In a world where essential goods become unaffordable, the working class grapples with the harsh realities of inflation, risking their livelihoods and future stability
While I broadly agree with the points made in this blog, there is one aspect to inflation that I don’t hear in current commentary: the aspect of expectation inflation. Interestingly, I first heard this term/concept in a Motor Trend article some 30 years ago. The author compared the price of a 1998 Camaro to that of a 1968 Camaro, i.e. when it was first introduced (or thereabouts; first production might’ve been 1967). The author took the average rate of inflation over that 30 year period and applied it to the cost of the 1968 Camaro. When protracted 30 years into the future, the inflation adjusted price of that early model Camaro was still thousand dollars less than the 1998 Camaro. Why was that? Answer: the overall expectations of the driving public had inflated, too.
And there was a cost to that. By 1998, such extreme luxuries of the 1960s came standard. Things like: four-wheel disc brakes, full air conditioning systems, electric windows and electric door locks, etc. Those costs were not a factor in the 1968 model, but they were just about standard in the 1998 model.
That’s expectation inflation. Don’t get me wrong as I do believe inflation is very real and very sinister. Yet, when we look to especially capital-intensive goods like cars and homes, we must consider the increased cost factor for inflated expectations.
Too often, we get in our own way with the KEEP UP WITH THE JONESES syndrome. 🙄 Shoot, Waylon Jennings’ famous song LUCKENBACH, TEXAS (Back To The Basics) was all about that psychological conundrum. 😏
While I broadly agree with the points made in this blog, there is one aspect to inflation that I don’t hear in current commentary: the aspect of expectation inflation. Interestingly, I first heard this term/concept in a Motor Trend article some 30 years ago. The author compared the price of a 1998 Camaro to that of a 1968 Camaro, i.e. when it was first introduced (or thereabouts; first production might’ve been 1967). The author took the average rate of inflation over that 30 year period and applied it to the cost of the 1968 Camaro. When protracted 30 years into the future, the inflation adjusted price of that early model Camaro was still thousand dollars less than the 1998 Camaro. Why was that? Answer: the overall expectations of the driving public had inflated, too.
And there was a cost to that. By 1998, such extreme luxuries of the 1960s came standard. Things like: four-wheel disc brakes, full air conditioning systems, electric windows and electric door locks, etc. Those costs were not a factor in the 1968 model, but they were just about standard in the 1998 model.
That’s expectation inflation. Don’t get me wrong as I do believe inflation is very real and very sinister. Yet, when we look to especially capital-intensive goods like cars and homes, we must consider the increased cost factor for inflated expectations.
Too often, we get in our own way with the KEEP UP WITH THE JONESES syndrome. 🙄 Shoot, Waylon Jennings’ famous song LUCKENBACH, TEXAS (Back To The Basics) was all about that psychological conundrum. 😏