If they changed the wording from “corporate profits” to “lack of competition”, then a solution would be apparent. As it is, they’ve crafted the narrative to encourage a push toward even greater monopolism.
Corporate profits account for almost half the increase in Europe’s inflation
161–170 of 476 posts
Re: Corporate profits account for almost half the increase in Europe’s inflation
#162Remember: profits are a direct measure of the inefficiency of a given market. In a functioning market, the existence of profits either drives businesses to reduce their own profits by competing on price (problem: cartels) or else drives new businesses to emerge in order to seize some of those profits (problem: barriers to entry). To have record-breaking profits means that are markets are record-breakingly inefficient…
Bad take. If the market "functions" according to your definition, then what is the incentive to innovate? (besides shits and giggles, which is not sustainable). No markets are efficient. While it's probably a bad idea to worship at the altar of profit: A profit of zero for most productive pursuits is not ideal.
Innovation create a temporary inefficiency that the innovator can take advantage of. Once the market stabilizes there are no more profits to be had. So this theoretically would always drive innovation.
Re: Corporate profits account for almost half the increase in Europe’s inflation
#163Earlier quoted context omitted.
> 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.
In ideal world. Stuff like groceries are such a rigged market that (well I'm sure somebody already wrote a book about it, recommendations?) it puts financial institutions to shame. Just a few brands own most of the stuff you buy [1] and then supermarkets have deals with those. Both protect each other. I mean market finds its way, people can move to small stores and non-branded products if it gets bad enough, but to p…
Sure, but that assumes that people will do nothing in the long term that affects their spending behavior and will just eat the cost indefinitely.
If groceries tomorrow cost 10x I would not suddenly be spending 10x my current grocery bill. Luxury purchases like snacks, soda, premade sauces, candy, off-season produce, would be on the chopping block. Anything non-perishable would be bought in bulk during sales and wholesale clubs.
And for people who are already scraping by it would result in a 10x grocery bill which they can now not pay.
There's only so much money you can squeeze from a stone in the long run. Rising prices like this changes consumer behavior but can't make money appear out of nowhere. Since food is one of the easiest ways to belt-tighten rising prices across the board has the risk of reducing the wallet share food producers have.
Re: Corporate profits account for almost half the increase in Europe’s inflation
#164Remember: profits are a direct measure of the inefficiency of a given market. In a functioning market, the existence of profits either drives businesses to reduce their own profits by competing on price (problem: cartels) or else drives new businesses to emerge in order to seize some of those profits (problem: barriers to entry). To have record-breaking profits means that are markets are record-breakingly inefficient…
Bad take. If the market "functions" according to your definition, then what is the incentive to innovate? (besides shits and giggles, which is not sustainable). No markets are efficient. While it's probably a bad idea to worship at the altar of profit: A profit of zero for most productive pursuits is not ideal.
Innovation gives you a valuable competitive advantage - that doesn’t mean it lasts forever - that’s why companies have to constantly develop to stay competitive.
Or, they gain enough power to create a failed market, in which it is practically impossible for new entrants to compete and eliminate the incumbent’s rent-seeking. This is what we so often see now, particular in markets with strong economies of scale.
An “efficient market” does not mean it is at its optimal efficiency all the time, but that there is an efficient equilibrium it is capable of tending towards.
Re: Corporate profits account for almost half the increase in Europe’s inflation
#165Earlier quoted context omitted.
What government is arguing that employee wages should be lower/stagnant in order to fight inflation? EDIT: I mean advocating not just that we should avoid a wage/price spiral through other means, but specifically that individual workers should accept/volunteer for lower wages than they could otherwise get? Edit 2: seeing several cases of "$Reserve_Bank_Person says wage increases are too high and need to come down", n…
The UK government has done this various times in the last couple of years to argue against (high) pay rises for the National Health Service and other government institutions. One of the more recent articles: https://www.reuters.com/world/uk/uk-annual-wage-growth-72-ex... Or here: https://www.theguardian.com/business/2022/jun/20/would-a-wag...
So the one exception that I considered putting in would be cases where the government is the employer and is negotiating with their employees. And yes of course, they will use whatever arguments they can to come out ahead in labor negotiations, like any employer.
I didn't see any mention of calls for workers to accept lower wages in the first article. In the second article, such calls were mentioned but not explicitly referenced or quoted. (Maybe they would be familiar to a British audience.)
But I would say that is different than asking for private sector workers to accept lower wages as an inflation fighting strategy. And note that the actual fiscal policy that the UK has pursued is wage subsidies, as much as 650£ - 1000£ annually it seems. (As described in the second article, not something I'm familiar with beyond that.)
Re: Corporate profits account for almost half the increase in Europe’s inflation
#166Does this make anyone else spitefully want to spend less, even though they don't have to? My econ training is very limited, and perhaps this is a pointless idea, but - the central bank approach to curbing inflation seems to assume that actors in the economy won't change their spending patterns (and decrease firms' price-setting power) until they're unable to continue (i.e. are laid off, can't access financing, etc) o…
If you want to boycott every corporation that is trying to increase profits, you will lead a highly ascetic life.
That said, what you are saying isn't entirely untrue, and in fact is considered conventional wisdom by many. If everyone was a lot more price sensitive and more willing to forego discretionary spending, then yes, profit margins and prices would probably be lower. When boomers talk about millennials and their avo toast, this is what they are talking about.
Re: Corporate profits account for almost half the increase in Europe’s inflation
#167Earlier quoted context omitted.
Probably referring to news like this? https://www.nytimes.com/2023/04/28/business/wage-inflation-m...
Can't read the full article but the headline seems to say that the fed is hoping for wage increases to slow, but that would be because they have tightened monetary policy. That's different from the fed chair getting up and saying "Workers, please ask your boss to pay you less so we can fight inflation." Note that the main transmission mechanism of monetary policy in fighting inflation is basically putting people out…
> "Workers, please ask your boss to pay you less so we can fight inflation."
that is, more of less, ahat bank of england has announced.
Re: Corporate profits account for almost half the increase in Europe’s inflation
#168Remember: profits are a direct measure of the inefficiency of a given market. In a functioning market, the existence of profits either drives businesses to reduce their own profits by competing on price (problem: cartels) or else drives new businesses to emerge in order to seize some of those profits (problem: barriers to entry). To have record-breaking profits means that are markets are record-breakingly inefficient…
Bad take. If the market "functions" according to your definition, then what is the incentive to innovate? (besides shits and giggles, which is not sustainable). No markets are efficient. While it's probably a bad idea to worship at the altar of profit: A profit of zero for most productive pursuits is not ideal.
Nobody has ever claimed that markets are efficient, so that's a strawman. The supply and demand model states that markets tend toward efficiency. When there is inefficiency, then someone can exploit it for their benefit while bringing the market closer to efficiency.
Re: Corporate profits account for almost half the increase in Europe’s inflation
#169Earlier quoted context omitted.
> Companies do not price goods based on the goodness of their hearts. Governments etc. argue that employees should not demand higher pay to match inflation to avoid a "spiral" out of the goodness of their hearts. If employers catch the absolute currency value increase of inflation the employee employer balance is shifting.
What government is arguing that employee wages should be lower/stagnant in order to fight inflation? EDIT: I mean advocating not just that we should avoid a wage/price spiral through other means, but specifically that individual workers should accept/volunteer for lower wages than they could otherwise get? Edit 2: seeing several cases of "$Reserve_Bank_Person says wage increases are too high and need to come down", n…
Australia
https://www.canberratimes.com.au/story/8054911/rba-wants-wor...
In before someone argues that RBA isn’t part of the Australian capital-G Government, the organisation certainly is part of the governing institutions of Australia.
Re: Corporate profits account for almost half the increase in Europe’s inflation
#170As they say, never waste a good crisis.
Crisitunity!