How new online tool accurately measures inflation

Inflation is a crucial economic indicator, since rising prices can hurt consumers and trigger political discontent. It is also hard to measure. In the United States, Bureau of Labor Statistics employees track over 20,000 prices in person or via phone, which are then aggregated into the Consumer Price Index, a monthly gauge of price levels. But what if the Internet could help measure inflation, and in real time? That is the aim of an ambitious new enterprise, the Billion Prices Project, launched by Roberto Rigobon and Alberto Cavallo, two professors at the MIT Sloan School of Management.

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