In a 1997 paper for the National Bureau of Economic Research titled Why Do People Dislike Inflation?
, Nobel laureate Robert Shiller and a team of graduate assistants interviewed hundreds of people in the US, Germany, and Brazil. While few of those ordinary Joes knew much about the economic term in question, they were all uniformly against it. Even when one researcher told a survey respondent that inflation might help raise his wages, he remained steadfastly opposed. “I suspect that an important difference between economists and laymen is that, to some extent, we speak different languages,” wrote Harvard’s N. Gregory Mankiw in his review of Shiller’s project.
That’s the problem with inflation, which Shiller’s research found to be the most-used economic term in all published news stories in the Nexis database (even ahead of ecospeak staples such as unemployment, productivity, and poverty). Rather than some precisely defined economic truth—say, the decline of a currency’s purchasing power over time, often with nominal income gains failing to keep place with price changes—inflation is a much squishier concept for those of us who are more schooled in home economics than macro policy. We’re not sure about how exactly supply shocks affect monetary policy, yet we innately understand that anything that erodes our living standards in a way that’s completely out of our control is something to fear.
While an intense anxiety about robust price increases—something the US hasn’t seen in almost four decades—is a big part of kitchen table conversations across the country right now, it’s not just inflation that’s unsettling people. A jarring string of events is raising fears that the underpinnings of modern American life are crumbling. A pandemic that shows no sign of abating. Shortages of everything from new cars to baby formula. Mass shootings and unsafe schools. Plunging financial markets. The Jan. 6 insurrection, stoked by an ex-president who continues to lie about the fairness of American elections. A Supreme Court poised to reverse women’s reproductive rights. And a war in Ukraine that could escalate into a nuclear conflict. All this turmoil has left many Americans with a nagging unease that harks back to the “malaise” that gripped the country during the Jimmy Carter era—when inflation last raged.
“At this point, people have been primed with stimuli practically to the breaking point,” says George Loewenstein, a professor of economics and psychology at Carnegie Mellon University. “When people are in a state of fear, they become more afraid of everything. So people are right to be afraid about the economy, but their fears are amplified by all the other background risks they are, and have been, exposed to.”
Read more at Bloomberg.