Humanities Indicators
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The How & Why of Inflation Adjustment

Why does the Humanities Indicators (HI) adjust for inflation?

When describing a funding trend, the HI presents inflation-adjusted funding levels in its graphs and analyses of the data. In order to properly track change over time, the Indicators hold the value of a dollar constant (from the most recent data point in the series), in order to convey the actual purchasing power of an entity through the years. Since inflation erodes the value of each dollar spent, to ignore that change would be to overstate the significance of increases in funding. For instance, it would be misleading to report that an institution received a funding increase of 5% over a particular period of time, if the price of a given basket of goods and services had grown 5% more expensive over that same span of time. That said, we also appreciate that the nominal (unadjusted) funding levels may be of interest to HI users. We thus supply these amounts (expressed in "current" dollars), along with the inflation-adjusted amounts, in the downloadable supporting tables that accompanying the graphs presented on our website.

How does the HI adjust for inflation?

While many information providers adjust for inflation using the Consumer Price Index (CPI), the HI prefers to use the gross domestic product deflator. The deflator measures the changes in prices of products purchased by individual consumers (the focus of the CPI), but also products bought by institutions like universities, not-for-profit organizations, and government agencies, which are the types of entities for which the HI presents funding trends. For more on the differences between the CPI and the deflator—and details as to how they are calculated—please see the documentation on the Bureau of Labor Statistics website.