ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Sunday, April 28, 1996 TAG: 9604270017
SECTION: EDITORIAL PAGE: 2 EDITION: METRO
ASKED ABOUT the U.S. economy, only 37 percent of registered voters in a recent survey said they're "very" or "somewhat" satisfied with the inflation rate. (The survey was done by Peter D. Hart Research Associates for NBC-Wall Street Journal polls.)
That percentage is lower than for any other element of the economy. Nearly twice as many folks, for example, said they were very or somewhat satisfied with their job security.
Yet the 1995 inflation rate was only about 2.5 percent, and there's no particular reason to expect it to rise this year. From 1990 through 1994, inflation averaged less than 3.5 percent annually - a far cry from the double-digit rates of a decade and a half ago. What gives?
Partly, perhaps, short memory.
People over 40 - those, that is, who already were adults by the late '70s when inflation was raging - were more likely to be satisfied with the inflation rate than those under 40. Even so, fewer than half of the older group expressed satisfaction with it.
And partly, perhaps, selective memory.
Unless we're buying a home, which few of us do very often in our lives, most of us aren't apt to pay much attention to the decline in long-term interest rates. In a dynamic market economy, prices continually rise and fall. We tend to forget the prices that dropped or stayed relatively steady, while remembering the ones that went up. We tend to forget that gasoline prices remain lower than they were a few years ago, while remembering that heating bills were higher this past winter than in previous, warmer ones.
Similarly, we have come to expect steady improvements in the quality of existing products, and steady expansion of new products available to us as consumers. What we tend to take note of (and complain about) are products that don't fulfill these expectations - where we're getting less value for a buck, which is one way of looking at inflation.
And yet, to the extent a price increase simply reflects the value of an improvement in a product's quality, it isn't inflation. Neither is spending money on something we want but couldn't buy before because it didn't exist.
When we take for granted the flow of new and improved products that a bountiful economy with rising productivity provides, we sometimes see inflation even when it isn't really there. Inflation jitters may be, in part, a function of a successful economy.
In which case the Federal Reserve, which has kept up a vigorous anti-inflation fight despite low inflation rates, may be operating less in isolation from public sentiment than is sometimes supposed.
LENGTH: Medium: 52 linesby CNB