Economic Stress: Notes on the Psychology of Inflation

This research examines economic inflation as a “psychological stressor.” Economic behavior in response to inflation is hypothesized to be a function of subjective cognitive appraisal of threat as well as objective economic indices such as actual income. A survey of 504 American college alumni compared the contribution of perceived threat and family income to self‐reported changes in buying practices and leisure activities. These changes, as well as the reported degree of stress experienced, were better accounted for by perceived threat than by actual income. Further, threat and income did not interact in affecting economic behavior. Finally, none of the demographic and economic variables differentiated between groups of more versus less threatened individuals. A replication study was conducted on a sample of 112 Israeli college alumni. The rate of inflation in Israel is 10 times higher than the American rate, but income is protected by continuous indexing. The findings for the Israeli sample replicated with a high degree of accuracy the American findings, thereby providing unique cross‐cultural validity to the conception of economic inflation as a psychological stressor.