Why What Things Used to Be Ain’t What They Used to Be

For economists, psychologists and other experts, the gulf between the public belief in Europe that the euro has sent prices up and official statistics that show it hasn’t is providing a rich new area of research, inspring dozens of learned papers with titles such as “Expectancy Confirmation in Spite of Disconfirming Evidence.”

Their conclusions tend to be quite similar. Public perceptions of the impact of the euro were skewed, they argue, because people noticed the rise in the cost of everyday items such as coffee and vegetables more than they noticed the declining costs of telephone calls, refrigerators and other less frequently purchased items. That in turn confirmed pre-euro anxieties that the new currency could be inflationary. Extensive media coverage of price rises didn’t help. Moreover, some people may have simply not related their spending to what they were earning, and so made mistakes.

But in probing the problem, some researchers have come up with evidence that people have, at best, a hazy recollection of what things really used to cost. One study by two psychologists and an economist, to be published by the Bank of Italy, asked moviegoers in Rome if they remembered how much cinema tickets used to cost in lire before the introduction of the euro in 2002. Less than 1 in 10 got the amount right, while more than half underestimated the true cost by at least 30%.

One fundamental flaw in the argument of those who believe the euro pushed up inflation significantly is that there’s almost no supporting evidence. Italy provides a good example because, in 1993, it experienced a sharp deterioration in household income following a massive lira devaluation. Tens of thousands of people lost their jobs, auto and retail sales crashed and there were other sizable — and measurable — effects on the economy as a whole.

But in 2002 and since, despite complaints about the euro, there have been no such drastic side effects. From retail sales to savings patterns, the data appears normal. “There are no indicators that something terrible happened,” says Enrico Giovannini, the former head of the Italian statistics office who now works at the O.E.C.D. in Paris.

So far, such reasoned and academic arguments have largely failed to filter into the mainstream public debate. But in the world of statisticians, there is some introspection taking place. “Perhaps the communication of statistics was too focused on averages and not enough on variants,” Giovannini says. That’s a statistician’s way of saying people were not warned that some prices could go up, even if inflation as a whole stayed down. Now, it’s a bit late.