Why is inflation so sticky? It could be corporate profits

And yet despite 15 years of stimulus we have had persistently low inflation for all except the last 2 years or so, the first half of which was very clearly driven by supply chain issues.

It’s almost like even if stimulus has had an impact it’s not the only, or even the primary driver.

There's this strange thing that is done. We have economics departments and business schools and they aren't the same thing.

Mainstream neoclassical economics is mostly preoccupied with what ought to happen in some mathematically defined fantasy world and business school is the study of what actually does happen.

In fact when you get into post-graduate classical economics, it's mostly just a formal branch of mathematics with models and axioms. It's got nothing to do with how people actually engage in the real world with the distribution of resources.

It's based on some mathematically defined homo-economicus and has a bunch of assumptions like infinite knowledge, exclusively rational and always correct based on some utility function calculation, etc... as if every single person, without exception, pours over arbitrarily complex excel spreadsheets covering a wide variety of properties for every single purchase and they all, in unison, arrive at the exact same conclusions and without any more thought immediately respond to the price signal. Oh and they also are acting only in their self-interest without any regard, at all, like some kind of narcissistic psychopath, for anything but themselves.

That's why the advanced economics books are just proofs, axioms and math while the business books are things like real world sales numbers. Classical Economic theories predict real world human behavior about as much as an astrology chart. (There's lots of revolutionary work in economics in the past 30 years that present other models but many people outside the discipline haven't gotten the memo yet and think James M Buchanan and other Virginia and Chicago school people from the mid-20th century are all of economics - it isn't and never was)

I've given a pretty good multi-year study into both. One of them reflects reality more.

Price signal is real, don't ignore it. $100 packs of gum won't sell ... unless they do (https://www.mastika.store/products/mastika-gum-gold)

It's part of the "4-6" ps of marketing. (usually price/place/promotion/product - sometimes people and presentation). As you can see in that link, those things are part of it.

It's way more complicated than sellers stupidly slashing their profit margins in some purely competitive feeding frenzy for your dollar. That does happen - but usually only in collapsing markets where price, speculation, information, and value are counterintuitively all unknown.

Robert Shiller has documented this, how the predictive capacity of neoclassical models reach their highest accuracy during market panics. So there is that

>"government spending" does not cause companies who are making record profits to increase their prices. That's just greed.

It absolutely does. If people have "extra" money (e.g. COVID payments), they can bid higher on limited resources (i.e. inflation). If there's more employed (i.e. government jobs), that's again, more people with more money, for limited resources (i.e. inflation).

While I'm sure companies are taking advantage of the fact, they must also realise that there's more demand for their limited resources, which causes them to raise prices.

These companies are making "record profits", but you also need to consider that the purchasing power of your dollar is being debased, and these companies are (at least partially) trying to keep up with inflation.

Inflation is never linear, and tends to over/under shoot.

Under normal circumstances, supply chain issues (otherwise known as supply reduction) results in demand being priced out of the market. But we didn’t do that. We gave stimmie checks, and gas cards, and increased unemployment benefits, and paused loan repayments.

When there’s not enough of thing X it means some people won’t get thing X. Giving people money to make it “more affordable” just pushes price higher without increasing affordability (as the market still settles on a market clearing price).

The problem is that people don't have "extra" money, they have record amounts of debit and rising homelessness. The depressingly small amount of money people got in aid from the government kept their lights on, kept food on the table, and helped them transition to working/schooling at home at a time when they couldn't go to work and had no income at all.

What little "extra" money made it into the hands of regular Americans isn't and never was the problem and while most people here are well insulated from the hardships, Americans are seeing their quality of life decline and are having to struggle in ways they never had to before. The American people are not sitting on huge piles of free government money while bitching about the price of eggs. The middle class is struggling (and sliding into poverty) and poorer Americans are even worse off.