EU survey shows how much people dislike inflation

As reported by the excellent Carola Binder:

Personally, what are the two most important issues you are facing at the moment? 

This question was only asked in May 2012. For the EU as a whole, by far the most common response was rising prices/inflation. In fact, 45% of people in 2012 said that inflation was one of the top two most important issues they were facing. The pie graph below shows, for the EU as a whole, the responses people chose. Only 15% of people chose the financial situation of their household as a top issue. Health and social security also had a mere 15%. I was stunned that three times as many people consider inflation a top issue as consider health and social security a top issue.

Of course the survey respondents are wrong (see the link for more details, including on national distribution of answers).  I believe that a) they are confusing a tight standard of living with “inflation,” and that b) they missed the post on Scott Sumner’s blog where he mentioned nominal gdp as a way of thinking about monetary policy, gobbling up only the items on Swedish liberalism, Chinese economic growth, and Asian cinema.  The best case you can make for their response is that they understand they have privileged/protected service sector jobs, they know they will not see many more nominal wage hikes, they feel more or less protected against nominal wage cuts, they do not like the idea of renegotiating their labor contracts, and so they understand that a higher “p dot” does indeed lower their real wage more or less forever.

In any case, people really do not like “inflation,” as they understand the concept.  They are not keen to hear that “inflation” should be higher, simply on the basis of a theory held by some economist.

By the way, according to one measure cited in the comments on Binder’s post, measured EU inflation is running at about 1.2%.


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