Mahfi Eğilmez: There is unregistered inflation in Turkey

Mahfi Eğilmez, in an article evaluating the inflation figures announced by the Turkish Statistical Institute (TÜİK), said that people do not find the CPI (Consumer Price Index) figures realistic and even report that they are facing at least double the inflation in a year.

Eğilmez stated the following in his article:

"Optical illusion is an expression used for situations where perceived images and objective reality differ. The information our senses obtain and send to the brain can create a perception that does not fully match the physical state of the source of information. As a result of this development, we move away from seeing the truth. This situation is called an optical illusion. An observer in a transparent medium, when looking at an object in a different transparent medium, sees that object in a different size or level than it should be.

For example, when looking at a pool full of water from above, the fish swimming in the pool appears in a different position than it actually is. This illusion that occurs in perception is caused by the change in direction of light as it passes into the second medium, that is, the refraction of light.

In social sciences, unlike in physical sciences, optical illusion manifests itself in the form of man-made illusions. The most well-known of these are illusions such as balance sheet or budget dressing, showing inflation, exchange rates, and unemployment rates lower than they are, and showing per capita income and growth rates higher than they are.

Greedflation is when producers and/or sellers take advantage of the environment created by high inflation to increase the selling prices of the goods or services they sell above the rate of inflation. The term greedflation, formed by combining the word greed, which means greedy in English, with the word inflation, which means swelling, can be translated into Turkish as 'açgözlülük enflasyonu' (greed inflation).

CPI change rate is taken as a reference

According to the data announced by TÜİK, the latest 12-month inflation data (CPI) points to a rate of just over 67 percent. In this case, all goods and services whose prices have increased by more than 67 percent since February of last year fall under the scope of greedflation. However, there are some problems with taking the 67 percent rate as a basis:

(1) The fact that inflation is 67 percent does not mean that the price of every good or service in the economy has increased at this rate. This is an average rate. The prices of some goods or services may have increased by less than 67 percent, and some by more. (2) The CPI basket, where the 67 percent inflation calculation is made, is a basket consisting of 406 goods and services selected through surveys from among thousands of types of goods and services in the economy. Therefore, it does not represent all goods and services.

Despite all this, when people look at the price of a good or service and want to compare it with the past, they usually refer to the CPI change rate. If the price of any good was 100 TL a year ago and became 167 TL a year later, it is said that the price of that good has increased at the rate of inflation, but it is not claimed that there is greedflation. On the other hand, if the price of the same good has risen to 200 TL, the 67 TL portion of the difference is perceived as normal inflation, and the remaining 33 TL portion is perceived as greedflation.

Is this really the case? Or is there an optical illusion?

It cannot be determined who causes inflation!

While looking for an answer to this question, we must first decide what real inflation is. Because people do not believe that the CPI rate reflects the truth. Let's say we take into account the e-CPI inflation of around 121 percent, which is the measurement of the ENAG group; if the price of the good in question should have actually been 221 TL at the end of the year but became 200 TL, there is no greedflation here. In fact, the price of this good has remained even behind the average inflation.

In Turkey, as in every other subject recently, there is a serious optical illusion regarding inflation. This illusion continues in determining who is responsible for this situation. Most people argue that the real inflation is not 67 percent, but at least double that, but when it comes to the issue of who is responsible for this, they start blaming sellers, landlords, or banks.

Is there greedflation in Turkey or an optical illusion? As long as an evaluation cannot be made based on real data, it will not be possible to give the correct answer to this question. On the other hand, we can call the difference between the inflation rate announced by TÜİK and the inflation rate announced by ENAG 'unregistered inflation'. Thus, Turkey may have contributed to the literature by adding unregistered inflation to concepts known for a long time such as the informal economy, unregistered income, and unregistered employment."