If we have learned anything in the past 2 years, it’s that people don’t like inflation. Well, you probably already knew that. But I guess we learned that they really, really don’t like inflation. Polls of various sorts still indicate that Americans are upset about inflation, even though the worst of it was happening in June 2022, almost 2 full years ago.
But how much inflation do Americans want? The answer: almost 0%. In fact, the median preference is exactly 0% according to a new working paper titled simply “Inflation Preferences.” The mean preference was 0.2%.
But this paper does more than just survey people on their preferences. It also presents to them several “narratives” about inflation, and to see whether people who have considered those narratives have different preferences. Given my many blog posts about the relationship between wages and inflation (or rather, the race between them), this narrative was interesting to me:
T4 (Wage inflation) When prices increase over time (inflation), worker’s wages may not immediately adjust in proportion. Inflation, therefore, affects the amount of goods and services that workers can buy with their wages. By keeping inflation low, workers can buy a similar amount of goods and services over time.
People who had considered that narrative (wages increases trail price increases) tended to prefer even lower inflation rates, by about 0.7 percentage points. Again, perhaps this is obvious, but it is important to understand how different individuals think about inflation (it was the only one of five narratives that had a statistically significant negative impact on inflation preferences).
Finally, as one final interesting tidbit, survey respondents that were also Economics Majors in college reported higher inflation preferences, by about 1 percentage point.
Economist Writing Every Day 