This shifts the distribution of power in the financial marketplace to the more sophisticated and knowledgeable actors to the detriment of the average person, in this view. Similar issues of getting confused or fooled can operate within firms. Some monetary policy makers have hypothesized that managers may be lulled into complacency about profits by increases in the general price level. Inflation thus may weaken our judgment about how well we are doing, both as individuals and as firms. People's immediate concern is with how their incomes hold up with changes in their expenses.
Businesses care about how the prices of their products do in relation to their costs.
Americans' recent memory of high inflation stems from the 1970s, a time when changes in relative prices, specifically the spike in oil prices, combined with a rise in the general price level. This combination of relative and general price changes in the 1970s, in Shiller's view, confused many people's perception of inflation. The two oil shocks did result in higher inflation. But equally damaging was the relative price change. Because inflation may benefit some people, say by its redistribution of wealth from creditors to debtors, Shiller was surprised that not a single respondent mentioned any benefit gained due to inflation.