Johan on Nostr: This is the current state of affairs in the Netherlands. This is an article published ...
This is the current state of affairs in the Netherlands. This is an article published by the public broadcaster (NOS = Nederlandse Omroep Stichting). It is funded by taxpayers’ money. Article below and translated by ChatGPT. Source in link below.
They are saying that the burden of inflation is (partly) in your head...
MartyBent (nprofile…s2gj)
#bitcoin #nostr #inflation
The burden of inflation is (partly) in your head, say economists
By Charlotte Boström, Economics Editor
For years, it has been a familiar refrain: groceries in the supermarket are becoming more expensive due to inflation. In fact, 85 percent of respondents in an Ipsos poll believe that food prices will continue to rise in the first half of this year.
But in reality, price increases in supermarkets are not as bad as they seem.
For example, last year, inflation for consumer goods and services (such as clothing or haircuts) stood at 3.3 percent, while food prices rose by ‘only’ 1.1 percent compared to the previous year.
So, why do so many people feel the pinch of inflation when the numbers tell a different story? Three economists explain why we perceive it this way.
Our brains are just slow
One factor is the human tendency to assume that recent events will repeat themselves in the near future. Inflation was recently high, so we unconsciously believe and feel that it still is. Researchers call this “extrapolation.”
“Research shows that people often do this with numbers,” says Kim Peijnenburg, Professor of Household Finance at Tilburg University. “Why our brains are so slow, there’s no clear answer to that. But it is a typical example of the false expectations we as humans create about our environment.”
What exactly is inflation?
Another factor is that inflation is a complex concept. Almost a quarter of respondents said they didn’t understand how inflation works, according to researchers at the University of Groningen.
Inflation is an abstract concept, says Peter Hein van Mulligen, Chief Economist at Statistics Netherlands (CBS). People tend to focus on the absolute price level rather than whether something has become more expensive. “The shock of high prices in the supermarket isn’t because prices have risen significantly in the last month. It’s because people still perceive the prices from a few years ago as the norm.”
That’s why the concept of inflation may be especially relevant for economists, Van Mulligen says. For consumers, it’s primarily about the price level, he believes.
If you drink, smoke, and rent, it’s a different story
Moreover, the inflation figure from CBS is an average. In reality, people have different spending patterns and financial burdens. This means that some people experience inflation more acutely than others.
For example, last year, excise duties on alcohol and tobacco increased. Rents also rose significantly, says Marike Knoef, Professor of Economics at the universities of Groningen and Tilburg. “Rent is a major expense. So, when people say inflation is very high, that can certainly be true in their situation. Those with a mortgage and a fixed interest rate don’t experience this impact.”
Echo chamber effect
Research shows that people often have an inaccurate perception of how high inflation actually is. This perception is often based on the recent past.
The European Central Bank identified this as a problem even before the significant price increases in 2022. According to Professor Peijnenburg, people’s inflation expectations “make a huge difference.” When people overestimate inflation, they tend to spend more money, thinking their money will lose value tomorrow. “This only leads to more inflation. That’s why it’s important for people to have an accurate picture of prices. Often, the price increases are less dramatic than they think.”
How do you ensure that people have a realistic view of inflation?
The economists believe that this is a task for journalists, researchers, and government institutions. They should clearly and specifically explain what is becoming more expensive or cheaper, particularly because there is no such thing as an “average consumer.”
They should also consistently indicate the period to which the inflation figures refer.
https://nos.nl/artikel/2551808-last-van-inflatie-zit-deels-tussen-je-oren-zeggen-economen
They are saying that the burden of inflation is (partly) in your head...
MartyBent (nprofile…s2gj)
#bitcoin #nostr #inflation
The burden of inflation is (partly) in your head, say economists
By Charlotte Boström, Economics Editor
For years, it has been a familiar refrain: groceries in the supermarket are becoming more expensive due to inflation. In fact, 85 percent of respondents in an Ipsos poll believe that food prices will continue to rise in the first half of this year.
But in reality, price increases in supermarkets are not as bad as they seem.
For example, last year, inflation for consumer goods and services (such as clothing or haircuts) stood at 3.3 percent, while food prices rose by ‘only’ 1.1 percent compared to the previous year.
So, why do so many people feel the pinch of inflation when the numbers tell a different story? Three economists explain why we perceive it this way.
Our brains are just slow
One factor is the human tendency to assume that recent events will repeat themselves in the near future. Inflation was recently high, so we unconsciously believe and feel that it still is. Researchers call this “extrapolation.”
“Research shows that people often do this with numbers,” says Kim Peijnenburg, Professor of Household Finance at Tilburg University. “Why our brains are so slow, there’s no clear answer to that. But it is a typical example of the false expectations we as humans create about our environment.”
What exactly is inflation?
Another factor is that inflation is a complex concept. Almost a quarter of respondents said they didn’t understand how inflation works, according to researchers at the University of Groningen.
Inflation is an abstract concept, says Peter Hein van Mulligen, Chief Economist at Statistics Netherlands (CBS). People tend to focus on the absolute price level rather than whether something has become more expensive. “The shock of high prices in the supermarket isn’t because prices have risen significantly in the last month. It’s because people still perceive the prices from a few years ago as the norm.”
That’s why the concept of inflation may be especially relevant for economists, Van Mulligen says. For consumers, it’s primarily about the price level, he believes.
If you drink, smoke, and rent, it’s a different story
Moreover, the inflation figure from CBS is an average. In reality, people have different spending patterns and financial burdens. This means that some people experience inflation more acutely than others.
For example, last year, excise duties on alcohol and tobacco increased. Rents also rose significantly, says Marike Knoef, Professor of Economics at the universities of Groningen and Tilburg. “Rent is a major expense. So, when people say inflation is very high, that can certainly be true in their situation. Those with a mortgage and a fixed interest rate don’t experience this impact.”
Echo chamber effect
Research shows that people often have an inaccurate perception of how high inflation actually is. This perception is often based on the recent past.
The European Central Bank identified this as a problem even before the significant price increases in 2022. According to Professor Peijnenburg, people’s inflation expectations “make a huge difference.” When people overestimate inflation, they tend to spend more money, thinking their money will lose value tomorrow. “This only leads to more inflation. That’s why it’s important for people to have an accurate picture of prices. Often, the price increases are less dramatic than they think.”
How do you ensure that people have a realistic view of inflation?
The economists believe that this is a task for journalists, researchers, and government institutions. They should clearly and specifically explain what is becoming more expensive or cheaper, particularly because there is no such thing as an “average consumer.”
They should also consistently indicate the period to which the inflation figures refer.
https://nos.nl/artikel/2551808-last-van-inflatie-zit-deels-tussen-je-oren-zeggen-economen