Having just bought a used copy of a primer on advanced economics, received Thursday, with the first chapter being history and concluding with a sub essay on inflation expectations, this seemed clearer.
I did think inflation expectations and the media could be investigated. Inattentiveness reduces as more is said, or other factors are involved e.g If the report is from Fox, Dems are in charge, the average Fox viewers expectations might be high. If CNN, Dems are in charge, the average CNN viewers expectations might be lower.
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Jeremy Rudd, of the Fed, is skeptical of the importance of inflation expectations: "Economists and economic policymakers believe that households’ and firms’ expectations of
future inflation are a key determinant of actual inflation. A review of the relevant theoretical
and empirical literature suggests that this belief rests on extremely shaky foundations, and a
case is made that adhering to it uncritically could easily lead to serious policy errors."
I originally read the piece back in 2022 but this sentence still lives rent-free in my head: "hence why consumers, in aggregate, have never forecasted real income increases in the history of the University of Michigan survey despite decades of real wage growth."
nice post. one question: what’s the role of money supply in managing long run inflation. it seems to me that this trumps expectations. eg in the long run, prices can’t continue to increase if money supply is fixed
Very nice work. Three gold stars!
This is a superbly-written piece; crystal clear!
Thank you!
A nice job, with good support from academic studies. Timely.
My Jan. 1 newsletter looks at inflation, in ways that are consistent with this post.
https://johnhowe.substack.com/p/inflation
Few can write like this.
Having just bought a used copy of a primer on advanced economics, received Thursday, with the first chapter being history and concluding with a sub essay on inflation expectations, this seemed clearer.
I did think inflation expectations and the media could be investigated. Inattentiveness reduces as more is said, or other factors are involved e.g If the report is from Fox, Dems are in charge, the average Fox viewers expectations might be high. If CNN, Dems are in charge, the average CNN viewers expectations might be lower.
Is your subscription service only the free model or is there a paid option?
Jeremy Rudd, of the Fed, is skeptical of the importance of inflation expectations: "Economists and economic policymakers believe that households’ and firms’ expectations of
future inflation are a key determinant of actual inflation. A review of the relevant theoretical
and empirical literature suggests that this belief rests on extremely shaky foundations, and a
case is made that adhering to it uncritically could easily lead to serious policy errors."
https://www.federalreserve.gov/econres/feds/files/2021062pap.pdf
I originally read the piece back in 2022 but this sentence still lives rent-free in my head: "hence why consumers, in aggregate, have never forecasted real income increases in the history of the University of Michigan survey despite decades of real wage growth."
Just incredible stuff, man.
nice post. one question: what’s the role of money supply in managing long run inflation. it seems to me that this trumps expectations. eg in the long run, prices can’t continue to increase if money supply is fixed
I would generally agree with this statement, but with the caveat that people should focus on total income/spending more than money supply.