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Corporate profits account for almost half the increase in Europe’s inflation

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Re: Corporate profits account for almost half the increase in Europe’s inflation

#71

Post by cortesoft »

rgbrenner wrote: post #33

I think this talk about costs vs profits sounds important to lay people, but is completely irrelevant. Companies do not price goods based on the goodness of their hearts. They price it at the point that maximizes volume*(unit price-COGS). Companies are constantly testing this price point. For example, a promotion may produce data that can indicate how consumers will respond to a price change. In an inflationary perio…

This is exactly my reaction whenever I see things like this. Profit margins are not the DRIVER for any of these market changes, they are the end result of all the various factors at play.

Re: Corporate profits account for almost half the increase in Europe’s inflation

#72

Post by jldugger »

alexaholic wrote: post #19

I find it hilarious when companies are following their stated goal of making profits, while everybody else is rushing to explaining rising prices by factoring in everything but profits.

Well, you have to come up with a reason for why now -- the profit motive has been there forever.

There's also a question of why high margins don't induce new entrants to these markets, or why consumers responding too cleanly to higher prices by buying less. There's been a variety of factors at play and I think if you want to pin it on profits you gotta put in the legwork to rule out or at least quantify the dozens of other factors.

And like, if Nintendo wants to charge an extra ten dollars for Zelda[1], I don't think thats any kind of call for EU/UK regulators to step in.

[1]: https://www.gamesradar.com/zelda-tears-of-the-kingdom-is-get...

Re: Corporate profits account for almost half the increase in Europe’s inflation

#74

Post by bombcar »

mkl95 wrote: post #69

Recently, I was approached by the biggest non-big-tech company I've ever talked to. They are a big EU startup and they have raised 1bn+ in the last few years. So I had a look at their Glassdoor reviews. Apparently they are extremely cheap, to the point that they make employees share a room when they attend corporate events. Other than that, I have noticed a trend where recruiters reach out on LinkedIn with what I cal…

Venture Crapitalists love when the company makes it look like their money is going to go much further because the employees are kept on a super cheap chain.

Re: Corporate profits account for almost half the increase in Europe’s inflation

#75

Post by cortesoft »

zozbot234 wrote: post #43
rgbrenner wrote: post #33

I think this talk about costs vs profits sounds important to lay people, but is completely irrelevant. Companies do not price goods based on the goodness of their hearts. They price it at the point that maximizes volume*(unit price-COGS). Companies are constantly testing this price point. For example, a promotion may produce data that can indicate how consumers will respond to a price change. In an inflationary perio…

> And this permits companies to increase prices, and produce higher profits. It's worth noting that this mostly reflects short-term pricing power. It takes a lot of time for new competitors to enter any industry. So we should expect these price increases to occur rarely and be somewhat time-limited as competition ultimately reestablishes itself.

Maybe... but if competitors realize that the established companies can just lower prices once they enter the market, it might not make sense to enter the market at all.

Re: Corporate profits account for almost half the increase in Europe’s inflation

#76

Post by coliveira »

zozbot234 wrote: post #43
rgbrenner wrote: post #33

I think this talk about costs vs profits sounds important to lay people, but is completely irrelevant. Companies do not price goods based on the goodness of their hearts. They price it at the point that maximizes volume*(unit price-COGS). Companies are constantly testing this price point. For example, a promotion may produce data that can indicate how consumers will respond to a price change. In an inflationary perio…

> And this permits companies to increase prices, and produce higher profits. It's worth noting that this mostly reflects short-term pricing power. It takes a lot of time for new competitors to enter any industry. So we should expect these price increases to occur rarely and be somewhat time-limited as competition ultimately reestablishes itself.

Competition doesn't work correctly in modern economies because companies are allowed to buy their competitors. If you start competing with another company, they can essentially raise money to buy you and stop what would be the "normal" process. As a result, all theories that people have about how competition works don't apply as they think it should.

Re: Corporate profits account for almost half the increase in Europe’s inflation

#77

Post by cbg0 »

thermalsauce wrote: post #41
monero-xmr wrote: post #18

Ah yes ignore the money printing, certainly all of this inflation is the private sector! Where are the price caps?!?

Right, how does it make sense to blame the private sector for rapid inflation when it's the government and central banks that control the minting of currency? I get that corporations are evil and greedy, but inflation is not something corporations have influence over. If anything, we should be looking at banks, yet even banks count on the central bank to print them fresh bills.

> inflation is not something corporations have influence over

Of course they do. Here's a simple example: if the price of energy goes up, the price of food and various goods goes up across the board.

Re: Corporate profits account for almost half the increase in Europe’s inflation

#78

Post by concordDance »

alexaholic wrote: post #19

I find it hilarious when companies are following their stated goal of making profits, while everybody else is rushing to explaining rising prices by factoring in everything but profits.

Well the question they are asking is: why now? Were companies not wanting to maximize profits 5 years ago?

Re: Corporate profits account for almost half the increase in Europe’s inflation

#79

Post by LudwigNagasena »

I am just going to quote parts of the paper to precaution from misinterpretation and hasty judgement. I also suggest to read the paper in its entirety — most of it can be understood without any deep knowledge of economics.

> While this accounting identify[GDP Deflator = Unit Profit + Unit Labor cost + Unit Taxes] does not allow for any causal interpretation, it shows how (changes in) the GDP deflator is reflected in profits per unit of real GDP (unit profits), labor compensation per unit of real GDP (unit labor cost), and taxes less subsidies per unit of GDP (unit taxes).

> While nominal profits have increased, this is not necessarily true for profitability.

> [Dhingra (2023) and Haskel (2023)] caution against an oversimplistic interpretation where an increase in gross operating surplus is interpreted as corporate profits being the largest driver of inflation

The paper has to rely on very strong assumptions to come to its conclusion because of that.

Re: Corporate profits account for almost half the increase in Europe’s inflation

#80

Post by jjoonathan »

rgbrenner wrote: post #33

I think this talk about costs vs profits sounds important to lay people, but is completely irrelevant. Companies do not price goods based on the goodness of their hearts. They price it at the point that maximizes volume*(unit price-COGS). Companies are constantly testing this price point. For example, a promotion may produce data that can indicate how consumers will respond to a price change. In an inflationary perio…

> Companies do not price goods based on the goodness of their hearts.

Yes, but let's remember this next time they are whinging about taxes, labor rights, and anti-trust measures, k?

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