DELLINGER – The Media and Inflation Psychology

The connection between our brains, the media, and inflation warrants more attention than we may realize. 


Anyone who pays a reasonable amount of attention to the news today will recognize the heavily-politicized and partisan nature of most news outlets.  Whether it is Fox News or CNN, there is typically very little doubt as to the political ideology of any given network.  A 2019 RAND study found that between 1989 and 2017, both print and televised media shifted away from objective language in their reporting and towards subjective.  The difference between traditional televised news and so-called “Prime-Time Cable Programming” showed a similar shift toward subjectivity between 2000 and 2017, though this should not come as a surprise due to “…the different objectives and business models of the two platforms.”  This opinionated and emotional reporting is cause for concern, as it can have a distinctly negative effect on the collective American psyche, our spending habits, and by extension, inflation.

This connection between the collective American psyche and inflation is not unique to American households.  A 2012 study found that disagreements on inflation predictions between households in Germany were driven primarily by “…the heterogeneity of story content and on the reporting intensity, especially of news on rising inflation.”  Though not a perfect analogue, there does appear to be similarities between German and American opinions of their respective news outlets.  The Pew Research Center has published two reports, one in 2014 and one in 2018, exploring the trends and relationships between political ideology, source of news, and general trust in the media in the United States and in Germany, respectively.  Germans on both sides of the political spectrum tend to favor  “…Germany’s largest public broadcasting network,” ARD, while Americans are more varied in their news outlet selection.  Americans on the political right rely heavily on Fox News, while the political left are split amongst such outlets as CNN, NPR, MSNBC, and the New York Times.  What is most concerning, however, is the Germans’ tendency to rank their news outlets as “neutral” news sources.  If disagreements between German households on inflation predictions rely heavily on a media that they view as generally neutral, with the plurality of Germans receiving their news from the same outlet, one can only imagine the impact on inflation predictions that our fractured, highly-partisan media has in the United States.  This is only further compounded by the fact that more than half of the journalists in the United States do not believe in equal news coverage for all issues (though one study suggests that there is not much political bias in reporting generally, but bias is more present at the national level).  

It seems that the American populace is being informed by a media that, for lack of a better term, “cherry picks” the news stories curated for their audience, and has (all but) abandoned objectivity in favor of subjectivity.  This, in theory, satisfies the “intensity” factor from the aforementioned German household inflation expectation study.  As for the “heterogeneity” factor, it seems as though it does not apply to the political left, as they are fractured between several news outlets, while Republicans center around Fox News.  However, it would not be a stretch to assume that news outlets on the political left share similar stories with similar perspectives and narratives, thus satisfying the heterogeneity requirement.  One only needs to think as far back as any one of a number of scandals, alleged or otherwise, from the 2020 Presidential Election and the subsequent (and ongoing) fallout to see how media on the political left tend to fall in line with one another.  This is not an indictment of the political ideology of any news outlet, rather a simple, intuitive suggestion that outlets that share similar ideology will tend towards similarity in their reporting.  In one survey, more than 70% of survey respondents indicated that news outlets ABC, NBC, and CBS are “pretty much the same” regardless of the respondents’ preferred television news source, and approximately 60% of respondents reported “real differences” between CNN, FoxNews, and MSNBC.  Admittedly, the study is limited due to the lack of comparison between the major news outlets collectively according to their perceived political ideology, though I would argue that such a study would yield similar results.

Further compounding this problem is our tendency to lose the ability to differentiate between facts and opinions when presented with an opinion that aligns with our political ideology.  What we have left, taking each factor together, is a selective media who uses emotion in their reporting to attract their audience, who will then, in turn, struggle to separate fact from opinion.  This gives the media an inordinate amount of control over the substance and strength of our thoughts, opinions, and subsequent actions.  In order to fully comprehend this level of control and influence, however, we must understand how this influence works in our brain.

Though intuitive to some, we must acknowledge that the human brain seems to have a particular sensitivity to emotion.  In one study analyzing the rates of recall for neutral and negative words given certain circumstances, Elizabeth Kensinger and Suzanne Corkin suggest that we are more likely to “…remember emotional words with more detail than…neutral words.”  A similar study from France in 2006 yielded similar results, however, even in situations where participants could not remember the exact word, they were still able to provide information about the emotional content of said word.  Yet another Kensinger study saw that both young and old adults recall non-arousing, emotional words with greater accuracy, though the specifics differ based on age (young adults recall negativity better, while older adults recall positivity better).  I would argue that the term “inflation” itself generates negative thoughts and emotions, especially given recent news coverage as well as our historical experience with it.  This experience is critical to our understanding of inflation psychology, as Kensigner “…suggests that emotion serves to increase not only the likelihood that an emotional experience will be remembered, but also the details that one will remember about that event.”

There is one critical piece missing between inflation and our psychology, however, and that term is, rather intuitively, “inflationary psychology.” The term is not a new one.  Richard Curtin from the University of Michigan describes the phenomenon as one in which “Consumers purposely advance their purchases in order to beat anticipated future price increases. Firms readily pass along higher costs to consumers, including the future cost increases that they anticipate.”  This creates an inflationary cycle, as described in a June 2022 report from the Brookings Institute: “high inflation drives up inflation expectations, causing workers to demand wage increases to make up for the expected loss of purchasing power. When workers win wage increases, businesses raise their prices to accommodate the increase in wage costs, driving up inflation.”  The International Monetary Fund cites a similar cycle, though they utilize the term “inflation inertia.”  Similar to a fully-loaded train or a semi-truck rolling downhill, once inflation begins, it takes a great deal of conscious, concerted effort to return it to a reasonable speed.

Ultimately, this leaves the news media with an important responsibility: not to hyper-focus on the negativity of inflationary trends.  Though important to accurately cover the current state of the United States economy, managing inflation expectations is an important factor in “…breaking the inflation psychology…”  If inflation is accelerating, one’s personal experience with inflation is critical to developing inflation expectations, which, as we have seen above, can create an inflationary cycle.  

It is important to note, however, that reducing inflation can be accomplished utilizing the same logic.  Jerome Powell admitted as much during an August 2020 speech, wherein he warned against the potential negative effects of inflation expectations that are too low.  Low inflation expectations can hurt long-term inflation by reducing expected long-term inflation, thereby reducing actual long-term inflation, and the spiral continues in the opposite direction as what we have discussed earlier. A continuing downward spiral of inflation puts the economy at risk of entering a period of deflation, “…which means prices and perhaps wages, on average, are falling–a phenomenon associated with very weak economic conditions.”  Adopting policies that immediately reduce inflation, whatever they may be, will help establish a new personal experience with decelerating inflation, subsequently reducing inflation expectations, which can have a similar effect on the actual inflation rate.  

Honest, non-sensational reporting and, by extension, managing expectations, has never been more important.


The views and opinions of this piece do not necessarily reflect the official views of Young Americans for Liberty or the Mercatus Center. Articles are selected for the blog on the basis that they are interesting or topical to the liberty movement and those involved.


Ryan Dellinger is currently employed as a State Outreach Associate with the Mercatus Center at George Mason University, and has completed an MPA from Shippensburg University and a JM in American Legal Studies from Liberty University. He currently lives in Alexandria, VA with his wife and two dogs.


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