# Cost of Living

What criteria do economists use to determine the cost of living for a city/state/nation? I would guess they encompass csot of homes, average price of food, gas, owning a car, etc., but are there specific standards for these criteria? Fr’instance, do they take the price of a 3 bedroom home with 1 and 1/2 baths, a sedan, and a diet of red meat and veggies? And what exactly are the uses of this standard for a single guy with no kids, an SUV, and a diet that unfortunately consists of maybe 2 meals a day, one of which inevitably comes from a fast food place?

Is there a reasonable formula for extrapolating these values to encompass other lifestyles?
And is there a scale where various places can be measured against one another? Where, say, NYC is an 8 and Assboink is a 2 (where higher numbers indicate higher COL’s)?

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## I don’t know that there is a specific standard for computing COL but I believe any given COL is based on a standard set of purchases for that index. As you suggested, they price the cost of a house, a car, groceries, utilities, etc. and track them from year to year, month to month, or whatever. Anyone who cites a COL index should be able to get you back to the basis for that index, but of course they seldom do.

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I’m not exactly sure how any of this is done, but I have a couple of resources that will calculate it all for you. The first compares demographic, economic, and climate info between two cities, while the second one will calculate how much you will need to earn in the city you plan to move to in order to keep the lifestyle to which you are accustomed where you live now.
http://www2.homefair.com/calc/citysnap.html
http://www2.homefair.com/calc/salcalc.html

I don’t know how econimists do it, ( if you layed all the econimists in the world end to end they STILL wouldn’t reach an agreement) but every time the price of Cuban cicars, hotel suites, limo rentals,gourmet meals, hotel suites and ‘advisors’ goes up, congress votes themselves a 'cost of living ’ raise.

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Excellent question, Flypsyde! Unfortunately, way too much to answer here. I’ll take a crack at quick and dirty answers, and direct you elsewhere for the complete skinny.

[quote]
What criteria do economists use to determine the cost of living for a city/state/nation? … (A)re there specific standards for these criteria? Fr’instance, do they take the price of a 3 bedroom home with 1 and 1/2 baths, a sedan, and a diet of red meat and veggies?

[quote]
The people at the Bureau of Labor Statistics take extensive surveys in each area to find out how consumers are actually spending their money. From the surveys, they create a “basket” of goods and services from which the Consumer Price Index is derived. This “basket” has about 200 categories, arranged into eight broad groups. The basket is readjusted every so often. When the guy on CNBC says that “The Consumer Price Index came in at +.3%,” he means that nationally, the price of the basket went up .3%, seasonally adjusted (another complex set of variables).

Essentially none. It also is useless for people with much larger than normal medical expenses, people with 17 cats, or whatever. Like most averages, it applies directly to a relatively small population in the sample.

BLS publishes the components, so yes, but it’s tricky. Special interest groups do this from time to time. For example, a senior citizen’s advocacy group might reasonably want to try to demonstrate that the cost of living for the aged exceeds the stated rate, so Social Security COLAs should be higher. It rarely works anymore.

BLS is pretty careful to avoid making this sort of thing available, but yes, economists, interest groups and others try to create cost of living differentials by geography.

There’s a pretty good site at http://stats.bls.gov/cpihome.htm . Any deeper than that, and you’ll need a few statisticians and an economist, which will really increase your cost of living!

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