Fictions of the market: The shelter component of the consumer price index in theory and practice

The consumer price index (CPI), calculated in the United States by the Bureau of Labor Statistics, is a gauge of commodity prices’ fluctuations month-over-month as they are experienced by consumer households. The CPI has wide-ranging influence on economic expectations, especially in inflationary periods. The influence of the so-called “shelter component” of the CPI, which purports to measure fluctuations in housing prices nationally, is considerable. Despite its primacy, the shelter component is deeply flawed and has only limited use when it comes to providing an actual picture of fluctuations in housing and rental prices. In the CPI, housing is not treated as a produced commodity but as a tap from which something called ‘housing services’ flows, to be consumed by households. The failures of the shelter component, I find, are the failures of orthodox economics, also springing from a steadfast refusal to center production. I argue that the reigning economic treatments of housing are based on untenable theoretical assumptions that severely constrain their usefulness; as such, the shelter component of the CPI should be rejected entirely. But first, it is necessary to understand it fully.