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Shock Values: Prices and Inflation in American Democracy
How inflation and deflation fears shape American democracy.
Many foundational moments in American economic history—the establishment of paper money, wartime price controls, the rise of the modern Federal Reserve—occurred during financial panics as prices either inflated or deflated sharply. The government’s decisions in these moments, intended to control price fluctuations, have produced both lasting effects and some of the most contentious debates in the nation’s history.
A sweeping history of the United States’ economy and politics, Shock Values reveals how the American state has been shaped by a massive, ever-evolving effort to insulate its economy from the real and perceived dangers of price fluctuations. Carola Binder narrates how the pains of rising and falling prices have brought lasting changes for every generation of Americans. And with each brush with price instability, the United States has been reinvented—not as a more perfect union, but as a reflection of its most recent failures.
Shock Values tells the untold story of prices and price stabilization in the United States. Expansive and enlightening, Binder recounts the interest-group politics, legal battles, and economic ideas that have shaped a nation from the dawn of the republic to the present.
Many foundational moments in American economic history—the establishment of paper money, wartime price controls, the rise of the modern Federal Reserve—occurred during financial panics as prices either inflated or deflated sharply. The government’s decisions in these moments, intended to control price fluctuations, have produced both lasting effects and some of the most contentious debates in the nation’s history.
A sweeping history of the United States’ economy and politics, Shock Values reveals how the American state has been shaped by a massive, ever-evolving effort to insulate its economy from the real and perceived dangers of price fluctuations. Carola Binder narrates how the pains of rising and falling prices have brought lasting changes for every generation of Americans. And with each brush with price instability, the United States has been reinvented—not as a more perfect union, but as a reflection of its most recent failures.
Shock Values tells the untold story of prices and price stabilization in the United States. Expansive and enlightening, Binder recounts the interest-group politics, legal battles, and economic ideas that have shaped a nation from the dawn of the republic to the present.
352 pages, Hardcover
First published May 22, 2024
36 people are currently reading
508 people want to read
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Displaying 1 - 13 of 13 reviews
December 8, 2024
An excellent account of the interaction between political and monetary debates throughout American history.
The dominant economic story of the last four years has been the rise and fall of inflation. This isn't the first time inflation has dominated national conversation or shaped politics. Carola Binder, an economics professor at Haverford, presents a history of inflation and monetary institutions in the United States, examining how they have affected politics, reshaped economic institutions, and upended economic theories. Her motivation extends beyond the conventional menu and shoe leather costs discussed in economics textbooks. As she writes, "high inflation also erodes confidence in policy makers, institutions, and democracy itself: people look to their policy makers for assurance and solutions, and instead they find finger-pointing and false promises."
The book explores several themes: inflation and disinflation have distributional effects, helping some groups while hurting others; unexpected changes in purchasing power and debt values affect contracting and due process; inflation crises expand the role of government; and modern inflation targeting has deep historical roots.
One fascinating concept is "technopopulism," which argues that technocrats and populists share something in common: both channel the will of the people without mediation by democratic institutions. In this light, transparency becomes a means of increasing accountability to "the people" rather than just to the delegated decisions of elected representatives.
The book leaves unaddressed one nagging question about the politics of inflation (which I haven't seen addressed elsewhere): why don't we see different coalitions of winners and losers battling over current inflation? In the historical episodes Binder chronicles, farmers knew they gained from inflation reducing their real debt repayment, so they lobbied for more of it. Modern inflation also has clear winners and losers (alongside second-order net losses), yet the winners don't seem to recognize their advantage or advocate for more inflation. Despite "greedflation" claims (and possible markup increases during the inflationary period), businesses largely opposed recent inflation rather than seeing it as cover for price increases. Similarly, despite the "hot economy benefits workers" thesis (in many ways the opposite of "greedflation"), workers didn't welcome inflation or inflationary institutions. Even people with large mortgage debt, whose repayment burden was reduced more in real terms than their wages, didn't advocate for inflation. Why has this distributional politics of inflation disappeared when it was once so salient?
While I was already very familiar with some of the ground covered (and read those parts more quickly), overall I learned a great deal. The book made connections and offered creative interpretations I had missed. Readers less familiar with U.S. monetary history stand to learn even more.
The dominant economic story of the last four years has been the rise and fall of inflation. This isn't the first time inflation has dominated national conversation or shaped politics. Carola Binder, an economics professor at Haverford, presents a history of inflation and monetary institutions in the United States, examining how they have affected politics, reshaped economic institutions, and upended economic theories. Her motivation extends beyond the conventional menu and shoe leather costs discussed in economics textbooks. As she writes, "high inflation also erodes confidence in policy makers, institutions, and democracy itself: people look to their policy makers for assurance and solutions, and instead they find finger-pointing and false promises."
The book explores several themes: inflation and disinflation have distributional effects, helping some groups while hurting others; unexpected changes in purchasing power and debt values affect contracting and due process; inflation crises expand the role of government; and modern inflation targeting has deep historical roots.
One fascinating concept is "technopopulism," which argues that technocrats and populists share something in common: both channel the will of the people without mediation by democratic institutions. In this light, transparency becomes a means of increasing accountability to "the people" rather than just to the delegated decisions of elected representatives.
The book leaves unaddressed one nagging question about the politics of inflation (which I haven't seen addressed elsewhere): why don't we see different coalitions of winners and losers battling over current inflation? In the historical episodes Binder chronicles, farmers knew they gained from inflation reducing their real debt repayment, so they lobbied for more of it. Modern inflation also has clear winners and losers (alongside second-order net losses), yet the winners don't seem to recognize their advantage or advocate for more inflation. Despite "greedflation" claims (and possible markup increases during the inflationary period), businesses largely opposed recent inflation rather than seeing it as cover for price increases. Similarly, despite the "hot economy benefits workers" thesis (in many ways the opposite of "greedflation"), workers didn't welcome inflation or inflationary institutions. Even people with large mortgage debt, whose repayment burden was reduced more in real terms than their wages, didn't advocate for inflation. Why has this distributional politics of inflation disappeared when it was once so salient?
While I was already very familiar with some of the ground covered (and read those parts more quickly), overall I learned a great deal. The book made connections and offered creative interpretations I had missed. Readers less familiar with U.S. monetary history stand to learn even more.
April 3, 2025
4.5 stars.
April 7, 2025
Good information but a little long and challenging to follow direct correlations without more education in certain economic theories.
September 15, 2025
Shock Values is an economic and political history of the United States framed around the recurring problem of price instability, namely inflation and deflation, and how those phenomena have shaped American democracy, institutions, economic policy, and popular expectations over more than two centuries.
Binder argues that price fluctuations are not peripheral disturbances; they are central forces in American political economy. The responses to them, whether through monetary policy, fiscal policy, price controls, or political rhetoric, have had lasting structural effects: on the size and scope of government, the legitimacy of institutions (especially the central bank), interest group politics, and popular ideas about what just or fair prices look like.
Binder uses episodes of crisis, such as wars, panics, great depressions, etc. as turning points where new institutions, policies, or norms are adopted. Different social groups win or lose in different scenarios. Debtors benefit from inflation (since real debt falls), creditors suffer; consumers lose when prices rise; producers may win or lose depending on their costs; wage earners worry about purchasing power, etc.
Overall, the book shows that the struggle to manage prices is deeply intertwined with American democratic institutions. What people expect from government, what they consider legitimate, what kinds of institutional checks and balances are acceptable, all are shaped by how well or poorly previous governments handled price shocks.
Unfortunately for me, I found this book difficult to put up with for any long stretch of time. Binder adopted a "tell, not show" approach to writing this, and at times it felt like she was just describing various political and economic events and trying to connect them with a single, albeit strained thread, rather than building a watertight narrative.
I was expecting something along the lines of The War on Prices: How Popular Misconceptions about Inflation, Prices, and Value Create Bad Policy or Forty Centuries of Wage and Price Controls: How Not to Fight Inflation. Alas, this was not it.
Binder argues that price fluctuations are not peripheral disturbances; they are central forces in American political economy. The responses to them, whether through monetary policy, fiscal policy, price controls, or political rhetoric, have had lasting structural effects: on the size and scope of government, the legitimacy of institutions (especially the central bank), interest group politics, and popular ideas about what just or fair prices look like.
Binder uses episodes of crisis, such as wars, panics, great depressions, etc. as turning points where new institutions, policies, or norms are adopted. Different social groups win or lose in different scenarios. Debtors benefit from inflation (since real debt falls), creditors suffer; consumers lose when prices rise; producers may win or lose depending on their costs; wage earners worry about purchasing power, etc.
Overall, the book shows that the struggle to manage prices is deeply intertwined with American democratic institutions. What people expect from government, what they consider legitimate, what kinds of institutional checks and balances are acceptable, all are shaped by how well or poorly previous governments handled price shocks.
Unfortunately for me, I found this book difficult to put up with for any long stretch of time. Binder adopted a "tell, not show" approach to writing this, and at times it felt like she was just describing various political and economic events and trying to connect them with a single, albeit strained thread, rather than building a watertight narrative.
I was expecting something along the lines of The War on Prices: How Popular Misconceptions about Inflation, Prices, and Value Create Bad Policy or Forty Centuries of Wage and Price Controls: How Not to Fight Inflation. Alas, this was not it.
August 21, 2025
Exceptional monetary and fiscal history of the USA. Well written with ample explanations of political, social, and geopolitical events through the lense of central banking and government policy. Wish I could memorize it all.
March 13, 2025
Summary: An economic history of the United States, considering the various means used to stabilize prices and control inflation.
Price fluctuations not only upset an economy. They drastically affect many lives. Rampant inflation hurts consumers and savers alike, as they find their money is worth less. It is good news to debtors paying off loans in inflated currency but terrible for creditors. Less discussed is deflation, but those with underwater mortgages due to falling housing prices recognize how deadly falling prices can be. Ultimately, the best situation is price stability with low inflation.
In Shock Values, Haverford College economics professor traces the history of efforts in the United States to control prices and the interplay of politics and monetary policy. She takes each period from the Revolutionary War to the present, discusses the price stabilization challenges and the means used to bring price fluctuations under control. We go from discussions of paper currency versus specie and a central bank versus many banks to debates about the gold standard and the creation of the Federal Reserve system.
Two big themes in the book are price controls and monetary policy by the Fed that contracts the money supply and raises interest rates in inflationary periods and expands the money supply and lowers interest rates during economic contractions. Apart from wartime situations, price controls haven’t seemed to work well, as those of us who lived through the Seventies remember. Whip Inflation Now buttons, which Binder discusses, just didn’t cut it.
That leads to the other theme, the use of monetary policies and the appointment of Fed chairs whose terms are not concurrent with presidential terms. The Volcker years marked a decisive shift. Instead of a Fed that compromised fiscal policy to maintain high employment but with high inflation, Volcker focused on inflation. Consequently, for a period, interest rates were sky high. So, for a period was unemployment. But inflation came down, slowly jobs came back. Monetary policy could work, if it was not compromised by politics.
Subsequent Fed Chairs developed inflation targets, with an implicit and later explicit goal of keeping inflation under 2 percent. And this worked pretty well until the pandemic and the years that followed, when oil prices, and world food prices spiked, due in part to global disruptions. At this writing, the Fed has responded with tightening the money supply.
Binder doesn’t spend a lot of time on tariffs but her comments don’t offer hope. Tariffs tend to pit sectors of the economy, particularly agriculture and industry, against each other. They usually result in retaliatory tariffs. And they impose a hidden (and inflationary) tax on consumers.
Binder offers an informative history of monetary policy. She helped me realize no system is impervious to external shocks. One example is the shaky lending practices leading to the 2008 recession. The Fed actually played a crucial role in stabilizing lenders, preventing a worse debacle. The intrusion of short-term political expedients will always be a challenge to monetary discipline, often with inflationary consequences.
All of this underscored the radically new chapter being written by political interventions in the present. I suspect this will write a new chapter rather than just a continuation of the last. What is clear from Binder’s book is that if price stability is not a theme, it will be an economically tumultuous chapter.
_____________
Disclosure of Material Connection: I received a complimentary copy of this book from the publisher for review.
Price fluctuations not only upset an economy. They drastically affect many lives. Rampant inflation hurts consumers and savers alike, as they find their money is worth less. It is good news to debtors paying off loans in inflated currency but terrible for creditors. Less discussed is deflation, but those with underwater mortgages due to falling housing prices recognize how deadly falling prices can be. Ultimately, the best situation is price stability with low inflation.
In Shock Values, Haverford College economics professor traces the history of efforts in the United States to control prices and the interplay of politics and monetary policy. She takes each period from the Revolutionary War to the present, discusses the price stabilization challenges and the means used to bring price fluctuations under control. We go from discussions of paper currency versus specie and a central bank versus many banks to debates about the gold standard and the creation of the Federal Reserve system.
Two big themes in the book are price controls and monetary policy by the Fed that contracts the money supply and raises interest rates in inflationary periods and expands the money supply and lowers interest rates during economic contractions. Apart from wartime situations, price controls haven’t seemed to work well, as those of us who lived through the Seventies remember. Whip Inflation Now buttons, which Binder discusses, just didn’t cut it.
That leads to the other theme, the use of monetary policies and the appointment of Fed chairs whose terms are not concurrent with presidential terms. The Volcker years marked a decisive shift. Instead of a Fed that compromised fiscal policy to maintain high employment but with high inflation, Volcker focused on inflation. Consequently, for a period, interest rates were sky high. So, for a period was unemployment. But inflation came down, slowly jobs came back. Monetary policy could work, if it was not compromised by politics.
Subsequent Fed Chairs developed inflation targets, with an implicit and later explicit goal of keeping inflation under 2 percent. And this worked pretty well until the pandemic and the years that followed, when oil prices, and world food prices spiked, due in part to global disruptions. At this writing, the Fed has responded with tightening the money supply.
Binder doesn’t spend a lot of time on tariffs but her comments don’t offer hope. Tariffs tend to pit sectors of the economy, particularly agriculture and industry, against each other. They usually result in retaliatory tariffs. And they impose a hidden (and inflationary) tax on consumers.
Binder offers an informative history of monetary policy. She helped me realize no system is impervious to external shocks. One example is the shaky lending practices leading to the 2008 recession. The Fed actually played a crucial role in stabilizing lenders, preventing a worse debacle. The intrusion of short-term political expedients will always be a challenge to monetary discipline, often with inflationary consequences.
All of this underscored the radically new chapter being written by political interventions in the present. I suspect this will write a new chapter rather than just a continuation of the last. What is clear from Binder’s book is that if price stability is not a theme, it will be an economically tumultuous chapter.
_____________
Disclosure of Material Connection: I received a complimentary copy of this book from the publisher for review.
August 9, 2024
It's hard to write an interesting book about inflation, as demonstrated by Carola Binder in her book "Shock Values." You have to be really committed to learn about this subject to be willing to plow through this history of the subject. The book gets more exciting when she gets to the more contemporary examples of struggles with inflation. You may be surprised to learn that debate over this subject stretches all the way back to the inception of this country, and before that elsewhere. The topic is not going anywhere. This is an important book that merits some amount of commitment to learn about the issue. Few people, however, will have this commitment because it's just not sexy enough. Credit Miss Binder for her exhaustive research of this subject, as testified to by the fifty pages of notes at the end of this book. If you are an economics nerd, this book is for you. Fo the rest of us, you must have an intense interest. Still the book is rewarding enough if you are persistent.
Want to read
December 6, 2024WSJ Ten Best list for 2024: https://www.wsj.com/arts-culture/book...
(Paywalled. As always, I'm happy to email a copy to non-subscribers)
"Everyday low prices is the concept that Walmart took to the bank but that the Federal Reserve has turned on its head. What the central bank seeks, and has lately achieved, is everyday high prices.
“Inflation is always and everywhere a monetary phenomenon,” according to Milton Friedman. Rises in price levels bedevil politicians but are frequently driven by political decisions. Carola Binder’s book ranges from the colonial era to today, chronicling Americans’ many attempts to outsmart inflation. She makes few judgments on policy but gives voice to critics whose ideas, in an age of high deficits, should be heard."
(Paywalled. As always, I'm happy to email a copy to non-subscribers)
"Everyday low prices is the concept that Walmart took to the bank but that the Federal Reserve has turned on its head. What the central bank seeks, and has lately achieved, is everyday high prices.
“Inflation is always and everywhere a monetary phenomenon,” according to Milton Friedman. Rises in price levels bedevil politicians but are frequently driven by political decisions. Carola Binder’s book ranges from the colonial era to today, chronicling Americans’ many attempts to outsmart inflation. She makes few judgments on policy but gives voice to critics whose ideas, in an age of high deficits, should be heard."
Want to read
December 5, 2024WSJ Best of 2024
January 1, 2025
It reads like an economic textbook, but a relevant one
January 9, 2025
It was a very interesting book. I found it difficult to read as I have no background in economics. But overall a very good education for me.
January 25, 2025
An historical review of the ways the US government has tried to address inflation throughout its history.
February 2, 2025
Few nonfiction authors seem to have the capacity to take a single topic over a several decade period, yet Binder marvelously shows how this can be done both with high clarity and keeping the reader’s interest. The topic of inflation is so ill defined so it’s all the more impressive that she was able to tackle it so thoroughly. On top of that she gives the most concise and clear introduction to the topic of NGDP targeting I have seen so I finally feel like I have some inkling on this topic even having been a regular Macro Musings listener since its debut.
Displaying 1 - 13 of 13 reviews