RESET Demonstration Project: Overview and Technical Background

The seminar will provide an overview and technical background for the Re-Engineering Statistics using Economic Transactions Demonstration Project (RESET DP). This project proposes a new architecture for building official measures of inflation and spending from granular, item-level transactions data, offering internally consistent measures of real expenditures and inflation. The RESET architecture aims to replace the existing 20th century infrastructure for official statistics, which relies on disparate surveys and enumerations, with one built upon 21st century information systems. The RESET DP will release real-time monthly indices of inflation and sales covering most retail goods in the United States—accounting for almost ten percent of GDP.

Item-level transactions data yield cost-of-living indices that can account for quality change and consumer substitution. Transactions data require confronting the rapid turnover of items because prices of new and existing products are interrelated in equilibrium. The attached paper “Quality Adjustment at Scale: Hedonic vs. Exact Demand-Based Price Indices” evaluates multiple approaches to measuring quality change at scale. It shows that a hedonic superlative approach—using econometrics or machine learning for hedonic estimation combined with index formulas that require simultaneous observation of item-level price and expenditure—yields improved measures of the cost of living. Accounting for ubiquitous quality change and for consumer substitution yields lower measures of inflation than traditional, official methods.