The overstatement of the Consumer Price Index (CPI) may be the world's most costly accounting error:
"...remarkably, the upward bias by itself would constitute the fourth largest federal outlay program, behind only social security, health care and defense. By 2008, the increased deficit would be $180 billion and national debt $1 trillion."
-Final Report of the Boskin Commission on CPI
Economic theorists have developed numerous formulae to define, quantify, and index growth and inflation. Unfortunately, they are known to be
A). Mutually inconsistent
B). Ill defined for consumers whose tastes are not absolutely constant.
C). Incomputable from (price and quantity) data without detailed knowledge of consumer psychology
and these difficulties have come to be known as "The Index Number Problem(s)". In joint work with economist Pia Malaney, we show that all the above problems can be simultaneously eliminated in a novel way by recasting the problem in the differential geometric framework of connection theory on fiber bundles. This introductory talk will focus on an application of gauge theoretic differential geometry to the first of these outstanding problems in mathematical economics. Conversely, the talk could be viewed as an unorthodox introduction to gauge theory bypassing the abstraction of differential geometry by way of the CPI.
This talk should be accessible to grad students and advanced undergraduates.