Inflation Conflation: Rates, Prices, and Politics in the Public Mind

Despite the political importance of price inflation in recent years, we know surprisingly little about how citizens think, and process information about, inflation. We report the results of a series of survey experiments designed to assess relationships between inflation, prices, the broader economy, and hypothetical political judgments. Results from a novel experiment that combines both between- and within-subject randomization reveal that (1) citizens' economic and political evaluations are strongly influenced by trends in the inflation rate, and that (2) whether the same macroeconomic trend is shown as inflation rates or as prices can have an enormous impact on these same evaluations. Our study thus reveals citizens' widespread tendency to conflate changes in the inflation rate with changes in prices. These results come with important implications for how best to communicate data on inflation and prices to the general public so that they can make more informed electoral choices.