Scientifically, one of the assumptions of the theories underlying economics is that the consumers are rational. Even though it is not a reality, it is important in terms of gaining economic analysis skills as the human race that has moved away from being “homo-economicus”. When this rationality issue came to the fore, I realized that contrary to the assumption, people are driven by their emotions whilst making decisions.
Perception is the reality
This sentence has intrigued me ever since I heard it. I ask myself “how can there be more than one truth?”. As time passed, I noticed the presence of people who were easily manipulated. Later on, this question flew out of my mind. In short, people can easily be convinced to whatever they want to believe, especially when others have powerful persuasion tools… In the light of what I have mentioned above, I will discuss the inflation basket issue in Turkey. First of all let me introduce TÜİK to clarify the institution I will refer to throughout the article. TÜİK (also known as TURKSTAT in English), is the Turkish Statistics Institute. In fact, the calculation of inflation basket records are accessible to everyone and anyone with a basic knowledge can make a comment, but it is useful to analyze it over and over.
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While determining the weight of the inflation basket, TURKSTAT makes people well aware of something by paying attention to one thing. How is it calculated? With the change that come into the effect in February 2021, TURKSTAT takes 415 different products as the basis for inflation calculation. All of the products have varying weights according to how frequent they are used: there is a wide range of products ranging from pickle to pilgrimage fees. These products are divided into 12 main groups:
|
2021 |
2020 | Difference | ||
| Food and soft drinks | 25.94 | 22.77 | 3.17 | |
| Alcoholic beverages and tobacco | 4.88 | 6.06 | -1.18 | |
| Clothing and shoes | 5.87 | 6.96 | -1.09 | |
| Housing | 15.36 | 14.34 | 1.02 | |
| Furniture | 8.64 | 7.77 | 0.87 | |
| Health | 3.25 | 2.80 | 0.45 | |
| Transportation | 15.49 | 15.62 | -0.13 | |
| Communication | 4.64 | 3.80 | 0.84 | |
| Culture and entertainment | 3.01 | 3.26 | -0.25 | |
| Education | 2.28 | 2.58 | -0.30 | |
| Restaurants and hotels | 5.91 | 8.67 | -2.76 | |
| Other goods and services | 4.73 | 5.37 | -0,64 |
So where is the magical touch? We must start by knowing that, as of December 2020, the weight of the first 33 items in the basket is half the weight of all products that constitute inflation. In other words, TURKSTAT can determine inflation up to a certain point by product selection. Another issue is the order of these products. TURKSTAT did not act in an inclusive way for all of the citizens during the process, and priorities were not made correctly. In other words, TURKSTAT can determine inflation up to a certain point by choosing these products arbitrarily. For example, internet expenses would not have been in the 40th place if the product selection was made on the basis of total expenditures by the public. Until the last change in the calculations, cigarettes were the leader with 5.71% on product basis.
When we compare the average prices of cigarettes in 2020, we see that there is almost no change. (January 20: 16,2427 – December 20: 16,2746) The inflation rate of a product covering 1/20 of the whole basket is approximately 0%. In addition, the price remains the same throughout the year as the tobacco price hikes are made at the end of the year.
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Speaking of price increases, we can pass to the third most important item, electricity. Electricity price raises are regularly made at the beginning of each year, except for a 5-time increase between 2018-2019, which can be attributed to the Brunson crisis. As such, the average price does not change much throughout that year. (January 20: 0.7102 – December 20: 0.7511) It must have come out of the hands of a master in deceptive perception, to include a service with such low price changes throughout the year under these conditions. As I have already exemplified, some of the heavily weighted products are not included in the inflation calculation of that year, as the price increases are made at the end of the year and the general price balance of that year increases less. The calculation method is flawed as is the perception it creates is manipulative.
For example, when we look at the alternative accounts of the Inflation Research Group (ENAG), which consists of reputable academicians and former bureaucrats, the 2020 inflation rate of our country is 36.72% (according to TURKSTAT, this figure is 14.34). ENAG uses a different technique when making this calculation. Unlike TURKSTAT, which calculates maximum monthly inflation, daily or even hourly inflation is calculated. This makes it easier to access correct information instantly. TURKSTAT does not collect data for the products in the basket as often as ENAG. Naturally, there is a difference of up to 15 times between the sample data of the two institutions. With this method, ENAG reaches the number of data taken by TURKSTAT in a month in 48 hours. At the same time, companies make their decisions more accurately by accessing instant data. In this way, instant data will indirectly contributes to growth by making better decisions.
It’s not about high inflation, basically. When the real inflation experienced by the people is higher the inflation announced by TURKSTAT, even if people’s income increases numerically, they become poorer.
Well, let me say two words to those who ask, “what is wrong”. Simply put, the Central Bank makes every decision accordingly and uses this data in future predictions, more often than not setting policy rate at a level not sufficient to suppress inflation.
If Turkstat is obliged to give more information about daily life, it will be realized that the REAL incomes earned by the citizen decreases every year. In addition to being an institution that does not give confidence to the public in recent years, TURKSTAT has been making an effort to perceive / manipulate the inflation account as if it were looking for a gap in the law. This is quite sad… Our hunger for truth as a country is increasing over the years. What a pain it is that every element in my beloved beautiful country raises this hunger.
Yağız Kutay Işık, Bilgi University
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