The Economics of Feeling Ripped Off

In this latest installment of The Professor Is In, I answer follow-up questions and respond to comments from my diving into the $20 burrito debate—and what it gets wrong about affordability.

I start by addressing an all-too-common misconception: you don’t actually want prices to fall. There's a huge difference between slowing inflation (the Fed’s 2% target is a level you can basically ignore) and actually forcing prices down (which would almost certainly trigger a recession and very possibly a depression).

Then I dig into whether some costs are rising more than others, why looking at the sum of our needs is more honest than cherry-picking items to suit our personal narrative, and why certain salient prices (like food and gas) drive a disproportionate amount of inflation anxiety.

I also draw attention to a caveat flagged by my partner (and favorite economist) Betsey Stevenson: recent wage gains are driven primarily by job-switchers. So in today’s “low-hire, low-fire” environment, the raise that’s supposed to help you catch up may have become more elusive.

Other questions include:

• Have any supply shocks ever made a country permanently poorer?
• How does all this relate to ?
• What could be driving the record-high pessimism among American consumers?

Be sure to check out the video to hear all my answers—as always with this series, they’re a combination of confident assertions, vague recollections, and my best guess!

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