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Why is inflation so sticky? It could be corporate profits

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

#191

Post by 2000UltraDeluxe »

refurb wrote: post #158
2000UltraDeluxe wrote: post #71

Earlier quoted context omitted.

Handful of products? In Finland, at least, much of the grocery market is controlled by two dominant players that more or less control the entire supply chain for many products. Both have been profiteering like crazy lately, and for most people there's no option than their local supermarket.

Supply chain - the materials that go into producing a good or getting the finished good to market. There were no supply issues during covid with many, many products. Yet those prices went up too, even in a country with a high level of competition. Why?

It's not about disruptions in the supply chain, but rather about controlling it and using it to extract maximum value for the shareholders. Everyone wants their share and nobody will accept a smaller percentage than they did last week. Consumers are caught in the middle, with rapidly increasing costs of living as a result.

We as in "society"), have assumed this would be solved by some healthy competition. It's just that we optimized society for maximum short-term gain rather than a market where newcomers are welcome. As a result, the players that are already in the game are free to ignore the forces society assumed would keep things running smoothly.

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

#192

Post by atchoo »

scotty79 wrote: post #154
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…

> 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? Covid has nothing to do with it. Market always worked this way. There's really very little reason for a company to lower the prices below what consumers are already willing to pay. When the market is saturated and…

> Try to buy a box of crayons in Florence, Italy.

What is this a reference to?

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

#193

Post by cgio »

pydry wrote: post #160
dragonwriter wrote: post #143

Earlier quoted context omitted.

> Rents would go down, actually. The idea that you can tax an input more and reduce prices is ridiculous on its face. > Demand for housing would remain the same. Also unlikely. Basically any change in local conditions will impact housing demand one way or another. The global number of people needing housing may not change, but that’s not housing demand (globally or locally). > Short term it would create a strong ince…

>The idea that you can tax an input more and reduce prices is ridiculous on its face. Of course. It would absolutely reduce the price of property. Just not rents. >Basically any change in local conditions will impact housing demand Hand waving. >Property tax already does that, and most places have properry taxes. When high enough property taxes do inhibit hoarding, yeah. They approximate a less desirable form of land…

So if I buy the reduced price property, would I not afford to offer cheaper rent and still get the same return on investment?

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

#194

Post by prepend »

mjevans wrote: post #97
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…

Things I pay a lot for: * Rent (they're all high; and can't afford to buy anywhere near where I work) * Food (prices are pretty much the same everywhere) * Internet (Cable's the only modern-speed option where I currently rent) * Energy / Gas - either utilities or again, the same everywhere I think most everyone else is in the same boat. I can scale down some of these a little bit, but they're all fairly __inelastic__…

Only food is an area where there’s lots of profit, right?

Internet is regulated through phone and cable so profit is hidden into costs and whatnot.

Same for energy.

Rent is hard to determine profit because of the way expenses can be assigned and so much is private landlord direct to renters.

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

#195

Post by andrepd »

shoubidouwah wrote: post #136
mjevans wrote: post #97

Earlier quoted context omitted.

Things I pay a lot for: * Rent (they're all high; and can't afford to buy anywhere near where I work) * Food (prices are pretty much the same everywhere) * Internet (Cable's the only modern-speed option where I currently rent) * Energy / Gas - either utilities or again, the same everywhere I think most everyone else is in the same boat. I can scale down some of these a little bit, but they're all fairly __inelastic__…

the rent, as always: https://en.wikipedia.org/wiki/Law_of_rent and the companies do not want to compete: most modern large companies only exist as a _vehicle for investment_, and as such compete for shareholders, not consumers. Due to this, short-termism dominates: average CEO stays 4 years at a given company, and performance of the company after they leave is largely uncorrelated with their carreer success, while sh…

>the rent, as always: https://en.wikipedia.org/wiki/Law_of_rent

And regarding efficient and just taxes: https://en.m.wikipedia.org/wiki/Land_value_tax and https://en.m.wikipedia.org/wiki/Georgism

It's amazing how people have figured this out in the 19th and 20th centuries yet we're still arguing with bunk neoliberal economics today.

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

#196

Post by camgunz »

otikik wrote: post #183
tiedieconderoga wrote: post #13

Earlier quoted context omitted.

The problem is that people aren't rational, and they don't have perfect information. So the history of finance and commerce has been a cat-and-mouse game where the cats find new ways to cheat people, and the mice try to recognize and prevent those schemes. One example: cartels. If an industry is dominated by a small number of large players, they can collude to set prices and stifle competition through regulatory capt…

They don't even need to "collude". They can just look at what their "competitors" are doing. I raise my prices a little bit. You see me raise the prices a little, and you raise them a little. And then I see that and raise them a little more. Then I do a tiny round of layoffs. You also layoff some people. Then I do a bigger round of layoffs and communicate big profits publicly. And you follow suit. You and I never tal…

Yeah exactly. What we're looking at here are similar actors reacting to the same incentives. Pepsi raised prices because they can and their shareholders demanded it. Coke raised prices because they can and their shareholders demanded it. Thus 80% (or whatever) of soda worldwide increased in price, without collusion. So you have the failure case of collusion without the cause, which sucks because we didn't really consider that this failure case might have two causes (which, I would argue that we should have, probably back in like 1920).

It's an important first step to realize this is happening. Larry Summers was like, "I don't think suddenly corporations got more greedy", implying that because corporations have been maximally greedy the whole time that that can't be the cause of additional inflation.

But it can be that it causes a new, unfortunate reaction with a new set of incentives, and this is exactly the situation we find ourselves in. It used to be OK (well, not really but let's stipulate) for corporations to be maximally greedy, but now it's not.

So what's the next step? I don't really know. People float stuff like a tax on profits or price controls. I generally think those are probably too blunt, though I could get behind a tax on profits I guess. I might prefer some kind of blanket industry regulation ("Hi Coke, Pepsi, we know you didn't mean to exactly but you inadvertently increased the price of 80% of world soda by 20%--please stop") because this kind of thing seems like it can be nuanced and tailored to a specific situation. Maybe also a prohibition on stock buybacks to lower investor pressure to juice short-term profits--but I haven't thought this one through very much.

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

#197

Post by prepend »

barney54 wrote: post #190
codeflo wrote: post #178

Earlier quoted context omitted.

Why do you believe this to be a market failure?

Just for sake of argument, let’s say it is market failure. But what will correct it first, the market or a new law passed by Congress?

Is no one cleaning in Boston? It seems pretty easy to test whether it’s a market failure (ie, there are no cleaners cleaning in Boston).

I think if you ask anything vs “new law passed by Congress” I’m going with anything. So at least the invisible hands will eventually solve this problem by raising cleaner pay until someone is willing to commute 60 minutes (note that was my commute in a larger metro area on programmer pay) or cleaners can afford closer.

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

#198

Post by DrNosferatu »

No shit, Sherlock:

In Portugal, for most of 2022 to this day, the price of 1L own/white brand of semi-skimmed milk (one of the most basic and essential staple foods) has been the exact same - to the cent - on all different supermarket chains (Lidl, Audi, Auchan, Jerónimo Martins, Intermarché, Sonae, Dia, etc.) operating here. And, it has risen in steady small increments at exactly the same time in all of them, multiple times. As in, price time evolution correlation = 1.0

If this is not price fixing, I don't know what it is. The regulators just whine and yawn.

And obviously, MBA-types haven't read Numerical Recipes' chapters on random numbers ;)

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

#199

Post by DannyBee »

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…

An efficient free market was never a thing except in the fever dreams of economists.

Most forms of the efficient market hypothesis have been formally proven incorrect. The remaining ones are harder to disprove but can be tied to other things (ie only true if p=np).

There are literally mountains of evidence that you have to ignore to believe in efficient free markets at this point. The evidence for them has always amounted to "I have a theory, I looked at a market for a while and it was sometimes true. Therefore my theory is proven"

All countervailing evidence is "no true scotsman"'d. No inefficient market is free enough you see.

It’s one of those things that people feel like should be true, but just isn’t.

meanwhile, if you start from the theory that there’s no particular reason for free markets to be efficient, stories like this aren't even news.

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

#200

Post by RugnirViking »

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…

> the free market is basically not a thing anymore

The free market was never a real thing. It's like spherical cows in a vacuum. It describes what you would expect to see given a sufficiently large number of buyers and sellers, with no network effects, with perfect information for buyers and sellers, no players with controlling stake of the market, and over a long enough timespan.

In this case, the fact that most industries have literaly been reduced to one or two players, the powerful force of competition isn't very effective at reducing prices. It might eventually, but because there are so few competing sellers, we'll have to wait a long time.

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