The economy of the 1940’s looks a lot like the economy of today. High consumer demand for goods, record corporate profits and production bottlenecks in key areas. In 1940’s United States, the Office of Price Administration had some power to set prices and simply prohibited companies from raising prices over certain levels. Be careful if you suggest something similar today, as Isabella Weber from the University of Massachusetts found out.
Late last year, she published an article arguing for strategic price controls and the reaction was fierce. Like so many academic debates in 2023, the response was anything but academic. She was called “stupid”, “certainly wrong” and her article “the worst” of the year. Six months later, this article from The New Yorker tries to reckon with the substance of her argument. Should price controls be a tool in the policymakers toolkit in 2023?
We have seen early signs that western governments are open to price controls, particularly in the energy market. The EU is regulating the price of natural gas and the G7 is trying to enforce a global cap on the price of oil produced in Russia. It is a far cry from the World War Two era of government price controls across the economy, but it is a small break from the Keynesian idea that the cure for high prices is high prices.
At the same time, Weber’s critics in 2022 have come around to her views in 2023. The Nobel laureate Paul Krugman called her “truly stupid” when her article was published last year. This year, Krugman wrote in the New York Times that price controls may be a useful piece of inflation management after all.
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