Robert Shiller: Stop making the same mistakes.
Mr. Shiller is Professor of Economics at Yale University.
Inflation rewards debtors and hurts creditors. It tends to help young homeowners, as they are generally debtors, to the detriment of older people, who can live on pensions that are not fully indexed to inflation.
The “great inflation” that ended after Paul Volcker took over as the Fed in 1979 was a national tragedy for its impact on retirees and minimum wage earners, since the minimum wage was also not correctly indexed to inflation.
People do not ask for indexation often enough and misunderstand inflation. Irving Fisher, professor of economics at Yale, wrote a book in 1928, “The Money Illusion,” which described popular misconceptions about inflation. People still make the same mistakes almost 100 years later, and those mistakes contribute to income inequality. They also create a feeling of ill will, and this social discord creates problems for all of us.
Josh Bivens: The Fed’s reaction to inflation could be worse than inflation itself.
Mr. Bivens is Research Director at the Economic Policy Institute.
Rising prices can certainly squeeze family budgets, other things being equal. But recent inflation has been fueled by price spikes in a small number of sectors, such as used cars, hotel rooms and airline tickets. Inflation induced by idiosyncratic sector shocks should not encourage policymakers to slow down.
The only inflation that should The inflation that comes from the labor market, when jobs become so plentiful that workers can successfully demand wage growth well in excess of the economy’s capacity to provide it, stimulates more restrictive macroeconomic policy. This has not happened in the United States for a long time.
Inflation hawks might argue that’s because the Fed has successfully stayed ahead of the inflation curve. But too often, the Fed has cut recoveries short before the wages of most American workers experience decent growth. In a recent study, we found that overly austere macroeconomic policies are the main reason for the sluggish wage growth observed by the vast majority of American workers after 1979.