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Tyler Cowen

Pandemics Upend Classic Measures of Inflation

The public understands the true cost of Covid-19 better than the professional economists.

Lines at the DMV are a form of inflation too.

Lines at the DMV are a form of inflation too.

Photographer: David Paul Morris/Bloomberg

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In light of the expectation that Jerome Powell and the Federal Reserve System will announce a new stance toward inflation this week, it is worth reviewing what we have learned during the Covid-19 pandemic. The lessons are unsettling for the broader economic picture, but also indicate that Powell and the Fed are on the correct track.

The most obvious effect of the pandemic is often better understood by the public than by professional economists: It has been an inflationary time, but not in the traditional manner.