

Episode 78, Carola Binder, author of Shock Values: Prices and Inflation in American Democracy, host Rick Ferri
30 snips Jan 17, 2025
Carola Binder, an economics professor at the University of Texas at Austin and author of "Shock Values," dives into the historical context of inflation in America. She discusses the origins of price indexes, including the inaugural index created in 1750, and charts the political ramifications of inflation throughout U.S. history. The conversation reveals how economic shocks shape monetary policy, the struggles surrounding national banks, and lessons from past crises that inform today's strategies for managing inflation. A must-listen for anyone interested in economics!
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Inflation vs. Deflation
- Inflation is a rise in aggregate prices, not just individual items.
- Deflation, the opposite, occurs when aggregate prices fall.
Dangers of Deflation
- Deflation, while sometimes caused by increased productivity, is often bad.
- It signals low demand, as seen in the Great Depression.
Money Illusion and Wages
- Wage deflation is challenging due to money illusion, where people react more negatively to nominal wage cuts.
- This resistance can lead to layoffs instead of wage adjustments.