales' statue of Bob Marley was unveiled a quarter of a century ago, many Jamaicans were shocked and some were even angry. They rejected it. Alvin Marriott, renowned sculptor, who was 80 at the time, was then called upon to create a new monument which now stands on Arthur Wint Drive, opposite the National Stadium.
The Gonzales' statue which portrayed the reggae superstar emerging like a tree from roots anchored in the ground was scoffed at because it did not look like the man Jamaicans embrace as their greatest cultural apostle. In creating the statue, Gonzales' chisel was guided by powerful creative forces. In an interview years later, he said "(t)he symbolism of the tree trunk from which the figure emerges represents Marley's ascent from the ghetto into international acclaim with the music he created". In a sense, national statistics are like statues of folk heroes. As such, statistics cannot be mystical or symbolic - if they don't look or feel like what they are purported to be depicting, people will reject them.
If people are told that the economy is growing and they cannot identify with it, they will believe that the figure is contrived by the Government to deceive them. If inflation statistics are out of line with the intuition of the average man, he will dismiss them as garbage.
to attain effectiveness
It is in this context that the agency entrusted with the collection, analysis and presentation of national statistics has a serious job. For it to be effective, it should be free from government interference and the information it presents should be 'timely, accurate and relevant'. Sonia Jackson, director general, and her team at the Statistical Institute of Jamaica (STATIN) is aware of this.
In late September, at the launch of the revised Consumer Price Index (CPI), Mrs. Jackson stated, "It is important that we develop a statistical culture, which is very lacking in Jamaica." Clearly, this requires a change in the attitude of Jamaicans in with respect providing information and the use of data, as well as a statistical agency that is efficient and inspires faith. Undoubtedly, the revision of the CPI is a crucial step towards the creation of a statistical culture.
The CPI is the foremost way of measuring inflation in the economy. It is therefore essential that it is reasonably accurate. Trade unions depend on it when negotiating wage contracts; businesses use it in their income forecasts and the Bank of Jamaica employs it as a guide to monetary policy. And there are numerous other applications to which CPI is relevant.
Yet, accurate measurements of economics variables such price movements are not easy come by. Economic measurement involves an effort to capture dimensions over time and space that are constantly changing. To measure change, a yardstick or a stable reference point is indispensable. But in the world of economics, reality is in a state of constant change. It is further complicated by the fact that yardsticks used to measure these changes are themselves changing.
measuring CPI
In measuring CPI, the yardstick for economists is a 'basket' or a set of goods and services that represents the monthly consumption of the average man. So over time, to measure price changes, economists and statisticians assume that the basket of commodity the average man consumed is fixed. Therefore, if a basket of goods was established 10 years ago to measure price changes, if it is still being used today, then it is taken for granted that the average man is still consuming precisely the same goods in the exact quantity that he did a decade ago.
Until the launch of the revised CPI recently, the assumption made in measuring inflation by STATIN was that the consumer basket was the same as it was in 1984. Yet, so much has changed - children are eating lots more junk food now; people no longer listen music on vinyl, they rock to crisp sounds spun from compact disks (CDs); letters are written on computers, nobody bangs them out on typewriters anymore; who turns a dial to change TV channels when the remote is always present?; and why search for a phone boothe at the airport when your cellphone that is almost 'razor' thin?
changes in consumer tastes
Indeed, since 1984, there has been changes in consumer tastes, changes in the quality of goods available, changes in real per capita income, changes in the age distribution of the population and don't forget a whole bunch of new goods have arrived on the scene. Evidently, the 1984 yardstick not totally irrelevant, is less than adequate.
To introduce a new yardstick in a small developing economy is, however, a enormous task. It is a project which requires proper financing, special expertise and a massive household survey.
Sonia Jackson, director of STatin. - Winston Sill/Freelance Photographer
STATIN's CPI revision project was funded by primarily by the Inter-American Development Bank and the Bank of Jamaica, some $32 million in all. Plus the Government of Jamaica provided another $17 million. The entire project revolved around a Household Expenditure Survey conducted over a 10-month period spanning 2004 and 2005. It involved more than 12,000 households scattered all across Jamaica.
Special attention was given in the survey to the treatment of Hurricane Ivan which occurred in September 2004. This event represents a random factor which by its nature distorts normal consumption pattern. Adjustments were therefore necessary to ensure that the basket of commodities that would be a part of the new CPI reflects the normal state of affairs.
The classifications in the revised CPI basket are now consistent with international best practice. It is based on the 'Classification of Individual Consumption According to Purpose' (COICOP), a relatively new standard promulgated by the United Nation. This classification refers to broad groupings of
commodities such as food and non-alcoholic beverages; clothing and footwear, and so on. The new STATIN basket contains 12 categories of commodities against eight in the 1984 basket. The application of COICOP will make the comparison of inflation across international borders more meaningful.
The new CPI basket is also bigger. It contains 482 commodities versus 231 in the old basket. The basket now has a whole tray of fast food items - spanning Burger King breakfast to Tastee patties; it has yogurts for the health food freaks and chicken foot for those who considers this part of the fowl a delicacy. The basket has not ignored the fact that funerals are no longer a somber affair neither does it turns a blind eye to the increasing tendency among younger Jamaicans to put their "old people" in retirement homes. Yes, it has not missed out on the fact that hot-press is an ancient style in hair-salons which it has omitted and instead recognises the service charges for braiding and weaving in the basket. And of course, there is a whole array of electronics stuff in there as well - computers, CD player, DVDs, to name a few. As such the new basket is both bigger and more in tune with life in the 21st century. According to the laws of statistic, the larger the sample of commodities in the basket should make for a more accurate the index.
computing the price of a commodity
In addition, the approach to computing the price of a commodity is different. For example, a commodity such as men's shirt contains three items - polo shirt, sport shirt and dress shirt. To come up with the average price of the commodity the 'arithmetic mean' would have been used in the old CPI; now the 'geometric mean' is applied. The main advantage of this new methodology is that the index will be less susceptible to extreme price changes in the price of an item.
Inflation indicators can be controversial. Especially, for the person who stands by the cashier in the supermarket and suffers the humiliation of having to return items because the same amount of cash that was used last month cannot cover them all. In those instances, for the consumer the official statistics is always wrong. However, to be fair while there may be the issue of the relevance of the basket, consumers are prone to over-react.
tunnel vision
The consumer often suffers from tunnel vision and believes incorrectly that the goods he puts in his trolley at the supermarket represents the full range and sum of all goods in the CPI basket. However, the reality that the CPI seeks to measure is much wider than the experience of a few frustrated shoppers. It attempts to capture the reality of the average consumer. In that respect at the level of the individual some people will encounter higher price changes than others. Nevertheless, if the official inflation rate is not in accord with the general perspective of consumers as a whole then it is suspect.
When asked whether the revised CPI will show higher price increases, Miss Monica Bartley, the STATIN director who had the direct responsible for CPI revision project, pointed out that it would be difficult to give a clear cut answer. Certainly, a bigger basket should capture more price increases, but the weights of the commodities in the basket also influence the index. Furthermore, the volatility in commodity prices in the new basket will be somewhat dampened by the geometric mean.
For Miss Bartley what matters is not whether the revised CPI is higher or lower; what is crucial is that it gives a fairly accurate picture of reality. And she is confidence that it will. That is how it should be. After all, STATIN is not an assembly of sculptors conveying a creative vision by chipping stones - they are statisticians.
Cedric Wilson is an economics consultant who specialises in market regulations. Send your comments to: conoswil@hotmail.com.
