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1. Implicit Coordination in Sellers’ Inflation: How Cost Shocks Facilitate Price Hikes

Author:
Isabella Weber, Evan Wasner, Markus Lang, Benjamin Braun, and Jens van't Klooster
Publication Date:
11-2024
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Supply shocks are now widely recognized as a driver of the recent inflation bout, but the role of firms’ pricing strategies in propagating input cost shocks remains contested. In this paper, we review the state of the academic debate over sellers’ inflation and assess whether, in line with this theory, economy-wide cost shocks have functioned as an implicit coordination mechanism for firms to hike prices. We use a dataset containing 138,962 corporate earnings call transcripts of 4,823 stock-market listed U.S. corporations from the period 2007-Q1 to 2022-Q2 to conduct sentiment analysis via both dictionary-based natural language processing and a large language model approach. We find that large input price shocks (as well as their co-occurrence with supply constraints) correlate with positive sentiments expressed in executives’ statements about cost increases. Qualitative analysis provides further insights into the reasoning behind executives’ optimism regarding their ability to turn an economy-wide cost shock into an opportunity to raise prices and protect or even increase profits.
Topic:
Economy, Inflation, Profit, and Corporations
Political Geography:
North America and United States of America

2. The (Im-)Possibility of Rational Socialism: Mises in China’s Market Reform Debate

Author:
Isabella Weber
Publication Date:
10-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Investigate the long first decade of reform in China (1978-1992) to show that Mises, in particular his initiating contribution to the Socialist Calculation Debate, became relevant to the reconfiguration of China’s political economy when the reformers gave up on the late Maoist primacy of continuous revolution and adhered instead to an imperative of development and catching up. During the Cultural Revolution, Mao had rejected the notions of efficiency and rational economic management. In the late 1970s, the reformers under Deng Xiaoping’s leadership elevated these notions to highest principle. As a result, Mises’ critique that socialism could not achieve a rational economic order came to be debated throughout the 1980s and Chinese economists developed their own reading of Mises and the Socialist Calculation Debate. When Deng Xiaoping reinstated market reforms in the early 1990s after the Tiananmen crackdown, a history of thought review of the possibility of rational socialism and socialist markets helped to justify the Socialist Market Economy with Chinese Characteristics the official designation of China’s economic system to this day.
Topic:
Markets, History, Reform, Economy, and Socialism
Political Geography:
China and Asia

3. The Nature of Money and the Theory of International Trade: Thornton and Ricardo

Author:
Isabella Weber
Publication Date:
10-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
A rich recent literature reinvestigates the nature of money, but little attention has been paid to the ramifications of the ways in which we theorize money for the theory of international trade. This paper examines the logical relationship between the neutrality of money and self-balancing trade based on Henry Thornton and David Ricardo as two foundational contributions to credit and commodity money theories respectively. I show that both authors theorize trade as self-balancing whenever money is conceptualized as neutral. I distinguish two notions of the neutrality of money: ex ante and ex post neutrality. In Thornton’s Paper Credit money is not neutral ex ante: there can be temporary trade imbalances. But in the long-run money is neutral ex post and international trade boils down to self-balancing barter. In Ricardo money is neutral both ex ante and ex post and international trade is always balanced unless central bank policy undermines monetary neutrality.
Topic:
International Trade and Finance, Economy, Money, and Trade
Political Geography:
Global Focus

4. The State-Constituted Market Economy: A Conceptual Framework for China’s State–Market Relations

Author:
Isabella Weber and Hao Qi
Publication Date:
12-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
China has created a distinct economic system. Yet despite a growing literature with valuable contributions on the institutional arrangements under ‘capitalism with Chinese characteristics,’ the precise economic mechanisms underpinning China’s state–market relations remain undertheorised. In this paper we develop a conceptual framework of what we call China’s state-constituted market economy. We define essential as ‘systemically significant from the perspective of the state.’ We argue that the Chinese state ‘constitutes’ the market economy by creating, participating and steering markets for essentials in order to stabilise and guide the economy as a whole. We draw on China’s statecraft tradition as well as on proposals for financial policy reform in the U.S. to conceptualise the state market-constitution in China.
Topic:
Markets, Economy, and State-Market Relations
Political Geography:
China and United States of America