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James_K comments on Open Thread June 2010, Part 3 - Less Wrong
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I wouldn't be in a good position to determine if it's lost purpose syndrome since I'm an insider, but I would suggest that path dependence has a lot to do with it.
Price indices are produced by governments, who are notoriously averse to change. And what's worse the broad methodology is dictated by international standards, so if an economist or some other intelligent person comes up with a better price index they have to convince the body of economists and statisticians that they have a good idea, and then convince the majority of OECD countries (at a minimum) that their method is worth the considerable effort of changing every country's methodology.
That's a high hurdle to cross.
On my blog I suggested using insulin prices as a good proxy for inflation. That should be pretty easy for economists to find, even historical data. One economists could find the historical data for one country and use it as a competing measure. No collective action problem to solve there! Just a research paper to present.
(Though I can't find it on google searches, but economists should be able to get access to the appropriate databases.)
The technology to manufacture insulin has been getting a lot cheaper since the late 1970s when bacteria were first used to synthesize insulin (before that it had to be extracted from animals). That process has become even easier since the process for growing E. coli has become much more efficient.
True, that was just one layman's brief pondering of an alternate metric, and I hadn't realized the secular technology trend. I was mainly looking for something that can't be debased because then people will die, but that is also has minimal volatility in demand, supply, and speculation, and requires numerous inputs so as to smooth out the effect of local shocks.
And perhaps I'm running into a Goodhart trap myself -- today, the problem seems to be inflation being hidden via product degradation, but if I pick a metric mainly optimized for that, it will get worse over time. So finding a good or basket that covers all those would require more work -- but product debasement is pretty clearly being ignored today.
(Note that precious metals are sold in a way that prevents them from being secretly debased, but also are heavily influenced by global extraction rates, and are heavily speculated on and hoarded.)
Anything that has numerous inputs will likely be something which is complicated to manufacture and therefore will have increasing efficiency as the technology improves. I can't think of a single good that fits your criteria and hasn'thad substantial technological advancements of how it is made in the last 30 years. This sort of approach might work if one had very steady data for some long historical period with not much technological advancement.
That's making your inflation rate strongly tied to one particular technology. A breakthrough making insulin synthesis easier, or increased diabetes rates, would affect insulin prices but not the rest of the economy.