In a time of mounting frustration over soaring prices and economic uncertainty, Isabella Weber, an economist and advocate for unconventional approaches, has reemerged at the center of the inflation debate. Her ideas, once dismissed as radical, are now gaining traction globally as governments and policymakers grapple with persistent inflation and its social consequences.
Weber’s rise to prominence began with a controversial op-ed she penned in 2021. In the piece, she proposed tailored price controls as a strategy to combat inflation—a stance that starkly opposed the traditional economic consensus that interest rate hikes were the only effective solution. “If your house is on fire, you would not want to wait until the fire eventually dies out. Neither do you wish to destroy the house by flooding it,” Weber argued, likening her proposal to a targeted intervention rather than a blunt tool.
At the time, her suggestion was met with fierce backlash. Nobel laureate Paul Krugman called the idea “truly stupid” in a tweet he later deleted and apologized for, while critics on social media unleashed waves of hostility. Yet Weber persevered, pointing to what she termed the “explosion of profits” during the pandemic, when corporations benefitted from stimulus packages while raising prices for consumers.
In the years since, Weber’s ideas have seen a dramatic shift in perception. Her work with Germany’s government on gas and heating price controls during the energy crisis, following Russia’s invasion of Ukraine, has provided a real-world example of her strategy’s potential. The European Union later implemented similar measures, adding to the credibility of her approach.
Krugman himself has reconsidered, writing in support of Kamala Harris’s proposal to ban price gouging on groceries, which echoes Weber’s principles. “Just because something is popular doesn’t mean that it’s a bad idea,” he stated.
Weber’s research delves into the dynamics of corporate pricing, revealing how companies exploited economic shocks to increase profits. Using AI to analyze corporate earnings calls, her team found that executives viewed inflationary pressures as opportunities to raise prices, relying on industry-wide cost increases to justify their actions.
“Companies feel good about cost increases if these cost increases hit everybody at the same time,” Weber explained, emphasizing that traditional market competition often fails to regulate prices in consolidated industries dominated by a few major players.
Weber rejects the notion of blanket price controls, instead advocating strategic interventions in upstream sectors like oil and gas. She points out that price controls already exist for utilities, rent, and medication in the United States.
Her call for a broader toolbox of economic interventions reflects a concern for the erosion of public trust in political and economic systems. The divide between economists’ optimism over low unemployment and falling inflation, and the public’s frustration over the rising cost of living, has led to what some term a “vibecession”—a perception of economic decline despite technical indicators to the contrary.
“We need to do better and think about a toolbox for intervention and not just rely on interest rate hikes,” Weber urged. “Economists just can’t afford to say, ‘I have studied economics from first principles for 20 years, and here is the one and only acceptable answer to the problems we face.’”
Weber warns of the political dangers of unchecked inflation, linking economic discontent to the rise of far-right movements. “To defend democracy, you have to deliver policies that the majority of people feel are actually making their lives better,” she said.
As debates over inflation and economic justice continue, Weber’s insistence on thinking “outside the box” resonates with growing calls for systemic change—offering a roadmap for navigating a complex and fraught economic landscape.