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[The Mismatch Between Economic Data and Our 'In-feelings' of Inflation]-[When our inflation infeelings don’t match the CPI]

Planet Money · B2 · 2025-08-15

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📋 Summary

The Inflation Gap: Why Prices Feel Higher Than the Data Suggests

The Phenomenon of "In-feelings"

Economic inflation is a concept defined by data, but experienced through emotion. As NPR's Planet Money highlights, there is a persistent disconnect between official inflation statistics—which have cooled to near the 2% target—and the visceral shock consumers feel when shopping. This gap is what the show playfully dubs "in-feelings." When TikTok creator Rocky Walker posted a viral video expressing disbelief at the $8 price tag of Cinnamon Toast Crunch, he tapped into a collective anxiety shared by many Americans who feel the cumulative weight of prices that remain significantly higher than they were pre-pandemic.

Why We Overestimate Inflation

Economist Ulrike Malmendier, a professor at UC Berkeley, explains that our brains are not wired to process inflation like a macroeconomic report. Instead, we suffer from two primary biases that skew our perception:

  1. The "Frequently Bought" Bias: Consumers judge the health of the economy based on a very small, specific basket of goods they purchase regularly—such as eggs, gas, and cereal. Malmendier notes that these items are often subject to "temporary shocks" (like bird flu affecting egg supply), which are not indicative of broad, systemic inflation.
  2. Asymmetric Attention: We are psychologically primed to notice price hikes while ignoring price drops. As the podcast notes, "people really seem to latch on to the up part and get totally upset about it," whereas a sale on cereal rarely prompts a celebratory social media post. This causes consumers to experience a "20% inflation" reality even when official data shows a much more modest increase.

The Generational Scar of Inflation

Malmendier’s research suggests that our relationship with inflation is also a matter of "heritage." Younger generations, like Gen Z, grew up in an era where low, stable inflation was the norm. When prices spiked in the early 2020s, it was "extra disorienting" because it shattered their baseline expectations. Conversely, those who lived through the double-digit inflation of the 1970s carry a deeper, lingering economic scar that makes them inherently more pessimistic about future price stability.

The Housing Conundrum

Perhaps the most complex component of inflation measurement is housing. As economist Louise Shainer explains, the Consumer Price Index (CPI) relies on "Owner’s Equivalent Rent" (OER) to track the costs for homeowners. Because this metric uses rental market data to estimate the value of homeownership, it acts as a "lagging indicator." While a renter looking for a new apartment on Zillow faces immediate, high market rates, the official statistics move slowly, often failing to capture the sharp, painful jumps that individuals feel in real-time.

Conclusion: Navigating the Gap

Ultimately, there is no perfect way to measure the economy because "everybody has a different CPI" based on their personal lifestyle. While economists rely on summary statistics to guide national policy, individuals continue to struggle with the "in-feelings" of their daily grocery runs. The podcast suggests that while we cannot fully ignore the price tags, recognizing that our brains focus disproportionately on volatile, frequently bought items might help reduce the anxiety associated with these fluctuations. For shoppers like Rocky, however, the reality remains: when you see a deal on your favorite cereal, sometimes the best response is simply to stock up, regardless of what the macroeconomic trends say.

🎯Key Sentences

1
Am I tripping?
2
Has cereal always been this high?
3
Maybe I'm just broken.
4
Holy cow, I just got back from Target.
5
I'm serious. I'm not joking.
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📝Key Phrases

1
losing one's mind
2
sort of work through one's feelings
3
Am I tripping?
4
take a lesson from
5
mismatch between A and B
Expand All

📖 Transcript

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This is Planet Money from NPR. What drove the young man named Rocky to the Cinnamon Toast Crunch that day? his inner child, perhaps, memories of Saturday mornings and cartoons and pajamas, maybe, but...

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