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Why is inflation so sticky? It could be corporate profits

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Re: Why is inflation so sticky? It could be corporate profits

#291

Post by s1artibartfast »

dragonwriter wrote: post #280
s1artibartfast wrote: post #278

Earlier quoted context omitted.

High housing prices do reduced demand, just not by much. People living with roommates or parents are example of people priced out of the market. This is demand reduction.

No, that’s a just lower quantity demanded, not lower demand; demand is the function mapping price to quantity demanded. Its possibly that price level could over time effect actual demand (as well), that is, it could convert people who would buy at price $X to people who would only buy at a price lower than $X or not at all, but that’s not what your example is. (It does, actually, induced demand from availability it o…

You are right that I'm talking about the quantity of goods demanded. I think this is relevant because we are talking about the price per good demanded as well. Your classic supply and demand curve which we're talking about is units supplied, units demanded, and price per unit.

If you want to think about absolute demand for housing in absence of a price reference, the demand is enormous. If houses cost $0, I would probably demand three or four large ones for myself before getting to the point where I refuse a free house.

Re: Why is inflation so sticky? It could be corporate profits

#292

Post by dragonwriter »

s1artibartfast wrote: post #291
dragonwriter wrote: post #280

Earlier quoted context omitted.

No, that’s a just lower quantity demanded, not lower demand; demand is the function mapping price to quantity demanded. Its possibly that price level could over time effect actual demand (as well), that is, it could convert people who would buy at price $X to people who would only buy at a price lower than $X or not at all, but that’s not what your example is. (It does, actually, induced demand from availability it o…

You are right that I'm talking about the quantity of goods demanded. I think this is relevant because we are talking about the price per good demanded as well. Your classic supply and demand curve which we're talking about is units supplied, units demanded, and price per unit. If you want to think about absolute demand for housing in absence of a price reference, the demand is enormous. If houses cost $0, I would pro…

> You are right that I'm talking about the quantity of goods demanded

Right, that's different than demand. Demand is the function mapping price to quantity demanded (just as supply is the function mapping price to quantity supplied.)

There are things that shift demand, but price changes resulting in a different quantity demanded are not evidence of shifts in demand, just evidence of a normal shape of demand curve (which is not to say that price conditions over time don’t shift actual demand, that’s just a more complicated thing to demonstrate.)

Re: Why is inflation so sticky? It could be corporate profits

#293

Post by toss1 »

listenallyall wrote: post #290
toss1 wrote: post #281

Earlier quoted context omitted.

I'm claiming that the 50s, 60s, and early 70s were the peak[0]. Yes, yes, the economy did take a hit in the 70s before Reagan took office, but it is quite obvious that that inflation was a combination of extrinsic geopolitical influences and Nixon's abandoning the Gold Standard. Absent a huge anti-working-class / anti-union push, and shutting down most anti-trust enforcement, recovery of the working class would have…

> I'm claiming that the 50s, 60s, and early 70s were the peak So before computers kicked off unprecedented productivity increases, and before standardized shipping containers enabled manufacturing to be relocated globally. But sure, go ahead and blame Ronald Reagan.

I can hold recognize that things are not all good or bad, and I don't place 100% of the blame on anyone. That's not the same as saying they're absolved or irrelevant either.

I strongly supported (still do) Reagan's vision of the city on the hill, the global champion of democracy, and strengthening of the military to meet those goals and challenges.

But his strong pro-corporate actions (stopping anti-trust enforcement and union busting) also did huge damage to the middle class, the legacy of which is still here. Similarly, undoing the fairness doctrine instead of extending it to cable (which also use public infrastructure) and weakening laws on maximum ownership of media, also lead to the insane polarization of media we have today.

While microcomputers increasing productivity and shipping containers obviously have some influence, productivity still occurs in the context of workers having rules (or not) that support their bargaining position, and shipping containers in the policy of global trade. Reagan certainly damaged the former, and I don't recall him either much exacerbating nor helping prevent the problems of the latter.

Similarly, Obama did some great things, including a major step towards universal healthcare, but he also failed to respond to Russia's invasion of Crimea and actions Syria, both of which directly emboldened Putin to start his current genocidal war on Ukraine. Neither Reagan nor Obama are solely to blame for these serious problems, but they also bear some real responsibility for their major (mis-)steps in the wrong direction.

Re: Why is inflation so sticky? It could be corporate profits

#294

Post by AnthonyMouse »

navane wrote: post #127
AnthonyMouse wrote: post #81

Earlier quoted context omitted.

> So, we're at a point where we need to admit that mantra isn't true in the modern age, or admit that we've done a terrible job at preventing effective monopolies/duopolies from forming. It's objectively obvious that the latter is true, but why? One of the reasons is regulatory capture. But another is that people have stopped believing the former. Suppose there is a market with an existing duopoly that charges high p…

it is only profitable if you are a big corp who made his money elsewhere, a significant amount of money compared to the money in the market you're trying to enter. We've always known that a big guy can come into a small guys party and squish them all. That's why microsoft wasn't allowed to push their browser (OS = big guy, browser market = small guys party). This is why amazon shouldn't be allowed to sell its own ite…

It's only profitable if you have enough to invest to meet the entry costs in that market. Which is where the regulatory capture is causing trouble by raising entry costs. But that only means you need more or bigger initial investors, not that they don't make money by investing.

> We've always known that a big guy can come into a small guys party and squish them all. That's why microsoft wasn't allowed to push their browser (OS = big guy, browser market = small guys party).

That was an antitrust issue for an entirely different reason. The browser market had the potential to disrupt Microsoft's control over the OS market, because web pages are platform-independent. That gives Microsoft the incentive to dominate the browser market by operating at a loss in order to make sure that web pages are tied to Microsoft Windows by using platform-specific ActiveX controls or web extensions specific to Microsoft's browser.

The web reducing dependence on Windows is largely what happened in the intervening years outside of some specific app markets like gaming (where Microsoft has held on through similar dirty tricks with respect to DirectX and other APIs, and is finally starting to lose their grip).

Re: Why is inflation so sticky? It could be corporate profits

#295

Post by s1artibartfast »

dragonwriter wrote: post #292
s1artibartfast wrote: post #291

Earlier quoted context omitted.

You are right that I'm talking about the quantity of goods demanded. I think this is relevant because we are talking about the price per good demanded as well. Your classic supply and demand curve which we're talking about is units supplied, units demanded, and price per unit. If you want to think about absolute demand for housing in absence of a price reference, the demand is enormous. If houses cost $0, I would pro…

> You are right that I'm talking about the quantity of goods demanded Right, that's different than demand. Demand is the function mapping price to quantity demanded (just as supply is the function mapping price to quantity supplied.) There are things that shift demand, but price changes resulting in a different quantity demanded are not evidence of shifts in demand, just evidence of a normal shape of demand curve (wh…

I think you are right that demand is a function. I would quibble that it is pretty clear that "demand" refers to the quantity demanded when stated with the other variables of the function. e.g. "what is the demand for $10 coffee in a desert".

In the context of this discussion I thought it was pretty clear which I was talking about.

>>>For almost all goods, price increases will decrease the amount purchased.

>>Except that housing, at least in America, has dynamics which are nothing like that.

>High(er) housing prices do reduce demand...

Do you have any thoughts on if price impacts the quantity of homes demanded.

Re: Why is inflation so sticky? It could be corporate profits

#296

Post by AnthonyMouse »

doublespanner wrote: post #96
AnthonyMouse wrote: post #81

Earlier quoted context omitted.

> So, we're at a point where we need to admit that mantra isn't true in the modern age, or admit that we've done a terrible job at preventing effective monopolies/duopolies from forming. It's objectively obvious that the latter is true, but why? One of the reasons is regulatory capture. But another is that people have stopped believing the former. Suppose there is a market with an existing duopoly that charges high p…

Only if the infrastructure is something tangible, often the startup costs are regulatory, and not necessarily transferable. There is also the problem that if the incumbents move to undercut, then any onlooker would assume that even if they bought the infrastructure they would also face the same undercutting; and would therefore have to remain solvent longer than an incumbant to make a return. I think this is why ther…

Regulatory costs aren't lost in acquisitions. You buy the whole company.

> There is also the problem that if the incumbents move to undercut, then any onlooker would assume that even if they bought the infrastructure they would also face the same undercutting; and would therefore have to remain solvent longer than an incumbant to make a return

But the incumbent has the same problem. If the unit cost is $1 and they're selling for $0.90 to undercut you, they're losing money too. Anybody can see that they won't be able to keep that up forever, and as soon as they stop, whoever invested in the competition is making money.

> I think this is why there is so much focus on tech or disruption; you need some way to compete against the scale efficiency of the incumbant.

Most markets have a minimum scale past which being larger provides no significant efficiency benefit and only creates diseconomies of scale from bureaucratic overhead and internal politics. This is why companies try to commit antitrust violations to keep barriers to entry high enough that others can't get a foothold. Because once they do, the incumbent has no advantage and is commonly outmaneuvered because monopolists typically become inefficient from lack of competitive pressure and existing customers tend to hate them.

Re: Why is inflation so sticky? It could be corporate profits

#297

Post by BirdieNZ »

prepend wrote: post #201
BirdieNZ wrote: post #144

Earlier quoted context omitted.

Taxing land doesn't increase rent; it's an inelastic good with greater demand than supply. See Ricardo's Law of Rent, Henry George, or basically any analysis of land tax (or indeed, taxing any monopoly good). The incidence of land tax is well known to not fall on the tenant.

That’s interesting. Why is land tax not a cost that’s passed on to the consumer while all other costs do? Typically inelastic goods mean that prices can increase because demand will not drop as prices go up.

(Usually) rents are already as high as they can be, in aggregate. In other words, the market cannot bear a higher cost for the good, so an increase in cost has to be eaten by the landlord.

This is actually very easy to see in countries with no 30 year mortgages, because landlords have to refix their mortgage rates every 1-5 years. This means you can see regular landlord cost changes as interest rates fluctuate, as well as the impact on rents.

The impact on rents is essentially 0 as landlord costs change; instead, rents follow tenant incomes, because landlords are able to charge more as long as tenant incomes increase.

I've got plenty of data from New Zealand if you're interested, but I'm sure it's the same everywhere there is supply-constrained housing.

Re: Why is inflation so sticky? It could be corporate profits

#298

Post by kristopolous »

RugnirViking wrote: post #223
kristopolous wrote: post #115

Earlier quoted context omitted.

Marketing is part of the product design. The decisions on what to do and what not to do when coding or designing a feature should be a result of a marketing interrogation because you're building the product to be used in some set of ways by some set of people. Once you stop thinking about what they actually care about, you're drifting away from a successful execution. This is from copy to code. From price to presenta…

while that may be, i'm not sure how it relates to what the previous commenter was saying.

There's a common conflation of commercial advertising and marketing as if it can be extricated from consumption.

I really don't think it's possible

Classical economics are impoverished frameworks for dealing with the richness of human experience.

It discards reality, replaces it with simplicity and then re-presents it as reality.

There is no constructable Valhalla that will follow the rules.

What we have isn't a fall from grace of some theoretical perfection.

It's an unrepresentative mathematical model that has at most coarse correlation with fungible markets.

I always encourage people to analyze the code for various backtested trading bots of you're really interested in how these markets actually work

Re: Why is inflation so sticky? It could be corporate profits

#299

Post by Rury »

arcticbull wrote: post #92
Rury wrote: post #52

Earlier quoted context omitted.

It does. Think for example, if you had worked hard 30 years to acquire a $250,000 house, and the government just gave everyone $500k overnight. Would you think it's fair they could pay $250k for your house for not having worked for 30 years, while you had to? Probably not. Instead you'd likely raise the selling price of your house to protect the value of your hard work. Same goes for companies that produce milk. Obvi…

People don't save money, they save value. I don't know anyone who would recommend saving up $250K to make a down payment entirely as cash, because of course you're losing money to inflation. Given the huge run-up in equities over the last 30 years chances are you'd only have had to save up a small fraction of that had you invested it. And the more fiscal stimulus that went out, the more stocks went up.

I never mentioned about saving up $250k to buy a house entirely in cash. I said working 30 years to acquire a $250k house. It's about protecting value of your hard work - your equity. And regardless, it was hyperbole to show why prices rise when money is freely given out.

Re: Why is inflation so sticky? It could be corporate profits

#300

Post by MichaelZuo »

greenfield1 wrote: post #286
DrNosferatu wrote: post #229

Earlier quoted context omitted.

This is nation-wide to some 10 million customers. For your alternative explanation to be true, it would require that all the 8 retail chains would have the exact same margin by natural, fair chance - and , cumulatively by fair chance, increment prices by exactly the same amount, at exactly the same time... Better play the lottery.

Why "natural, fair chance"? Of course they see what their competitors charge. That's one of the ingredients of a free market. The quicker they react, the quicker the information is dissipated in the free market.

That is an aspect of alleged price fixing for consumer products I never got.

It's trivial for every large retail store to just send someone to look at their competitor's prices and price at the same mark.

This is not feasible to do for B2B only products, such as bulk LCD panels, so it's a lot easier to prove pre-arranged price-fixing.

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