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I wrote last week about the central role that inflation will play in defining the outcome of the forthcoming US election.Issues Among Likely VotersData for Progress
Since then, a number of people have pointed me towards a recent paper by Stefanie Stantcheva at Harvard who updates a classic 1997 work by the great Robert Shiller to ask: Why Do We Dislike Inflation?
It seems like an obvious question, but, particularly when asked now – at a time when inflation has such renewed political and economic salience – Stantcheva draws some powerful and perspective-altering insights.
Robert Shiller wrote his paper in the heart of the Great Moderation, when inflation remained under resolute control – there’s something almost nostalgic about the way he describes an era of rising prices. And this is important. Because he notes in his paper that, “At this time of relatively low inflation among most of the major countries of the world, “inflation” still appears to be the most commonly used economic term.” There seems to be a kind of folk memory of the pain felt by those who lived through the 1970s. Inflation is a bad thing, associated in the mind of the public and the media with an erosion in the standards of living, even if they don’t quite understand how it works.
Inflation 1960-2024MacroTrends
Shiller’s conclusion is that “the main issue for the public with regard to inflation is just that people do not see the connection between inflation and increases in income that might be associated with it.” Almost 30 years on, and Stantcheva’s findings are remarkably similar.
Stantcheva interviewed more than 2000 people between December 2023 and January 2024, asking them many of the same questions that Shiller had asked in his survey. She left more questions open-ended, though, permitting …
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