theglobeandmail.com
Inflation Perception Gap Fuels Anti-Incumbent Sentiment in 2022 U.S. Election
The 2022 U.S. election saw a significant disconnect between economists' assessment of a healthy economy and public perception of rampant inflation, leading to anti-incumbent voting and criticism of central bank policies; this "vibecession" is now impacting other countries.
- Why do the methods used by central banks to measure inflation differ from how ordinary people perceive inflation?
- The discrepancy between official inflation measures and public perception stems from how inflation is calculated. Central banks use measures like "core inflation," excluding volatile food and fuel prices, while the public experiences the full impact of these volatile components. This disconnect is amplified by the fact that people consider cumulative inflation over time, rather than economists' focus on monthly changes.
- How did the disconnect between official inflation data and public perception affect the 2022 U.S. election results?
- The U.S. Federal Reserve declared victory over inflation in 2022 and cut interest rates, but many Americans disagreed, believing inflation remained rampant. This disconnect, termed a "vibecession," influenced the 2022 U.S. election, contributing to anti-incumbent sentiment and a loss of confidence in economic advisors.
- What alternative approaches to inflation management could address the shortcomings of current methods and better reflect public experience?
- The current inflation debate highlights systemic flaws in economic modeling and policy response. Ignoring asset prices like housing in inflation calculations has severe impacts on younger generations, fueling populist support and potentially destabilizing future economic policies. Price-level targeting, proposed by Michael Woodford, offers a potential solution by focusing on long-term price trends rather than short-term fluctuations.
Cognitive Concepts
Framing Bias
The framing emphasizes the failure of economists and central banks to accurately predict and manage inflation, casting them in a negative light. The narrative prioritizes the experiences and perspectives of ordinary citizens who felt the economic pinch, potentially downplaying the complexities of economic modeling and policymaking.
Language Bias
The language used is generally neutral, but terms like "jarring," "gloom," "rampant," and "booting out" convey a negative tone and may subtly influence the reader's perception of economists and political leaders. More neutral alternatives could include "unexpected," "pessimism," "high," and "removing from office."
Bias by Omission
The analysis focuses heavily on the disconnect between economists' measures of inflation and public perception, but omits discussion of potential alternative economic indicators or contributing factors beyond consumer prices and housing costs. The impact of supply chain disruptions, geopolitical events, or other macroeconomic factors on inflation are not explored.
False Dichotomy
The article presents a somewhat false dichotomy between "objective" economic data (used by economists and central banks) and "subjective" public perception of inflation. The reality is likely more nuanced, with both objective data and subjective experiences playing a role in shaping economic policy and political outcomes.