inflation

In new research, Ricardo Marto finds that the rise of services in the United States explains the rise in firm markups over the last few decades rather than a lack of competition.

American households accumulated a large stock of savings during World War II, much of which was held in the form of war bonds. After the war, inflationary episodes eroded the purchasing power of these bonds, contributing to a backlash against the incumbent Democrats. In new research, Gillian Brunet, Eric Hilt, and Matthew S. Jaremski study the impact of post-WWII inflation on voting outcomes using data on the sales of savings bonds during the war.

In this second article on real estate in the current high-interest-rate environment, Joseph L. Pagliari Jr. explores banks’ exposure to commercial real estate, who might help fill the credit void as bank funding dries up, how the work-from-home phenomenon impacts commercial real estate prices, particularly the office sector, and what risks large urban centers face with emptied office buildings.

There are concerns among bankers and economists that commercial real estate prices are at risk of decreasing substantially. Joseph L. Pagliari, Jr. explains how commercial real estate should be priced based on current and projected inflation and interest rates. A subsequent article will explore if concerns about bank and broader economic vulnerabilities to lower CRE prices.

The United States has recently experienced shrinkflation. Many companies have downsized their products while keeping prices unchanged or even raising prices. Barak Orbach argues that misguided beliefs that failed antitrust policies enabled the decay of business morality have compromised the understanding of shrinkflation. The phenomenon typically arises when supply shocks or other factors inflate production costs in the economy and competitive pressures limit the ability of businesses to raise prices to pass on cost increases.

Economists have proposed two main theories to explain the recent spike in prices. Progressives have attributed the rise in inflation to corporate greed and have suggested price controls in response. Other economists have turned back to the New Consensus in Macroeconomics that arose in the 1970s in response to steep inflation blamed on the large Keynesian fiscal expansion of the preceding decades. Matías Vernengo writes that neither camp has correctly diagnosed the problems with current inflation. Proponents of Greedflation overlook the price stability of the last few decades even as market concentration increased. On the other hand, advocates of the New Consensus similarly forget their history and the commodity shocks and price-wage spiral that were the real culprit for inflation in the 1970s.

Some progressive politicians and advocates have argued that lax antitrust policies enabled the inflation surge that began in 2021 and that aggressive antitrust enforcement is crucial to combatting inflation. These assertions are misguided and misleading. Similar greedflation theories emerged during previous inflation spikes, but their promotion this time has proven counterproductive. The allure of trustbusting ideas, it seems, is starting to wane.

From critiques of the Consumer Welfare Standard to discussions about inflation, here are the ten most popular ProMarket articles from 2022. 10. Einer Elhauge: Should...

At a recent Centre for Economic Policy Research (CEPR) event, panelists, including the Stigler Center's own Luigi Zingales, reflected on the roles antitrust enforcement...

Most economists disagree with a new bill in the US that would set limits on "unconscionably excessive prices," according to a recent survey from...