All Else Equal: Making Better Decisions Rerun: Ep53 “The Truth About Inflation and Price Caps: Learn From Argentina” with Veronica Rappoport
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Aug 27, 2025 In this discussion, Veronica Rappoport, an Associate Professor at the London School of Economics and former Deputy Governor of Argentina's Central Bank, shares her insights on Argentina's historic inflation crisis. She emphasizes that price caps have exacerbated inflation rather than alleviating it, and debunks myths surrounding them. Rappoport also explores the role of fiscal deficits and government interventions, drawing lessons for countries like the U.S. This candid conversation highlights the complexities of inflation and the need for sustainable economic strategies.
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Money Creation Drives High Inflation
- High inflation often stems from governments financing deficits by creating money rather than taxes or borrowing.
- Printing money effectively taxes the population by reducing currency value and speeds inflation when investor confidence falls.
Price Caps Create Shortages Or Black Markets
- Price caps either cause shortages when enforced or black markets when unenforced, failing to stop true price increases.
- Caps shift goods to those who can resell at higher prices and create enforcement costs without solving underlying scarcity.
Katrina Water Example
- Michael Sandel's Katrina example shows low price ceilings let a few buy scarce water and resell it on black markets.
- The policy rewarded hoarding and profiteering instead of solving the shortage problem.
