Sections

Research

BPEA | 1997 No. 1

Public Resistance to Indexation: A Puzzle

Robert J. Shiller
Robert J. Shiller
Robert J. Shiller Sterling Professor of Economics - Yale University
discussants: Charles L. Schultze and
CLS
Charles L. Schultze Former Brookings Expert
Robert E. Hall
Robert Hall Headshot
Robert E. Hall Robert and Carole McNeil Joint Hoover Senior Fellow and Professor of Economics - Stanford University

1997, No. 1


THE INDEXATION OF payments makes excellent sense for all sorts of
long-term contracts. Future payments should not be expressed in currency
units, but instead tied to an index of consumer prices or an index
of wholesale prices, of wages, of incomes, or of components of income.
History shows that the real value of currency units has been so unstable
that it is better to use practically any one of these indexes to specify
future payments in contracts than to specify payments in terms of fixed
currency.