Why is inflation so sticky? It could be corporate profits • Hacker News Board

Re: Why is inflation so sticky? It could be corporate profits

#51

Post by kristopolous » Wed, May 03, 2023, 4:29 AM UTC

than3 wrote: post #47

kristopolous wrote: post #24

Earlier quoted context omitted.

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 mathemati…

I largely agree. People generally miss fundamentals and don't account for a moving store of value, they often assume its constant. Economics is marginally only used to sell something often with deceit in mind on someones part. As for what's driving inflation, its obvious its the fact that government is spending more than they have each year, printing the difference, and have now gone gangbusters with manufacturing sp…

You are attributing a lot of agency to different players.

They generally aren't that monolithic.

You seem to be conflating shortage and scarcity, which generally aren't the same.

It's an interesting theory but I'd like to see some evidence.

For instance, the general consensus is the supply chain issue is from Lean manufacturing which, although has a lower overall cost, trades that off with a much lower tolerance for disruptions. It presumes availability and it turns out these supply lines were both much longer and more delicate then presumed.

You can see that in practice. Monolithic traditional manufacturing didn't have such issues. Things like paper products for instance. When the demand for toilet paper shot up in March 2020, the supply was able to meet it within days, compared to the years for electronics and automobiles.

These are pretty studied topics in the journals. You seem to be interested. They're pretty approachable. Go check them out.

Re: Why is inflation so sticky? It could be corporate profits

#52

Post by Rury » Wed, May 03, 2023, 5:00 AM UTC

autoexec wrote: post #39

Rury wrote: post #35

Earlier quoted context omitted.

You're right in that (some) people don't have "extra" money. Most people can't print themselves money. However, some people do have "extra" money, particularly people who have access to the money printer, or who are bailed out by the people with the money printer. Guess who buys most of the government debt, allowing the government to overspend? The Fed. Government spending isn't in a vacuum either. Every dollar the g…

I can't argue that government spending isn't a problem. It really is. In particular it's where the money is going, how it's being accounted for, and how much benefit the average American sees from that which is way out of whack. The pandemic had the government printing a ton of money and handing it out to some very rich people, but does giving more money to a person who already had enough money to afford whatever the…

It does. Think for example, if you had worked hard 30 years to acquire a $250,000 house, and the government just gave everyone $500k overnight. Would you think it's fair they could pay $250k for your house for not having worked for 30 years, while you had to? Probably not. Instead you'd likely raise the selling price of your house to protect the value of your hard work. Same goes for companies that produce milk.

Obviously an oversimplified example, as again not everyone is benefitting the same amongst other reasons, but that's basically the principle behind it.

Re: Why is inflation so sticky? It could be corporate profits

#53

Post by zhte415 » Wed, May 03, 2023, 5:02 AM UTC

silisili wrote: post #3

It's a likely theory. But economics teaches us when a player overcharges, others will step in to undercut and take all the market share. So, we're at a point where we need to admit that mantra isn't true in the modern age, or admit that we've done a terrible job at preventing effective monopolies/duopolies from forming.

If an econ forum started a discussion of physics with discussion of what the ether teaches us, it would be quickly dismissed. Yet HN's fine, again, with the equivalent as the starting block, indeed highest voted comment, for discussion of an econ topic. Wisdom of the crowds perhaps, though crowds of people did once stone crows.

Re: Why is inflation so sticky? It could be corporate profits

#54

Post by theshrike79 » Wed, May 03, 2023, 5:08 AM UTC

wg0 wrote: post #23

Basic issue isn't excess of money. Basic issue is shortage in supply. Demand hasn't skyrocketed magically. The world over production levels were lowered to almost zero for couple of years. Interest rate hikes have wreaked a havoc of their own.

The supply shock was the initial reason.

Then corporations figured out that they could make huge bank and kept rising prices -> inflation.

Re: Why is inflation so sticky? It could be corporate profits

#55

Post by honkycat » Wed, May 03, 2023, 5:09 AM UTC

zhte415 wrote: post #53

silisili wrote: post #3

It's a likely theory. But economics teaches us when a player overcharges, others will step in to undercut and take all the market share. So, we're at a point where we need to admit that mantra isn't true in the modern age, or admit that we've done a terrible job at preventing effective monopolies/duopolies from forming.

If an econ forum started a discussion of physics with discussion of what the ether teaches us, it would be quickly dismissed. Yet HN's fine, again, with the equivalent as the starting block, indeed highest voted comment, for discussion of an econ topic. Wisdom of the crowds perhaps, though crowds of people did once stone crows.

weak argument.

econ and physics are two wildly different fields.

you are comparing a natural science to a social science.

Re: Why is inflation so sticky? It could be corporate profits

#56

Post by ikiris » Wed, May 03, 2023, 5:15 AM UTC

zhte415 wrote: post #53

silisili wrote: post #3

It's a likely theory. But economics teaches us when a player overcharges, others will step in to undercut and take all the market share. So, we're at a point where we need to admit that mantra isn't true in the modern age, or admit that we've done a terrible job at preventing effective monopolies/duopolies from forming.

If an econ forum started a discussion of physics with discussion of what the ether teaches us, it would be quickly dismissed. Yet HN's fine, again, with the equivalent as the starting block, indeed highest voted comment, for discussion of an econ topic. Wisdom of the crowds perhaps, though crowds of people did once stone crows.

If an econ forum started discussing gravity, there'd be some austrian physics guy yelling about how the invisible hand of the market pushes down on everyone.

Re: Why is inflation so sticky? It could be corporate profits

#57

Post by mlyle » Wed, May 03, 2023, 5:22 AM UTC

zhte415 wrote: post #53

silisili wrote: post #3

It's a likely theory. But economics teaches us when a player overcharges, others will step in to undercut and take all the market share. So, we're at a point where we need to admit that mantra isn't true in the modern age, or admit that we've done a terrible job at preventing effective monopolies/duopolies from forming.

If an econ forum started a discussion of physics with discussion of what the ether teaches us, it would be quickly dismissed. Yet HN's fine, again, with the equivalent as the starting block, indeed highest voted comment, for discussion of an econ topic. Wisdom of the crowds perhaps, though crowds of people did once stone crows.

Econ indeed does teach us what the poster suggests, in perfect competition.

If we're finding that lots of businesses have substantial pricing power, such that it's a driver of inflation (and this is open to debate)... then it looks like we have a whole lot of really imperfect competition.

Re: Why is inflation so sticky? It could be corporate profits

#58

Post by paxys » Wed, May 03, 2023, 5:23 AM UTC

Their argument is basically that while normally a company raising prices would mean that some of their customers move to a competitor, in today's environment there is an implicit agreement that every company will keep prices high.

So are they saying that the free market is basically not a thing anymore because of covid, and no company wants to get an edge over its competitors by undercutting on price despite having record margins?

Re: Why is inflation so sticky? It could be corporate profits

#59

Post by rhacker » Wed, May 03, 2023, 5:33 AM UTC

paxys wrote: post #58

Their argument is basically that while normally a company raising prices would mean that some of their customers move to a competitor, in today's environment there is an implicit agreement that every company will keep prices high. So are they saying that the free market is basically not a thing anymore because of covid, and no company wants to get an edge over its competitors by undercutting on price despite having r…

Technically does that mean the FTC can literally go after all the companies for collusive price fixing?

Re: Why is inflation so sticky? It could be corporate profits

#60

Post by mitthrowaway2 » Wed, May 03, 2023, 5:38 AM UTC

ageek123 wrote: post #43

Isn’t this reversing cause and effect? Corporations are able to raise prices because consumers are willing to pay higher prices. Corporations always want to make as much profit as they can. If consumers can pay more, you get inflation.

Competition should drive down prices even if consumers have deep pockets.

This suggests that the US market has gotten less competitive. I wonder how much it has to do with ownership of competing firms by a few large index funds with concentrated voting power.