Acta Oeconomica
Volume/Issue:
Volume 70: Issue 2
The anti deflation bias
Author: Philipp Bagushttp://orcid.org/0000-0002-8233-6629 1
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  • 1 Department of Applied Economics I, Economic History, and Institutions, and Moral Philosophy, King Juan Carlos University, Campus of Vicalvaro, Faculty of Legal and Social Sciences, Paseo de los Artilleros s/n, Madrid, 28032, Spain
DOI:
https://doi.org/10.1556/032.2020.00008
Page Count:
147–161
Publication Date:
01 Jun 2020
Online Publication Date:
Jun 2020
Article Category:
Research Article
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Abstract

Deflation is widely feared and opposed. This paper provides arguments to explain the anti-deflationary bias. It is argued that governments favour inflation, that the main deflation theories have influenced negatively the public opinion on deflation, and that rent-seeking behaviour and group formation explains why the opposition to deflationary redistribution is stronger than the opposition to inflationary redistribution. Moreover, psychological concepts, such as anchoring, the endowment effect or the availability heuristic have contributed to the fear of deflation by causing a money illusion and a equalisation of deflation and recession.

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Cover Acta Oeconomica
Acta Oeconomica Periodical of the Hungarian Academy of Sciences
Print ISSN:
0001-6373
Online ISSN:
1588-2659
Keywords:
monetary policy; inflation; deflation; money illusion; endowment effect; E52; E31; E70; G40

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