Opinion | What That $20 Burrito Says About the Psychology of Inflation

A burrito shouldn’t cost $20. That observation from a college student was picked up in early August by a conservative activist, who set off a firestorm in the MAGAsphere. Some told the buyer to suck it up and make smarter choices, while others warned that the G.O.P. wasn’t addressing voters’ concerns about affordability. And that Republicans might pay for it in the midterm elections.

Beneath the guacamole, though, is a genuinely interesting economic puzzle. An astonishing 95 percent of Americans say there’s an affordability crisis. But is there? The Consumer Price Index tracks a giant basket filled with all of the goods and services that most Americans buy — a basket that includes groceries, health care, rent, gasoline, haircuts, Netflix and yes, burritos. Dividing your paycheck by the cost of this basket tells you how many such baskets you can afford.

By most measures, most Americans can afford more than they could a few years ago — their inflation-adjusted wages have increased (although wages are yet to catch up to the recent Iran-related surge in energy prices). Which brings us to the puzzle. Americans are convinced they’re living through an affordability crisis. So, who’s more on the mark — the economic statistics, or the student who set off the MAGA burrito chorus?

My first instinct as an economist is to trust the stats. But using statistics to patiently explain to people that their feelings are wrong rarely works. Believe me, I’ve tried. There’s a different way to understand what people mean when they talk about affordability, which is more about the psychology of inflation than the economics.

Let’s consider my own story. My university employer gave me a modest raise this year. Naturally, I believed that I deserved this as a just reward for the fact I had economist-ed extra hard. It felt good to be rewarded. Then prices rose, and inflation ate away my gains. That felt different. Like theft. I felt that I had earned that extra purchasing power. Now some dark, impersonal force had taken it from me.

Of course, the economist part of my brain knows what really happened. My employer grudgingly gave me a cost-of-living adjustment, leaving my real income roughly unchanged. Economically, this was a wash. Psychologically, I experienced it as a play in two acts: first, a career triumph; then, the painful theft of most of my hard-won raise.

The key economic variable causing this pain wasn’t how much stuff I could afford; that had barely changed. My pain was caused by inflation. That’s why talk of an affordability crisis is better understood as being about the psychological hangover from rising prices.

I’m not alone: We all have our own mental models about how inflation works, and those models are quite different from those in our economics textbooks. Stefanie Stantcheva of Harvard has run large-scale surveys asking Americans about their experience with inflation. A commonly stated fear is that inflation will create financial hardship. People often worry about affording housing or food.

These responses conflict with economic theory and experience. After bursts of inflation, wages and prices tend to rise roughly in tandem — at least on average. Sometimes, wages move first; other times, prices do. But pretty quickly, they tend to move one for one. The empirical evidence is clear: The amount of stuff you can afford is generally not determined by inflation to any meaningful degree. If your output sells for a higher price, you’re worth more in dollar terms to your employer. If you don’t get a raise, a competitor might offer you a higher wage. In due course, the amount of stuff you can afford is restored.

That’s clblockic economics — but many Americans aren’t buying it. They see their wages as determined by their bosses, rather than market forces, and bosses don’t like to raise wages, despite price increases. Under that model, inflation really would destroy affordability. Prices rise, wages don’t adjust, and your paycheck buys less. That’s how anxiety about inflation translates to concerns about affordability.

The solution is obvious to people: lower prices. President Trump won the 2024 election after promising to “immediately bring prices down, starting on day one.”

He did not. That’s what the burrito discourse is really about. The burrito brouhaha indicates that people on the right are finally seeing through Mr. Trump’s false promises.

In 2024, he read the public mood accurately, even as he got the economics wrong. Reducing inflation is costly, but reducing prices is even more costly. And for what? Lower prices would likely bring lower wages, leaving actual affordability unchanged.

The burrito discussion is helpful because it reduces the economy to something you can wrap your hand around and taste. You can see the aluminum foil wrapper, subject to a 50 percent tariff. You can taste the Mexican tomatoes, carrying their own 17 percent tariff. You might be chewing on Aussie beef, which has been tariffed, untariffed, threatened with another tariff and then exempted. The avocados for our guac come tariff-free from Mexico because of a U.S.M.C.A. exemption, and those exemptions appear to be at risk. The cheese and sour cream come from American farms, which are struggling with worker shortages after ICE raids. And I would pblock on the lettuce, until food safety is improved.

No wonder people aren’t happy about the price.