Inflation Feels Bad No Matter How You Define It

The people who experience the US economy continue to disagree with the people who measure it, and the most likely reason is inflation: Most Americans still see it as a major problem, while most economists don’t. But this debate recently veered from economics to semantics. Has the common definition of “inflation” changed, and do economists just need to accept it?

Felix Salmon of Axios essentially answers yes to both questions. “The meaning of the word ‘inflation’ has changed” he writes. “It used to mean rising prices; now it means high prices.” This helps explain, he says, the disconnect between Americans’ perceptions of the economy and economists’ assessment of it.

I would answer no to both questions, and not because I am an economist. Both people and economists — and I might point out that there is 100% overlap between these two groups — agree on what inflation is. The confusing part has to do with timing.

According to Merriam-Webster, inflation is “a continuing rise in the general price level.” When Americans complain that prices are high, they are implicitly comparing prices now to those of 2021, when inflation took off. When economists point out that “inflation” is lower, they are implicitly comparing prices now to 12 months ago.

Both time frames are informative, and prices rose in both periods, so both are inflation. Redefining “inflation” is unnecessary and counterproductive when all we need to do is make the implicit parts explicit.