In November, the inflation rate in the US rose to 6.8 percent, the highest level in almost 40 years.

But inflation also recently reached new highs in Europe.

Savers have to watch as the money in their accounts loses purchasing power and, above all, socially disadvantaged groups have to tighten their belts even more.

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How long the high rates will last is uncertain. The debate on how best to deal with the rise in prices has, however, taken on an unexpected new impetus. In a guest article published in the British newspaper "The Guardian" at the end of December, Isabella Weber, junior professor of economics at Amherst University in Massachusetts, advocates "systematic price controls".

The proposal by the German economist met with a wide response on social media - albeit mostly negative. “Not all bad ideas come from the right,” wrote the left-liberal economist and Nobel Prize winner Paul Krugman on the short message service Twitter. In an initial tweet he had written: “I am not a fan of the free market. But that's really stupid. " However, he deleted this tweet and apologized for his choice of words.

Weber blames “large companies with market power” for the rise in inflation.

These had taken the delivery bottlenecks "as an opportunity to raise prices and make big profits".

The economist Joseph Politano counters this by saying that the prices for preliminary products have risen much more sharply than those for end products, which shows that companies do not simply pass the costs on to consumers.

"The last resort in absolutely exceptional situations"

Rüdiger Bachmann, professor at the University of Notre Dame in Indiana, does not consider the argument to be sound either. It could actually be that the competitive situation has worsened as a result of the pandemic, he says in an interview with the FAZ. "

The more obvious explanation for the high inflation is that in the USA but also in Europe, as a result of the state rescue measures, a high disposable income is encountering an economy that is not yet able to produce at pre-crisis levels due to supply bottlenecks. There was a similar situation after the Second World War. Weber also refers to this fact in her article. After the prices had been controlled during the war, the state released them again in 1946 - contrary to the recommendation of economists such as the later Nobel Prize winner Paul Samuelson. As a result, inflation skyrocketed.

"But the economy does not come out of a war, if price controls might make sense," says Bachmann.

Rather, the economy should now grow out of a pandemic.

“Price controls would be counterproductive in this situation.

Because incentives are needed so that companies can increase their production again ”.

Price controls should always be "the last resort in absolutely exceptional situations", emphasizes Bachmann, because they intervene in the information function of markets.

After all, the greatest difficulty in price controls lies in setting the “right” price, which normally forms on the market.

The question of which prices should and for which not appropriate controls should be introduced is likely to be controversial.

Bad experience with price controls

Price controls were last used in America in the 1970s. In order to get the inflation triggered by the oil price crisis under control, the then American government under President Richard Nixon imposed a price freeze for 90 days. At this point in time, inflation was already around 6 percent.

But full of the hoped-for relaxation, after the deadline there was an even greater price increase. Meaningful lessons can be drawn from this for the current situation. “If energy prices have been the main driver behind the price hike since 2020, not just in the US but around the world, would anyone want to repeat the experience America had with energy price controls in the 1970s? Certainly not, ”writes the British economic historian Adam Tooze in a blog post. Further historical examples from around the world illustrate the failure of price controls.

Curbing inflation only succeeded in the 1970s with a drastic increase in key interest rates.

This experience teaches that monetary policy should fight inflation at an early stage, warns Bachmann.

Instead of price controls, he considers a mixture of monetary and fiscal policy to be the better therapy to restore the functioning of the markets.

It is true that she also has unpleasant side effects.

A tighter monetary policy would lead to a decline in demand.

But with high inflation that is just the right thing to do.

“It must be clear that a pandemic cannot be overcome without a loss of welfare.

That is why it is by no means irrelevant which therapy you choose, ”warns Bachmann.