Life Is So Expensive, People Are Nostalgic for 2021

People used to talk wistfully about how movie tickets were $3 in the 1980s, or how a Big Mac cost a couple of bucks in the 1990s. Now they are nostalgic for the prices of just a few years ago.

Russell Max Simon

watched inflation play out in the cost of the avocados he likes to put on top of his breakfast. A 41-year-old marketing consultant in Rumney, N.H., Mr. Simon was dismayed to see their price climb from $1 each in early 2021 to $2.50 one year later. 

“There is an element of whiplash,” he said. “Was that a bygone era from my youth, or was it just last year?”

Prices these days just aren’t what they used to be. In February, the consumer-price index was up 6% from a year earlier, after hitting a four-decade high of 9.1% in June 2022. Eggs cost $4.21 a dozen last month, up from $1.60 in February 2021, and a pound of chocolate-chip cookies was $5.18, up from $3.80, according to national averages from the Bureau of Labor Statistics.

Nostalgia for an earlier price and time normally builds up over many years. Recent inflation accelerated that process, making many of us feel prematurely like our grandparents, opining about the price tags of yore. This overnight nostalgia—a sense that the price was right, but isn’t anymore—can be painful, consumers and economists said.

Hindsight is cheap

Faulty memories only deepen our angst. On average, people remember prices as being lower than they really were, according to forthcoming research from two finance professors,

Francesco D’Acunto

at Georgetown University and

Michael Weber

at the University of Chicago. 

In other words, the golden age of affordability we recall may never have existed. 

Profs. D’Acunto and Weber found in a 2022 survey that consumers on average estimated the price of milk one year earlier to be lower than what they actually paid. Nearly one-third of them produced an estimate that was at least about 50 cents, or roughly 18%, lower.

One reason we underestimate past prices, Profs. D’Acunto and Weber found, is that we pay disproportionate attention to things that jump significantly in price. Extrapolating from those jumps leads to a perception that overall inflation has been worse than it really was.

When asked to recall past prices, we also sometimes go too far back in time, the researchers found. For instance, if asked to estimate a price from 2020, we might mistakenly quote one from 2017, when prices were even lower.

The ghost of prices past

People aren’t mistaken that life was more affordable not long ago.

Wages have gone up in recent years, but real disposable household income, an indicator of how affordable life is at a given time, rose early in the pandemic and started to decline in mid-2021, according to estimates from the economists

Thomas Blanchet,

Emmanuel Saez,

and

Gabriel Zucman.

That metric was initially pushed up by federal stimulus and other pandemic-relief programs, then later dragged down by high inflation and the end of those supports. For U.S. households in the middle 40% of incomes, average real disposable income in December 2022 was 2.1% lower than what it was in January 2020. 

Even tiny fluctuations in cost can trigger price nostalgia.

Laura Schooler,

a 51-year-old public-relations consultant in New York, remembers the good old days—that is, last summer—when a can of soda at a local bodega cost $1 instead of $1.25 and a plain, untoasted bagel at a nearby shop cost $1.60 instead of $1.95. 

She recently noticed that the price of a single roll of toilet paper increased from $1 to $1.49. Seeing those changes can spur feelings that more than prices are out of control, she said: “It’s emotional and it signifies something else, like, ‘Oh, my God, if this basic thing has gone up 50%, my whole life is going to unravel.’”

When people look back fondly on prices from further back in the past, Ms. Schooler observed, “it’s not just about the nostalgia around price—it’s nostalgia around your life, and where you were and what your hopes and dreams were.”

Income, inflation and the brain

People’s understanding of the cost of living in earlier eras—such as the 1980s or the 2000s—are far more warped than their recent memories of prices, according to forthcoming research. 

In our brains, negative developments stand out more than positive ones, said

Jason Dana,

a professor at the Yale School of Management and a co-author of the study. 

“People are particularly sensitive and attentive to when prices increase, and don’t think about rising wages as vividly,” he said. 

Prices are unlikely to drift back down to the level they were at a couple of years ago, said

Carola Binder,

an economics professor at Haverford College. Instead, she said, the hope is that price hikes will slow but wages will continue to rise, eventually making life feel more affordable. 

Prof. Binder said that a return to 2020 and 2021 levels of affordability could happen within a few years. The Federal Reserve would like to reach that point sooner, but its interest-rate moves can only nudge wages and inflation up or down in tandem, rather than boost pay and lower inflation, as consumers would prefer. 

For now, memories of lower prices are leaving consumers feeling helpless.

Lani Akingbade,

a 25-year-old in Bergenfield, N.J., who works at a social-media marketing agency, was aghast to see that one of her favorite cereals, Cheerios Oat Crunch, cost $6.79. 

She said she used to buy a box for $3.49 “back in the day—and by ‘back in the day,’ I literally mean maybe three years ago.”

SHARE YOUR THOUGHTS

What prices from the past few years are you nostalgic for? Join the conversation below.

Write to Joe Pinsker at [email protected]

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

People used to talk wistfully about how movie tickets were $3 in the 1980s, or how a Big Mac cost a couple of bucks in the 1990s. Now they are nostalgic for the prices of just a few years ago.

Russell Max Simon

watched inflation play out in the cost of the avocados he likes to put on top of his breakfast. A 41-year-old marketing consultant in Rumney, N.H., Mr. Simon was dismayed to see their price climb from $1 each in early 2021 to $2.50 one year later. 

“There is an element of whiplash,” he said. “Was that a bygone era from my youth, or was it just last year?”

Prices these days just aren’t what they used to be. In February, the consumer-price index was up 6% from a year earlier, after hitting a four-decade high of 9.1% in June 2022. Eggs cost $4.21 a dozen last month, up from $1.60 in February 2021, and a pound of chocolate-chip cookies was $5.18, up from $3.80, according to national averages from the Bureau of Labor Statistics.

Nostalgia for an earlier price and time normally builds up over many years. Recent inflation accelerated that process, making many of us feel prematurely like our grandparents, opining about the price tags of yore. This overnight nostalgia—a sense that the price was right, but isn’t anymore—can be painful, consumers and economists said.

Hindsight is cheap

Faulty memories only deepen our angst. On average, people remember prices as being lower than they really were, according to forthcoming research from two finance professors,

Francesco D’Acunto

at Georgetown University and

Michael Weber

at the University of Chicago. 

In other words, the golden age of affordability we recall may never have existed. 

Profs. D’Acunto and Weber found in a 2022 survey that consumers on average estimated the price of milk one year earlier to be lower than what they actually paid. Nearly one-third of them produced an estimate that was at least about 50 cents, or roughly 18%, lower.

One reason we underestimate past prices, Profs. D’Acunto and Weber found, is that we pay disproportionate attention to things that jump significantly in price. Extrapolating from those jumps leads to a perception that overall inflation has been worse than it really was.

When asked to recall past prices, we also sometimes go too far back in time, the researchers found. For instance, if asked to estimate a price from 2020, we might mistakenly quote one from 2017, when prices were even lower.

The ghost of prices past

People aren’t mistaken that life was more affordable not long ago.

Wages have gone up in recent years, but real disposable household income, an indicator of how affordable life is at a given time, rose early in the pandemic and started to decline in mid-2021, according to estimates from the economists

Thomas Blanchet,

Emmanuel Saez,

and

Gabriel Zucman.

That metric was initially pushed up by federal stimulus and other pandemic-relief programs, then later dragged down by high inflation and the end of those supports. For U.S. households in the middle 40% of incomes, average real disposable income in December 2022 was 2.1% lower than what it was in January 2020. 

Even tiny fluctuations in cost can trigger price nostalgia.

Laura Schooler,

a 51-year-old public-relations consultant in New York, remembers the good old days—that is, last summer—when a can of soda at a local bodega cost $1 instead of $1.25 and a plain, untoasted bagel at a nearby shop cost $1.60 instead of $1.95. 

She recently noticed that the price of a single roll of toilet paper increased from $1 to $1.49. Seeing those changes can spur feelings that more than prices are out of control, she said: “It’s emotional and it signifies something else, like, ‘Oh, my God, if this basic thing has gone up 50%, my whole life is going to unravel.’”

When people look back fondly on prices from further back in the past, Ms. Schooler observed, “it’s not just about the nostalgia around price—it’s nostalgia around your life, and where you were and what your hopes and dreams were.”

Income, inflation and the brain

People’s understanding of the cost of living in earlier eras—such as the 1980s or the 2000s—are far more warped than their recent memories of prices, according to forthcoming research. 

In our brains, negative developments stand out more than positive ones, said

Jason Dana,

a professor at the Yale School of Management and a co-author of the study. 

“People are particularly sensitive and attentive to when prices increase, and don’t think about rising wages as vividly,” he said. 

Prices are unlikely to drift back down to the level they were at a couple of years ago, said

Carola Binder,

an economics professor at Haverford College. Instead, she said, the hope is that price hikes will slow but wages will continue to rise, eventually making life feel more affordable. 

Prof. Binder said that a return to 2020 and 2021 levels of affordability could happen within a few years. The Federal Reserve would like to reach that point sooner, but its interest-rate moves can only nudge wages and inflation up or down in tandem, rather than boost pay and lower inflation, as consumers would prefer. 

For now, memories of lower prices are leaving consumers feeling helpless.

Lani Akingbade,

a 25-year-old in Bergenfield, N.J., who works at a social-media marketing agency, was aghast to see that one of her favorite cereals, Cheerios Oat Crunch, cost $6.79. 

She said she used to buy a box for $3.49 “back in the day—and by ‘back in the day,’ I literally mean maybe three years ago.”

SHARE YOUR THOUGHTS

What prices from the past few years are you nostalgic for? Join the conversation below.

Write to Joe Pinsker at [email protected]

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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