Four UW–Madison faculty members discussed the ways that rapidly rising costs impact students’ lives during a September Cap Times Idea Fest session at Chadbourne Hall. The La Follette School and University Housing partnered with the Cap Times to present the student-focused session titled “Situation inflation: It’s more than just pricier pizza.”
The session was moderated by Cap Times higher education reporter Kayla Huynh, and the panel included three La Follette School faculty members: Mark Copelovitch, professor of political science and public affairs; Sarah Halpern-Meekin, professor of public affairs and human development and family studies; and Michael Collins, professor of public affairs and human ecology and Fetzger Family Chair in Consumer and Personal Finance. Justin Syndor, professor of risk and insurance at the Wisconsin School of Business, also joined the panel to offer his take on inflation from a behavioral economics perspective.
Copelovitch, whose work focuses on the international political economy, kicked off the panel discussion by providing an overview of inflation historically and globally. Despite recent rising prices due mainly to the pandemic and the war in Ukraine, Copelovitch explained that the economy has recovered much more quickly than it has in the past and inflation-adjusted income per capita has returned to pre-pandemic levels. “There are tradeoffs in everything,” said Copelovitch, noting that one tradeoff of inflation is our currently strong economy and high levels of employment.
However, the effects of inflation are not evenly distributed, explained Halpern-Meekin. Inflation has the largest impact on low-income people and people on a fixed income such as retirees because more of their income goes to necessities like housing and food. They also tend to have less savings and access to credit, which gives them less flexibility to adjust to rising inflation. Halpern-Meekin pointed out that prices of essential items like food and gas are particularly high, so people who were already struggling are greatly impacted by these rising costs.
“We react much more strongly when prices go up than when prices go down,” added Syndor, who studies how psychology merges with decisions about the economy. In addition to the unequal distribution of the effects of inflation, Syndor explained that individual perceptions also play a part. For example, when gas prices rose sharply earlier this year, the topic was endlessly discussed in the news, but now that prices have fallen, people tend not to focus as much on it.
The panel discussed how college students could use the current economic situation to their advantage. Syndor pointed out that students are well placed to enter the job market in the next few years because starting salaries are currently quite competitive. With rising rent prices, students should also think carefully about things like what city to move to after graduation and whether to live with roommates because these housing choices “will have a big effect on your finances, your ability to save, and how stressed you feel,” advises Collins.
Interest rates for things like car loans and mortgages will also be affected for some time, but as Collins pointed out, the current interest rate is still lower than average. Collins reassured students that the market is cyclical and interest rates will continue to rise and fall. He pointed out that students are doing the right thing by investing in themselves by furthering their education.
The panel presentations were followed by a moderated question and answer session with the audience, which consisted mostly of undergraduate students. The goal of the event was to share faculty expertise with students who might not otherwise have a chance to learn about economics while at UW, clear up some common misconceptions about inflation, and perhaps spark an interest in economics and public policy among students. To see more photos of the event, see the Cap Times story written by La Follette Certificate in Public Policy student Tyler Katzenberger (photos by Steve Daubs).