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The Ultimate Guide to Inflation

lynalden.com

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Re: The Ultimate Guide to Inflation

#211

Post by PhaedrusV »

I get the argument from the fed about hedonic adjustments and increased quality of life, but that's not how people measure their happiness. Subjective happiness is how you're doing relative to those around you. The hedonic adjustments are all about objective quality of life. Sure, my resources in my working class midwest neighborhood would be the envy of Louis XVI's court, but that doesn't matter to me when my neighbor gets a new car.

I wonder how difficult it would be to build a "Subjective Inflation" measure that was useful. Based on category consumption by income quintile you can figure out rough price inflation experienced. With the understanding that happiness is mostly about keeping up with the Joneses you can just assume away the hedonic quality boost and call it "subjective inflation".

The point from the inflation link about not being to eat ipads is critical. Increased resources are definitely nice, but the happiness derived from them is zero-sum, and at the end of the day they're taking more of my income.

This, coupled with the stagnation of median wages, means that:

    We're not getting any happier as a cohort, and

    The things we consume cost a bigger chunk of our earnings every year
I buy the link's argument that we should expect price inflation. Interestingly, this analysis is done with mostly pre-COVID data. COVID has amplified all these trends leading to price-inflation, and narrowed our demand into fewer goods and services. That further amplifies the inflationary forces that were already gearing up to make the 20's crazy.

Buckle up. There's going to be a lot of people who feel like their quality of life is crashing.

Re: The Ultimate Guide to Inflation

#212

Post by cerved »

throwawayboise wrote: post #188
coldtea wrote: post #168

Earlier quoted context omitted.

> Normally, an increase in money supply would cause consumer goods to increase in price, since more people are able to buy them Not if the increase in money supply goes from the banks to the already wealthy (as cheap loans), which don't use the extra money to consume, but to invest, buy land, and fund small-competition-crushing rent-seeking endeavours. Then the money supply increases, consumer goods remain more or le…

We saw what happened in 2008 when the loans went to unsophisticated, underqualified borrowers.

problem were the lenders not borrowers

Re: The Ultimate Guide to Inflation

#213

Post by cerved »

anm89 wrote: post #16

So awesome to see Lyn Alden at the top of Hacker News. She is an absolute genius! If you aren't familiar with her work and thinking I think a good introduction interview is: https://www.youtube.com/watch?v=f_JmGLMjIOk&t=35s Fun fact: She is an electrical / industrial engineer by trade, not an economist.

If she's not an economist, what is it that lends credence to her writing about economics and monetary policy?

Re: The Ultimate Guide to Inflation

#214

Post by toast0 »

aisengard wrote: post #146
dr_zoidberg wrote: post #109

Earlier quoted context omitted.

It's also debatable that there are no costs associated with digital goods. If suddenly Netflix had a surge in subscribers and they doubled them over a short period of time, they'd have to invest in infrastructure to support the extra demand. That would cost them in hardware and human resoursces to handle the extra demand. But yeah, digital services have a better situation at meeting demand than physical goods of whic…

But the surge in revenue from doubling subscribers would (way) more than cover any costs in infrastructure spending. This would not drive any increase in subscription cost, which is purely governed by the competition and content acquisition costs, paired with whatever magic number the major investors/board decides is an acceptable profit margin.

A doubling in subscribers might need a trippling in customer service agents (especially if the new customers are not as good at tech and need more help, which goes along with being a late adopter or if the service quality drops because of the presumed doubled usage, and there's more service requests as a result).

If the doubled subscribers requires doubling the number of Netflix OpenConnect CDN boxes, that would mean current capex, and while the additional revenue might eventually pay for it, there might need to be borrowing costs to get the equipment sooner rather than later. Also, right now is a tricky time to get lots more hardware, so a 2021 node might cost more than a 2020 node, even if they have the same capacity.

All that said, without looking at their investor reports, I suspect they have some margin and cash on hand to make things work and mostly profit. They probably also have a target for spare CDN node capacity, because there's some pretty high variability of peak load on new releases and ISP install lead time can be super long. Also, they do a lot of efficiency work to make sure they can push as much traffic as possible from their nodes.

Re: The Ultimate Guide to Inflation

#215

Post by midasuni »

throwawayboise wrote: post #188
coldtea wrote: post #168

Earlier quoted context omitted.

> Normally, an increase in money supply would cause consumer goods to increase in price, since more people are able to buy them Not if the increase in money supply goes from the banks to the already wealthy (as cheap loans), which don't use the extra money to consume, but to invest, buy land, and fund small-competition-crushing rent-seeking endeavours. Then the money supply increases, consumer goods remain more or le…

We saw what happened in 2008 when the loans went to unsophisticated, underqualified borrowers.

> unsophisticated, underqualified

Like Lehman Brothers

Re: The Ultimate Guide to Inflation

#216

Post by pyaamb »

treeman79 wrote: post #134
ClumsyPilot wrote: post #123

Earlier quoted context omitted.

Housing prices are not driven by scarcity, they are driven by financialization of our economy. There are multiple cities in England where population has decreased but house prices increased. During lockdown 700k people left London, but house prices kept going up.

Triple the housing supply. Prices will go down.

we shouldn't be treating essential goods as speculative assets

Re: The Ultimate Guide to Inflation

#217

Post by szundi »

alex_smart wrote: post #71
cortesoft wrote: post #34

I've wondered what the effect our modern digital economy has had on consumer price inflation. Normally, an increase in money supply would cause consumer goods to increase in price, since more people are able to buy them and there is a limit on how much of any particular physical good is available. This isn't the case, however, for digital goods. If there are suddenly 100 million new people who want to buy a Netflix s…

>The marginal cost for a new subscriber is practically zero, so there should be no price increase caused by a shortage. Yeah, I don't think that that argument works at all. The price does not increase due to "shortage", it increases due to an increase in consumers' willingness to pay. Going by the Netflix example, if Netflix realizes that not too many people will cancel their subscriptions if they were to increase th…

There is much less ingredients in digital products that can be a shortage to give away more digital products. Compared to physical ones where capacities are much more expensive compared to the price of the product, I think the parent comment is basically right.

Of course there is chipageddon now, nothing is without physical. The point is the IP and customer service are the major cost drivers, not the property, the assembly line and the workers.

One more thing is also true: you can scale up/down really fast these days and for a fact at least this won't change your price as even your scale-down risks/impacts are much lower.

Re: The Ultimate Guide to Inflation

#218

Post by runeks »

cerved wrote: post #213
anm89 wrote: post #16

So awesome to see Lyn Alden at the top of Hacker News. She is an absolute genius! If you aren't familiar with her work and thinking I think a good introduction interview is: https://www.youtube.com/watch?v=f_JmGLMjIOk&t=35s Fun fact: She is an electrical / industrial engineer by trade, not an economist.

If she's not an economist, what is it that lends credence to her writing about economics and monetary policy?

The fact that it’s possible to acquire knowledge outside of university.

Re: The Ultimate Guide to Inflation

#219

Post by midasuni »

closeparen wrote: post #208
cortesoft wrote: post #195

Earlier quoted context omitted.

Right, but I was talking about the MARGINAL cost per subscriber... those costs you mentioned are fixed costs, and they are the same whether Netflix has one subscriber or a billion. The marginal cost per additional subscriber is basically bandwidth, which is pennies.

The system incurs those fixed costs based on how it anticipates they will pay off. With more money chasing content, the system will find it profitable to green-light more scripts at higher production values. But ultimately everybody’s favorite sound mixer has only two ears.

You can see this in football. In the U.K. satelite TV massively increased the market - no longer were people spending £30 a game to watch at a stadium with a capacity of 30k, they were spending £10 a game to watch on tv with a capacity of millions.

This extra cash poured into the salaries of the footballers in the top division, salary’s doubling every 4 or so years for a sustained period.

The money didn’t trickle down to lower divisions or youth training or on site staff.

Re: The Ultimate Guide to Inflation

#220

Post by spurgu »

HNfriend234 wrote: post #113
omalleyt wrote: post #43

Time to buy gold.

Problem with gold is that it is also inflationary only difference is it is mines that "print" more gold instead of a central bank. Cryptocurrencies are better since they have geometric decay built into the algorithm to make them deflationary by default.

Then again you can create new cryptocurrencies out of thin air.
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