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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

#171

Post by ke88y »

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…

From a textbook economic perspective you are, of course, correct. And your conclusion that we shouldn't hate the player is also correct!

But that doesn't mean that we can't hate the game.

Capital-isms and market competition are two very different things.

Currently we have A LOT of capitalism AND very uncompetitive markets.

What we need are competitive markets, and the -isms hawked by the multi-generational holders of Capital be damned. (Which, these days, put far less stress on competition than they typically did in the late 20th century. See: Venture Capital-ists clamoring for regulation in greenfield markets, on the explicit basis that too much competition is dangerous!)

What does this look like? Primarily:

1. Stronger anti-trust laws,

2. more anti-trust enforcement,

3. assurance that labor markets are efficient,

4. lowering the barriers to entry for new competition, and

5. substantially shifting the tax burden in the meantime.

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

#172

Post by ClumsyPilot »

nabla9 wrote: post #95
rightbyte wrote: post #56

Earlier 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.

>Governments etc. argue As they should. that's how it works and they are correct. Employees should argue against that and demand more if they dare. The job of Central bank is to increase interest rates until unemployment rate increases to the level where employees don't dare ask more. Unemployment reduces both demand and wage growth. That will slow down inflation but it also baits recession. Economy is a dynamic syst…

> Central bank is to increase interest rates until unemployment rate increases

I might be old fashioned, but last time I checked, government's job was not to drive down living standards.

Maybe their job is to ensure that a resource-show like rising energy prices does not hit, by majing economy rsillient and relying on diverse suppliers

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

#173

Post by AndrewKemendo »

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…

Yes and the first step to solving the problem is acknowledging it.

In order to change some thing you have to prove that it’s happening.

In the case of “What underlying structure creates society’s problems,” increasingly more research is pointing to inequality itself and lack of democratic participation/ownership in the economy. These are the foundational factors driving poverty and precarious economic conditions for an increasing proportion of the population.

The Lions share of corporate profits go to existing shareholders and only rarely employees, and even rarer do employees compose the majority of shareholders (you have no shareholder power as a FAANG employee different than any other retail investor - namely, none)

So no it’s not irrelevant. It’s very relevant if people want to actually have power in determining how the organizations they join are operated.

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

#174

Post by surement »

kibwen wrote: post #92

Remember: 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…

> To have record-breaking profits means that are markets are record-breakingly inefficient

or more innovative companies captured the market share of less innovative ones, e.g. lockdowns bankrupting brick and mortars in favor of online giants

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

#175

Post by jldugger »

alexaholic wrote: post #157
jldugger wrote: post #72

Earlier quoted context omitted.

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…

https://news.ycombinator.com/item?id=36484267 > I suspect what happened was rising prices because of the pandemic and the war showed companies they can increase prices without also suffering a significant decrease in sales. After all, when virtually all prices are going up, where are consumers going to go?

I'm not disputing that's what is happening, but I do find it interesting _why_ its happening. Consider a scenario where consumer demand for your product jumps rapidly. The two normal profit maximizing responses are to raise prices and increase output. Ideally do both.

On the Odd Lots podcast, it's been discussed in various markets that companies that survived 2008 learned to avoid large capital investments when their competitors all went out of business chasing market share. And if market incumbents are all too afraid of making large, long term investments right now, output can only go up after new entrants to the market appear.

The online discourse seems to favor cigars and shady board rooms, but it seems just as likely to be risk aversion.

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

#176

Post by rthrfrd »

kibwen wrote: post #92

Remember: 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…

Thank you for articulating this. This is not just about monetary policy, but structural failures and regulatory capture that are creating unprecedented opportunities for rent-seeking.

Personally I also believe that the pandemic only accelerated this, as smaller players were disproportionately disadvantaged in many key markets where economies of scale dominate.

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

#177

Post by [deleted] »

[deleted] wrote: post #101
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…

[deleted]

[deleted]

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

#178

Post by refulgentis »

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…

Nah, this is an ECO101 take - a simplifying assumption for modelling.

You spend the rest of the degree learning history & how to model when you don't have the simplifying assumptions

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

#179

Post by mrguyorama »

ke88y wrote: post #171
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…

From a textbook economic perspective you are, of course, correct. And your conclusion that we shouldn't hate the player is also correct! But that doesn't mean that we can't hate the game. Capital-isms and market competition are two very different things. Currently we have A LOT of capitalism AND very uncompetitive markets. What we need are competitive markets, and the -isms hawked by the multi-generational holders of…

Nobody is ever forced to "play the game" so you absolutely SHOULD hate the player. They are choosing the play a game that hurts others and rewards them.
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