Corporate profits account for almost half the increase in Europe’s inflation • Hacker News Board

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

#291

Post by wnc3141 » Mon, Jun 26, 2023, 9:14 PM UTC

alexpotato wrote: post #262

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…

Going to add a slightly devil's advocate view here. I used to be the conference directory for a college club sport (specifically, paintball). Part of my job was to find paintball fields to host college events. It's important at to say that the organization that funded these events was 501(c)(3) aka "non-profit" and we therefore were trying to minimize costs. Something we ran into was this scenario: - Fields knew we w…

In labor economics, they refer to that slightly higher price (compared to the minimum clearing price) as an "efficiency wage" - it describes the same thing you describe above. Only note that this is a profit maximizing behavior - as companies pay out efficiency wages to avoid turnover costs or an unproductive workforce.

https://en.wikipedia.org/wiki/Efficiency_wage

https://www.investopedia.com/efficiency-wages-5206757#:~:tex....

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

#292

Post by makomk » Mon, Jun 26, 2023, 9:17 PM UTC

ajsnigrutin wrote: post #112

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…

The problem here, especially if the prices are rising higher than wages is, that sooner or later the basic necessities (food, shelter, ...) reach a level, where people can barely pay them, and all the other industries suffer, because consumers don't have any leftover money for luxuries, gadgets, etc. Some prices (mostly services) can be adjusted, some could be (rents, housing, mostly by rezoning and building more), b…

It is probably not possible for people to carry on buying luxuries, gadgets etc at the same levels as before without others being forced to do without the basic necessaties. Remember, this all started out with an energy crisis: there was not really enough to supply all the factories in China running flat out as people caught up with their consumption along with everything else, and then Russia throttled back their exports and made things worse. That shortage of energy directly caused prices to increase until demand could actually be satisified, which directly made things like food more expensive. You couldn't just fix this by forcing the companies to charge less, even though the money is ending up as profits, because energy and fuel just isn't available in sufficient quantities without Russia.

There's also a shortage of workers in most developed countries too, which means that any labour used to provide luxuries directly impacts the amount available to produce the basic necessaties like housing and healthcare as well.

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

#293

Post by hunson_abadeer » Mon, Jun 26, 2023, 9:20 PM UTC

vjk800 wrote: post #279

matrix_overload wrote: post #190

Earlier quoted context omitted.

The answer is competition. Most of markets nowadays are dominated by 2-5 big players with the CEOs going to the same golf club. Wink-wink, nudge-nudge, prices go up, nobody can do nothing. If we had 50 competing players, there would be enough incentive for a hungry challenger to lower prices and undercut the competition. Except, over a decade of leveraged acquisitions and antitrust regulators being asleep at the whee…

The problem with competition is, what happens after someone wins it? This is essentially what has happened in many markets; lots of small companies have been killed by or conglomerated into giant ones that rule the market. Sometimes antitrust regulation can't even help with this; what if there are no acquisitions, just one company doing stuff better killing all competition?

Then when they jack up prices, it creates an incentive for new companies to enter that field and make the same item for less.

A better question might be: what hinders this process today? Capital disparity plays a role (a wealthy company can perhaps make a competitor a buyout offer they can't refuse, or temporarily lower prices to try to kill them), but another major cause is excess regulation and the weaponization of intellectual property.

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

#294

Post by Sohcahtoa82 » Mon, Jun 26, 2023, 9:22 PM UTC

hayst4ck wrote: post #257

sdenton4 wrote: post #223

Earlier quoted context omitted.

Greedflation, in other words...

Greedflation frames the problem around greed. Greed is not the problem. Lack of competition is the problem. Robber barons are the problem. Citizens united legalizing bribery is the problem. Ultimately it is deeper than that. Laborers don't know how to exercise power and laborers don't know how to provide consequences when our aristocracy takes advantage of us. If banks can say "we'll trash the economy if you don't ba…

> Ultimately it is deeper than that. Laborers don't know how to exercise power and laborers don't know how to provide consequences when our aristocracy takes advantage of us.

It's deeper than that even still!

You've got half the labor pool fighting against the one thing that would give them power: Unions.

And they don't want consequences against the aristocracy because they have this delusional notion that one day they'll be a part of said aristocracy.

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

#295

Post by bjelkeman-again » Mon, Jun 26, 2023, 9:22 PM UTC

evancox100 wrote: post #103

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.

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…

In Sweden the government has absolutely argued for low pay rise to fight inflation. Even the unions got in line this year. Here is an example https://www.thelocal.com/20230117/explained-why-swedens-unio...

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

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Post by alexaholic » Mon, Jun 26, 2023, 9:23 PM UTC

eldritch_4ier wrote: post #154

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.

Of course inflation is "just" businesses increasing their prices, how else would prices increase - they are decided by humans after all. It's STILL the fault of loose monetary policy. Do you understand that? Many people mention corporate profits drive inflation like that's the end of the conversation. It's the equivalent of saying your house got flooded because the door broke open (allowing the raging hurricane outsi…

The article is about inflation in Europe

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

#297

Post by cwmoreiras » Mon, Jun 26, 2023, 9:24 PM UTC

nostromo wrote: post #52

Inflation is caused by monetary policy. Did profits increase? Potentially, yes. But they couldn't have increased without the enabling condition of massive money printing. Companies were trying to maximize profits before 2020. That hasn't changed. What changed was the monetary policy.

Source?

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

#298

Post by beirut_bootleg » Mon, Jun 26, 2023, 9:25 PM UTC

There will come a moment in time when consumer wealth has been almost entirely absorbed, leaving businesses with no further profit to gain from traditional revenue streams. After years of relentless pursuit of profit, multinational corporations will have effectively captured a significant portion of the world's wealth, consolidating resources and power in the hands of a privileged few.

Will the tipping point where no more wealth can be attained become the catalyst for a long-overdue revolution, leading humanity on a path towards a more just and sustainable future, or will it mark the beginning of an irreversible descent into chaos and despair?

- The Frog to the Boiling Pot, June 27 2063

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

#299

Post by whimsicalism » Mon, Jun 26, 2023, 9:27 PM UTC

gigel82 wrote: post #290

whimsicalism wrote: post #286

Lots of blaming of 'greedflation' as the cause of inflation in the comments here, which is definitely an outside of the economic mainstream view. If you want to hold heterodox beliefs, I think it is at least worth understanding the conventional wisdom on why inflation sees larger corporate profits: It's like Uber surge pricing, if you want more companies on the market making things people want, profits of the incumbe…

Greedflation absolutely is a cause of inflation; maybe you highlighted the wrong word there. It is a cause, it may not be the (only) cause.

Surging aggregate demand is a cause of inflation. 'Greedflation' is only a cause in so much as governments' refusal to set price ceilings at any moment is a cause of inflation. Sure, we could instantly end inflation by making it illegal to charge prices higher than in 2020, but then we would just get shortages.

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

#300

Post by akomtu » Mon, Jun 26, 2023, 9:29 PM UTC

beirut_bootleg wrote: post #298

There will come a moment in time when consumer wealth has been almost entirely absorbed, leaving businesses with no further profit to gain from traditional revenue streams. After years of relentless pursuit of profit, multinational corporations will have effectively captured a significant portion of the world's wealth, consolidating resources and power in the hands of a privileged few. Will the tipping point where no…

If you collect a 50% tax from one village and a 20% tax from another village, it's expected that the second village will eventually absorb all the wealth. It's not surprising because the tax collectors happen to live in the second village.