Google is developing a new-age price index that uses the company's epic collection of web shopping data to provide an alternative means of calculating inflation. Whereas the official Consumer Price Index provides a monthly measure of inflation based on data collected by more traditional means, the Google Price Index churns out …
Not worth the bits it's encoded in
Given the amount of price spamming in the results for google shopping (froogle) results, I don't think that this will be a very robust number.
I have almost given up on using it because of the number of made-up retailers that all point to a few retailers who don't sell for anything like the price that google says they do. In addition, there are a lot of results that quote prices before tax and other necessary add-ons (not even carriage) that skew the results.
I think this is where PageRank would come into play. Prices on goods from sites that rank low have less of an effect than ones from high-ranking sites.
Not sure the spam would have a debilitating affect on the inflation rate, even though it will skew the absolute price. Even the spammers would feel the effects of real inflation and adjust their prices.
The real killer for the index is the same as the killer for the CPI: The need to establish a basket of goods that reflects the actual inflation the buyer experiences. They've already admitted they don't account enough for housing. CPI suffers by excluding certain volatile goods that do influence real inflation. Yet at the same time you don't want the volatile numbers swamping the non-volatile ones.
It's a tough job figuring that stuff out, and one I'm glad I don't have to worry about too much. I just need to make sure there's enough paycheck left at the end of the half month.
CPI does use the internet
At the risk of being pedantic CPI does include goods traded on the internet, weighted according the money spent on them in the UK, and the market share of the relevant retailers.
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