Global Economics and Management

Should We Fight Inflation with Price Controls?

Inflation is a huge issue of contemporary relevance, and the quest for policies to address the problem of rising prices occupies many minds right now. You can find some of my past musings on this issue here, here and here.

One of the worst ideas ever devised to fight inflation, however, is also making the rounds: price controls. Price controls are a terrible idea in a market economy (in any economy, in fact), because they interfere with the information discovery process that prices embody (when price go up, it signals an increase in relative scarcity, incentivizing consumers to curtail demand and producers to expand supply). Price controls lead to shortages, and rationing. Their design is very difficult to get right, as price control boards are made up of humans (or even worse, economists!), who do not have the knowledge required to get prices right like a decentralized system of competitive markets does. In almost all cases (including during the last bout with inflation experienced by the US in the 1970s), they were an unmitigated disaster. So why The Guardian would agree to publish this utter nonsense is beyond my understanding... 

Some Articles of Note

Here are a few articles that caught my eye and provide useful recent information that will affect our discussions in class:

1) The great Paul Krugman on how to think about inflation in a world of zero nominal interest rates. The article is complete with an erudite reference to Richard Strauss (can you spot it?). Krugman is at his best when he brings his vast knowledge and understanding of economics to bear on the great issues of our times. 

2) One likely effect of the COVID pandemic will be to accelerate automation. From The Guardian, here is a fascinating article on efforts to reduce inter-personal contacts in South Korea, using automation - to build a so-called "untact" society.

3) Sent to me by my former student James Y. Kim (FEMBA 2023), a superb article from Foreign Affairs, authored by two political science professors, on the current state of liberal democracy. The article covers many themes of the Global Trends class, and as such would make excellent introductory reading for the course. Thank you, James!

4) One the biggest environmental issues facing India is the annual burning of crop waste ("stubble burning") in the region near New Delhi. This results in off-the-charts urban air pollution in winter months, with enormous health consequences. Now, it appears that a clever technological solution may help limit the problem. Bloomberg Green has the details. As I strive to cover more environmental issues in Global Trends, this article and the good news that it contains could not come at a better time.

Is the US Vulnerable to Military Conquest?

As I gear up to teach the next iteration of Global Trends, I am on the lookout for news items that could be relevant to the class. Yesterday I came across a striking article by Hal Brands over at Bloomberg News. In this article Professor Brands argues that the US is more vulnerable to a conflict on its own soil than is generally acknowledged. Of course, the relative geographic isolation and military might of the US means that it has (mostly) managed to avoid conflicts on its own territory until now. But the growing military clout of Russia, China and other players, coupled with new technologies to project force across vast distances (missiles, of course, but also cyberattacks) may mean that the next major conflagration may not be fought "over there" but "right here". Definitely worth pondering.