Comment Section for Opinion | America’s Irrational Macreconomic Freak Out - The New York Times

The article is an opinion piece by Justin Wolfers, an economist and professor of economics and public policy at the University of Michigan, titled "America’s Irrational Macroeconomic Freak Out". In it, Wolfers discusses the current sentiment around inflation in the American economy. He makes the case that the negative perception around inflation is largely due to a misunderstanding of how it works. Wolfers uses a hypothetical scenario to illustrate his point: if all prices and wages increased by a factor of 10, nothing would essentially change as the purchasing power remains the same. He relates this to the recent inflation triggered by the pandemic, where prices and wages rose in parallel. He states that the average American worker can now afford 2% more due to wage increases outpacing price inflation, which he asserts is an improvement compared to the average rate of real wage growth over the past few decades. However, Wolfers acknowledges that the public perception of inflation is often negative due to the psychological impact of seeing higher prices, even if wages increase correspondingly. He explains that people tend to internalize the gains brought about by wage increases while projecting the losses caused by inflation externally, leading to a distorted reality. Wolfers further argues that younger Americans, who haven't experienced high inflation rates before, are particularly anxious about inflation. They are not aware that wage increases usually follow price increases and hence feel threatened by the rising prices. Wolfers concludes by expressing his optimism about the economy, stating that it's currently larger, more productive, and yielding higher average incomes than ever before in history. He advises readers to see the current inflation as a temporary phase and to remain calm.