The Price Is Wrong: Why Inflation Feels Way Worse Than It Is (And Sometimes Way Better)

Send us Fan MailEpisode Description: Inflation is a number. But it doesn't feel like a number — it feels like a personal attack. Why does a 4% inflation rate feel like the economy is collapsing while a 6% raise feels like barely enough? Why do we notice when gas goes up 30 cents but completely ignore when airfare quietly drops? Why does everyone seem to have a wildly different gut sense of how expensive things have gotten? In this episode, we go deep on the psychology of perceived inflation — the gap between what the CPI says and what your nervous system believes. This one will change how you read financial news, fight about money, and make spending decisions forever.What You'll Learn:Why our personal "felt inflation" is almost always higher than measured inflationThe specific cognitive biases that distort how we perceive price changesWhy losses feel bigger than equivalent gains (and what this does to price perception)How the media, social comparison, and memory all conspire to make inflation feel worsePractical frameworks for recalibrating your inflation perception and making smarter financial decisionsKey Concepts Mentioned:Loss aversion (Kahneman & Tversky)Availability heuristicSalience biasMoney illusionHedonic adaptation (in reverse — "hedonic de-adaptation")Anchoring and price memoryThe CPI methodology and its known limitationsShrinkflationResources:Thinking, Fast and Slow by Daniel KahnemanThe Deficit Myth by Stephanie Kelton (for macro context)Dollars and Sense by Dan Ariely & Jeff KreislerKahneman & Tversky (1979), "Prospect Theory: An Analysis of Decision Under Risk" — EconometricaBureau of Labor Statistics CPI explainer: bls.gov/cpiIsabella Weber's work on "sellers' inflation" and price-setting behaviorSupport the show