Inflation & Obesity: a love story
How economists think people buy burgers
You wake up. You look sideways at your clock, and it reads 1.30pm.
“Holy malarkey! I’m late for work!”, you think to yourself, channeling your inner Joe Biden.
You push your blanket away and rush into the bathroom. You brush your teeth, decide to skip the shower, and rush downstairs to get the car engine running. You drive towards the closest McDonald’s. A shower may be ideal, but food’s essential.
You turn on the radio, while pushing the gas pedal a little harder.
Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic.
You grimace. “Inflation talk? It’s too early for that stuff!”
The deep and assuring voice on the radio keeps going.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run.
You reach the McDonald’s. Staring at the drive-thru menu, you’re stuck between two options. It’s a Quarter Pounder meal versus a double Quarter Pounder meal.
Memories of living in your parents’ basement flash through your mind. Maybe I should save some money today.
You’re also reminded of your aspirations to avoid an early death. Maybe I should try to eat less — I’m getting a little chubbier around the middle, anyway.
But suddenly, you hear the radio getting louder.
The invasion of Ukraine by Russia is causing tremendous human and economic hardship... In addition, COVID-related lockdowns in China are likely to exacerbate supply chain disruptions. The Committee is highly attentive to inflation risks.
And suddenly — SILENCE. Your eyes slowly head away from the windshield, and move towards the control screen below.
THE COMMITTEE IS STRONGLY COMMITTED TO RETURNING INFLATION TO ITS 2 PERCENT OBJECTIVE!
You’re shaking. Hell, your entire Toyota is shaking. Sweat rolls down your forehead. Your breathing gets heavier.
“Hi sir, are you alright?”
You sit still, frozen.
“Sir, may I have your order?” asks the drive-thru lady to your left.
Slowly, you turn your head and stare at the menu outside.
“I-I’ll... have the… d-double…” you begin, trying not to stutter.
The drive-thru lady looks puzzled.
“Sir?”
You exhale, and then burst out:
“Woman! Inflation’s a thing. If I don’t spend this $7 NOW, I’ll lose purchasing power eventually. I’ll lose every goddamn penny! The double! NOW!”
As you ride away from the McDonald’s, munching on your fries, you recall the wise words of every economist and business-person you’ve never heard of.
That some inflation is good. That some inflation’s necessary. And then you think to yourself:
“Damn it, inflation. You always get me. Thank god I spent more today. I wonder where we’d be without you,”
For despite increasing your shot at early demise, you’ve also boosted your contribution to aggregate demand.
And at the end of the day — that’s really what matters, isn’t it?
You can also follow me on Twitter @ramwithouthorns!
P.S. Here’s a working paper detailing why history suggests that the fear of deflation (and the advocacy for inflation) is exaggerated: Deflation in a historical perspective, Bank for International Settlements
P.P.S. If you’re looking for a simple explainer on deflation isn’t as bad as it’s often made out to be, do consider checking out this thread I put out on Twitter.
Image References:
https://www.cnet.com/roadshow/news/car-infotainment-system-automotive-tech-guide/
https://www.bloomberg.com/opinion/articles/2021-07-18/the-weak-progressive-case-against-jerome-powell#xj4y7vzkg
4 Hours | Joe Biden For President, Youtube
https://www.mcdonalds.com/us/en-us/meal/double-quarter-pounder-with-cheese-meal.html
https://time.com/4084668/mcdonalds-rebranding-sales-growth/