In this latest installment of The Professor Is In, I answer follow-up questions and respond to comments from my recent post 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 labor’s declining share of income?
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!
This post is sponsored by DeleteMe. As you may know, data brokers legally collect and sell all types of information about you – things like your name, your address, your phone number. This exposes you to a whole host of risks including phishing attempts, harassment, and doxxing.
DeleteMe helps remove your information from hundreds of data broker and people search websites – reducing the risk that your information winds up in the wrong hands (and saving you loads of time!). They’ve been the leading expect in removing Personally Identifiable Information for over 15 years and my friends over at the New York Times have recently named them the #1 data-removal service.
I also like the fact that they use their own tech to continuously monitor and remove your data. That means they’re keeping your data safe by not outsourcing to a third party – which is kind of the whole point. Use this link or go to joindeleteme.com/wolfers and use the code WOLFERS to get 20% off a DeleteMe consumer plan today.
There is a way for prices to go down:
1) Cancel Trump tariffs and revert to the Trade Agreements previously legislated by Congress.
2) If the Strait of Hormuz is opened to normal traffic, the price of Oil, Fertilizer, Oil derivatives, etc will go down.
3) Have Congress pass an Immigration law that responds to the needs of the economy.
4) Restore the CFBP and give it enforcement teeth.
I figure these measures could reduce our annual inflation rate by 100-200 basis points.
Funny how all of these are self-inflicted wounds. It's perfectly rational for people to have lost faith in their government. ("Prices will grow faster than my income.")
Hello Congressmen, stop gaslighting us and get to work!
Well, I wrote my previous comment halfway through this episode, and they ended on this very topic. The bastards ARE out to screw us, and it's perfectly clear. Historical data is not going to light the way going forward.