Post by account_disabled on Feb 28, 2024 5:33:00 GMT -5
Nearly a decade ago, economists Francesco D'Acunto, Ulrike Malmendier, and Michael Weber examined the responses of 18,000 Americans to the Chicago Booth Expectations and Attitudes Survey. The study, conducted by the University of Chicago Booth School of Business, tracked consumer attitudes toward the economy and showed that, measured overall, on average, women expected future price growth of 5.1 percent. percent, while men projected inflation of “only” 4.6 percent. Women tended to base their expectations on grocery purchases; When asked which item they followed most closely, their first choice was milk. In contrast, men looked at gas prices, as they made far fewer grocery purchases on average. In families where men did the same amount of grocery shopping, men's and women's inflation projections were found to be more similar. “Traditional gender roles. . . “expose women to different signals about prices than men,” the group concluded, noting that this led to “divergent beliefs about future inflation.
While a gap of less than 1 percentage point doesn't seem huge, it's more surprising when you learn that at the time of the study (2015), actual reported inflation in the U.S. was less than 2%. We are all, of course, creatures of our own environment. But the above distinction seems worth noting again now, as central banks scramble to control the price spiral. After all, if Job Function Email Database consumers think price growth will remain high, they may demand higher wages, creating a potential inflationary spiral; But if they are confident that prices can be contained, it should be easier for central bankers to do their jobs. Therefore, it is more important than ever to understand what goes on inside consumers' heads when they project future prices. It is a difficult task. In past decades, free market economic theory tended to assume that economies were shaped by a “rational man” (sic), the name given to an economic actor with a lucid and interested vision of the future. However, as behavioral economists have long pointed out, humans are never completely rational, in the sense of being consistent and neutral in their views.
The gender gap in inflation is an example of this, but not the only one. Take the University of Michigan consumer survey on inflation expectations, arguably the best-known of its kind in the United States. This suggests that five-year inflation expectations have recently fallen from 3% to 2.9%. That seems encouraging, and economists like Richard Clarida, former vice chair of the Federal Reserve, have taken it as a sign that expectations remain "well anchored" (i.e., "low"). But, as investment analyst Jim Bianco has pointed out, what's strange about this survey is that consumers didn't seem to change their expectations last year, even as prices rose. That could be because the Fed is so credible (as Clarida argues); But it could also be because consumers are simply telling pollsters what they think they want to hear. “The poll is total bullshit,” Bianco tweeted. Recommended Another possible explanation is that consumers' focus on economic data fluctuates.
While a gap of less than 1 percentage point doesn't seem huge, it's more surprising when you learn that at the time of the study (2015), actual reported inflation in the U.S. was less than 2%. We are all, of course, creatures of our own environment. But the above distinction seems worth noting again now, as central banks scramble to control the price spiral. After all, if Job Function Email Database consumers think price growth will remain high, they may demand higher wages, creating a potential inflationary spiral; But if they are confident that prices can be contained, it should be easier for central bankers to do their jobs. Therefore, it is more important than ever to understand what goes on inside consumers' heads when they project future prices. It is a difficult task. In past decades, free market economic theory tended to assume that economies were shaped by a “rational man” (sic), the name given to an economic actor with a lucid and interested vision of the future. However, as behavioral economists have long pointed out, humans are never completely rational, in the sense of being consistent and neutral in their views.
The gender gap in inflation is an example of this, but not the only one. Take the University of Michigan consumer survey on inflation expectations, arguably the best-known of its kind in the United States. This suggests that five-year inflation expectations have recently fallen from 3% to 2.9%. That seems encouraging, and economists like Richard Clarida, former vice chair of the Federal Reserve, have taken it as a sign that expectations remain "well anchored" (i.e., "low"). But, as investment analyst Jim Bianco has pointed out, what's strange about this survey is that consumers didn't seem to change their expectations last year, even as prices rose. That could be because the Fed is so credible (as Clarida argues); But it could also be because consumers are simply telling pollsters what they think they want to hear. “The poll is total bullshit,” Bianco tweeted. Recommended Another possible explanation is that consumers' focus on economic data fluctuates.