Why Are Voters So Upset? Consider the Snickers Bar.

Mr. Donovan is the chief economist of UBS Global Wealth Management.

The United States has just experienced one of the biggest collapses in consumer inflation in modern history. In June 2022 consumer prices had risen 9.1 percent over the previous year. By December 2023 the rate of increase had slowed to 3.4 percent. And yet, in survey after survey, voters still declare inflation to be at or near the top of their list of concerns.

Why aren’t voters recognizing the decline in the inflation rate? Because voters are humans, and humans don’t think about inflation rationally. To understand why, let’s look at a Snickers bar.

More than 12 Snickers bars are sold every second in the United States. That makes Snickers bars a very important part of consumer purchases, so the price of a Snickers bar should be included in the inflation calculation. Yet Snickers bars do not consume a big portion of most families’ annual budget (at least they usually don’t).

Most of us will spend far more of our budget on something like a television. With $1,500 a consumer could buy a high-end 55-inch television, or almost four Snickers bars a day for a year. Because items in the consumer price basket are weighted, roughly, by how much money consumers spend on that item in a year, television prices are more important than Snickers bars in the calculation of inflation.

However, we probably buy a Snickers bar much more frequently, perhaps even daily. So we’re much more likely to remember the price of the Snickers bar and forget the price of the television we bought last year. Consumers tend to think only about the prices of high-frequency purchases — food for the family and fuel for the S.U.V.

The different inflation rates for infrequent and frequent purchases is a big part of why consumers mistakenly believe inflation is higher than it actually is. The prices of more expensive goods like furniture and consumer electronics are actually falling — and have been falling for over a year. Once the post-pandemic surge in demand for electronics, furniture and similar items faded, manufacturers were unable to maintain higher prices, pulling the reported inflation numbers lower.

Unfortunately for the Biden administration, however, food prices are still rising — a fact evident at every supermarket checkout. Less than a tenth of an average household’s budget is spent at the supermarket, but the prices paid there dominate the inflation perception of the consumer. The result is that consumers perceive inflation as higher than it actually is.

This is not an uniquely American phenomenon. In 2002, Italian consumers were convinced inflation was running at 18 percent year over year, when the reality was 2 percent. Further investigation revealed that an increase in the price of a cup of espresso drove much of this erroneous impression.

The fact that we are all biased toward remembering the price of things bought more frequently is then compounded by two other phenomena. Humans are genetically programmed to emphasize bad news over good news when they make decisions. Aversion to loss is a primitive survival mechanism — we run away from the tiger faster than we run toward food.

In an inflation sense this means that people are inclined to place more emphasis on price increases (which represent a loss of spending power) than they are on price declines. In extreme situations this emphasis can span generations. For instance, Germans have a horror of rising prices today because the losses generated by hyperinflation in the 1920s and 1940s have become part of society’s collective memory. That has produced strong popular support for central bank independence and a reluctance to run large fiscal deficits.

In addition, big price increases are embedded in the memories of consumers, even if the item is a relatively unimportant part of their budget. A chocolate bar that moves up 20 percent in price from $1 to $1.20 will provoke a sense of outrage, even though their total spending on chocolate is, hopefully, fairly limited.

Consumers also frequently focus on price levels. A slowing in the rate of inflation does not mean prices are back to where they were; it simply means prices are rising at a slower pace than before. Consumers who have experienced a long period of low inflation, when many prices were static, want to get back to the price level that they remember.

The last time consumer price inflation was above 4 percent for more than a few months was the very start of the 1990s. If something cost $1 for a decade, consumers resent the fact that the same product is $1.20 today — even if the price of that product is no longer rising. Mentally, consumers feel that the product ought to cost $1 and they are nostalgic for the old price.

This mentality is one reason for what is sometimes called “shrinkflation”: Companies will keep the price of their products constant, but shrink the product size. Consumers get less for their money, but the unchanged price prevents negative nostalgia. (It should be noted that consumer price inflation is not deceived, and shrinking the size of a product is recorded as a price increase in the inflation data.)

All of this may help explain why the same consumers who believe inflation is higher than it really is aren’t aggressively cutting their own spending. Whatever consumers may feel about the damage of inflation, they will still spend the money that they have. The mantra “never underestimate the hedonism of the U.S. consumer” continues to hold good.

Whether politicians or central bankers can take much credit for the decline in inflation can certainly be questioned. The transitory durable goods price inflation of 2021 was always likely to reverse when consumer demand for furniture and electronics adjusted after the pandemic. The profit-led inflation of recent months is something that rarely lasts long — consumers revolt against profit margin expansions, and companies rush to shore up customer loyalty with price stability and selective discounts.

Nonetheless, the risk is that the current situation leaves policymakers blamed for something that no longer exists. The political risks of inflation misperception have long been understood. President Richard Nixon was acutely aware that rising prices for higher-frequency purchases could hurt his 1972 re-election effort. In that era, prices were not set by the market. In 1971 Nixon froze all wages and prices (except for agricultural commodities) for 90 days by executive order, and then went on to establish government control of wages and prices.

Within this policy, the Nixon administration obsessed about food prices. Hamburger meat, in particular, was a recurring theme. As one Nixon aide, Charles Colson, described it, hamburger meat “seems to be the one item that is highly visible and meaningful to the housewife.” The gender stereotyping seems archaic half a century later, but the principle still holds. The overall price strategy was a political success — Nixon’s economic approval ratings rose — but ultimately led to shortages and contributed to the rapid inflation that came after the election.

As the United States prepares for a deeply polarized election, perception matters. Throughout 2023 polls showed inflation as being voters’ biggest economic concern. Similarly, President Biden receives lower support for his handling of the economy than of other policy areas. If high frequency purchases are still rising in price, consumers are likely to discredit policymakers’ claims of economic improvement. Conversely, if disinflation takes hold for food and fuel, there may be more satisfaction about economic policy.

The aisles of Walmart may turn out to be one of the most important battlegrounds for the 2024 election.