💥NEW PAPER💥

Can price controls be optimal? Our model says: Yes, if there is endogenous price uncertainty. Economists need a more rational relation with price caps. Delaying them when shocks hit essentials deepens the crisis & fuels the far right as the German case shows. 🧶 Germany's dependence on Russian gas meant it was hit hard by the Russian invasion of Ukraine. But market fundamentalist economists downplayed the impact of the energy shock & opposed policies to control energy prices. This delayed the government’s intervention. A mistake: 2/

.@adam_tooze with all the right questions on the obsession with the 2% inflation target: "In an age of populism and mounting calls for racial justice, can marginal reductions in inflation take priority over youth and minority unemployment?" 1/ "If we favour trade unions as defenders of democracy and a powerful countervailing force against inequality, should we not be backing them rather than denouncing wage-price spirals?" 2/

It's been a lively week on Twitter and I thought I should say more about WWII-style price controls across the entire economy. Doing that for our time strikes me as mad and I haven't seen anyone advocate it. We are living in an age of overlapping emergencies, not total war. 1/ My '21 Guardian op-ed considered what the stance of leading economists on price spikes in the transition to a post-war economy could tell us about the post-shutdown inflation. The historical parallel had already been drawn by the White House Council of Economic Advisors. 2/

Corporate concentration is a possible explanation of price and profit hikes driving inflation. But concentration was high before inflation. So, why can firms hike prices in an emergency? We explore this question in a new working paper. A 🧵scholarworks.umass.edu/econ_workingpa… US profit margins have reached levels not seen since the aftermath of WWII when inflation coincided with windfall profits. As @mtkonczal shows, there is again a relation between profits & inflation. But why have the same firms that kept prices stable started price hikes? 2/

Inflation might be easing for now, but we are living in an age of overlapping emergencies. More shocks are likely to come. We need economic policy preparedness for micro stabilization. But which prices matter?

A new working paper 🧵
scholarworks.umass.edu/econ_workingpa… Inflation used to be thought of as being ‘always and everywhere a macroeconomic phenomenon’ that macro tightening should address. However, the current inflation is the result of sectoral shocks that involve large changes in relative prices & require a micro policy response. 2/