Shock Values: Prices and Inflation in American Democracy

Shock Values: Prices and Inflation in American Democracy by Carola Binder

The history of inflation and deflation is riddled with attempts at price controls. From the time of the revolutionary war, price controls were debated and sometimes put into place. Price controls had some impact on stabilization, but also created distortions in the market as well as made winners and losers. A national bank and monetary policy helps provide stability but exchange rates also caused distortions. (especially when values of silver and gold differed.) A strong, independent central bank can provide stability. However, it is difficult for politicians to resist tampering. FDR went to great extents to preserve his price controls. Policies to strengthen unions while controlling prices probably hurt the economy and employment (while benefiting those that kept jobs) Price controls stopped after the end of the war, but were tried again later without much success. People don't like it when things look more expensive and they always try to blame profit taking. Companies will look for an excuse to raise prices. They might be accused of short term high profits even if they don't make up for previous loses. Keeping inflation under control takes work, but does make people happy.