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>That seems like a pretty whacky theory to me because it assumes that companies only increase prices when forced to do so, and not just because they can. I see

>That seems like a pretty whacky theory to me because it assumes that companies only increase prices when forced to do so, and not just because they can. I see people post things like this, and I'm forced to conclude that you don't understand supply and demand. Edit: Sure, monopoly pricing is real. But blaming monopoly pricing for inflation is dubious. You'd need an account of 1) how the goods in the CPI basket are monopoly priced and 2) why all these monopolies decided to raise prices now instead of 3 or 10 years ago. The standard account is much more plausible: Supply side crunch due to covid policies and geopolitical problems and sanctions. Increased demand due to the Fed dropping money out of helicopters for over a decade + (more acutely) covid handouts.

socialismisok 4y ago
Supply and demand works on a idealized economy, but it's hardly true in the real world where there are cartels, monopolies, and other incentives to keep prices high even if there's supply.
- deleted 4y ago
  [deleted]
- mjhay 4y ago
  Supply and demand works great in Econ 101 though.
  - MereInterest 4y ago
    Correct, because Econ 101 is based on an idealized economy that doesn't match the real world.
    - SantalBlush 4y ago
      That's why you take Econ 102, which is an intro microeconomics course. It covers the different market types, like competitive, monopolistically competitive, duopolistic, and monopolistic, and it covers the concepts of positive and negative externalities, market failures, etc. A lot of people here are acting like these are foreign concepts to an econ curriculum, when they're completely rudimentary. It's just ignorance.
      - MereInterest 4y ago
        It sounds like we're in agreement. From the GP's comment, which I was attempting to support, "[Supply and demand are] hardly true in the real world where there are cartels, monopolies, and other incentives to keep prices high even if there's supply."
- AndrewUnmuted 4y ago
Retric 4y ago
Supply and demand are why companies can raise their prices. Suggesting companies only raise prices when they must is mistaken. Further, increasing the number of workers in the economy increases supply and demand for some things, while the supply of other stuff is like video games is unlimited.
- econ101time 4y ago
  You're forgetting that there's a market at the other end too. Every business has a cost of capital, and if its returns are not in line with other similarly placed businesses, they will have to spend a lot more money to acquire capital.
  - Retric 4y ago
    That’s assuming they need to raise capital. However, most companies are flush with cash and will only become more profitable with increasing demand.
    - econ101time 4y ago
      So much wrong with this line of thinking. 1) They're also facing increased costs. 2) Most companies are by no means "flush with cash". 3) Cash is fleeting but the need for capital is always hanging over your head. Even if you pride yourself on bootstrapping your business and not needing much in loans or additional investment, one or two bad quarters can quickly leave you with no choice but to get loans or sell equity.
      - Retric 4y ago
        Based on what evidence do you think companies aren’t flush with cash? Every indicator shows US companies have cash reserves vastly above historic levels. This isn’t about year to year changes. Start looking back to say the 1990’s and the difference is huge.
BlargMcLarg 4y ago
Economy is still a social science at large. Upping the prices to their theoretical limits might cause immense backlash whereas steady increases, either fixed yearly increases or a big increase due to "extraordinary forces", may have very different social effects. Blindly mentioning 'supply and demand' is the same as saying 'calories in and out'. It's true, but it misses nuance.
PaulDavisThe1st 4y ago
Do you think that Robert Reich also doesn't understand supply and demand? https://www.theguardian.com/commentisfree/2022/sep/25/inflation-price-controls-robert-reich https://www.theguardian.com/commentisfree/2022/sep/25/inflat...
- econ101time 4y ago
  Robert Reich is a politico with a political agenda, and that article is in a US politics opinion section. Inflation is a major US electoral issue, and the Biden admin has tried to shift blame to greedy companies (not that it's necessarily fair to put the blame on the Biden admin, that's another issue altogether). And even if he were an economist (which he's not, despite the PPE degree), economists can be political hacks just like anyone else (Paul Krugman comes to mind).
  - PaulDavisThe1st 4y ago
    I didn't ask what he was. I asked if he understood supply and demand. As for what he actually is: a professor of public policy at UC Berkeley and a former 1-term secretary of labor. He was appointed to the latter position, not elected. Almost anyone with an interest in the world has their own "political agenda".
    - econ101time 4y ago
      I'll spell it out more clearly for you, since you didn't seem to understand the implicit point: I sure hope a fellow like him understands supply and demand. I assume he does. But I think that understanding takes second seat to trying to convince people that greedy companies, not incompetent governments, are to blame for inflation. And he writes that (putting aside whether he also thinks it's true) in order to advanced a political agenda. That's why it's in a US politics op-ed section of a left-wing newspaper.
      - PaulDavisThe1st 4y ago
        I don't care what his political agenda is, I care what the actual source of inflation is. I see a lot more evidence that a lot more of it is due to price gouging by corporations than the money supply or supply chain issues. I don't care where he writes it either. It's not as if the WSJ is going to publish an argument like this. So maybe we can get away from "I hope <X> understands supply and demand" and actually tackle the evidence that has been presented by many economists and economic pundits regarding the relative contributors to the current inflation.
paulmd 4y ago
> 1) how the goods in the CPI basket are monopoly priced This actually is not as far-fetched as you're implying. for many types of commodity goods (baby formula, chicken, etc) there really are only 2-3 major suppliers left in operation. Agribusiness has taken over and consolidated many types of produce as well. As we recently saw with baby food - disruptions localized to a single supplier can severely affect the entire product segment - this outcome can only occur in a highly-consolidated market. It wasn't like there was some problem at the baby farm and nobody could make babyfood, this was one supplier that took some lines offline and it caused national shortages. And it's not just babyfood, it's meat production, meat processing, and many other food products besides. Smithfield controls a majority of the meat market for several types of products too. "monopoly power" as regulated in the US has never required a literal monopoly situation and that would be incredibly unrealistic in a market economy. In practice, oligopoly pricing is sufficient to be very commanding if the participants decide to collude or to otherwise exert their power. > 2) why all these monopolies decided to raise prices now instead of 3 or 10 years ago. because consumers are generally primed to accept it right now, and there are legitimate supply-chain disruptions and increases to allow to you to handwave your increases away (price increases are far outpacing cost increases). If everyone else is increasing prices 20%, and your competitors probably are too... why not increase your prices too, even if you only needed 5-10%? Never let a good crisis go to waste, and all that.

socialismisok 4y ago

Supply and demand works on a idealized economy, but it's hardly true in the real world where there are cartels, monopolies, and other incentives to keep prices high even if there's supply.

deleted 4y ago
[deleted]
mjhay 4y ago
Supply and demand works great in Econ 101 though.
- MereInterest 4y ago
  Correct, because Econ 101 is based on an idealized economy that doesn't match the real world.
  - SantalBlush 4y ago
    That's why you take Econ 102, which is an intro microeconomics course. It covers the different market types, like competitive, monopolistically competitive, duopolistic, and monopolistic, and it covers the concepts of positive and negative externalities, market failures, etc. A lot of people here are acting like these are foreign concepts to an econ curriculum, when they're completely rudimentary. It's just ignorance.
    - MereInterest 4y ago
      It sounds like we're in agreement. From the GP's comment, which I was attempting to support, "[Supply and demand are] hardly true in the real world where there are cartels, monopolies, and other incentives to keep prices high even if there's supply."
AndrewUnmuted 4y ago

Retric 4y ago

Supply and demand are why companies can raise their prices. Suggesting companies only raise prices when they must is mistaken. Further, increasing the number of workers in the economy increases supply and demand for some things, while the supply of other stuff is like video games is unlimited.

econ101time 4y ago
You're forgetting that there's a market at the other end too. Every business has a cost of capital, and if its returns are not in line with other similarly placed businesses, they will have to spend a lot more money to acquire capital.
- Retric 4y ago
  That’s assuming they need to raise capital. However, most companies are flush with cash and will only become more profitable with increasing demand.
  - econ101time 4y ago
    So much wrong with this line of thinking. 1) They're also facing increased costs. 2) Most companies are by no means "flush with cash". 3) Cash is fleeting but the need for capital is always hanging over your head. Even if you pride yourself on bootstrapping your business and not needing much in loans or additional investment, one or two bad quarters can quickly leave you with no choice but to get loans or sell equity.
    - Retric 4y ago
      Based on what evidence do you think companies aren’t flush with cash? Every indicator shows US companies have cash reserves vastly above historic levels. This isn’t about year to year changes. Start looking back to say the 1990’s and the difference is huge.

BlargMcLarg 4y ago

Economy is still a social science at large. Upping the prices to their theoretical limits might cause immense backlash whereas steady increases, either fixed yearly increases or a big increase due to "extraordinary forces", may have very different social effects. Blindly mentioning 'supply and demand' is the same as saying 'calories in and out'. It's true, but it misses nuance.

PaulDavisThe1st 4y ago

Do you think that Robert Reich also doesn't understand supply and demand? https://www.theguardian.com/commentisfree/2022/sep/25/inflation-price-controls-robert-reich https://www.theguardian.com/commentisfree/2022/sep/25/inflat...

econ101time 4y ago
Robert Reich is a politico with a political agenda, and that article is in a US politics opinion section. Inflation is a major US electoral issue, and the Biden admin has tried to shift blame to greedy companies (not that it's necessarily fair to put the blame on the Biden admin, that's another issue altogether). And even if he were an economist (which he's not, despite the PPE degree), economists can be political hacks just like anyone else (Paul Krugman comes to mind).
- PaulDavisThe1st 4y ago
  I didn't ask what he was. I asked if he understood supply and demand. As for what he actually is: a professor of public policy at UC Berkeley and a former 1-term secretary of labor. He was appointed to the latter position, not elected. Almost anyone with an interest in the world has their own "political agenda".
  - econ101time 4y ago
    I'll spell it out more clearly for you, since you didn't seem to understand the implicit point: I sure hope a fellow like him understands supply and demand. I assume he does. But I think that understanding takes second seat to trying to convince people that greedy companies, not incompetent governments, are to blame for inflation. And he writes that (putting aside whether he also thinks it's true) in order to advanced a political agenda. That's why it's in a US politics op-ed section of a left-wing newspaper.
    - PaulDavisThe1st 4y ago
      I don't care what his political agenda is, I care what the actual source of inflation is. I see a lot more evidence that a lot more of it is due to price gouging by corporations than the money supply or supply chain issues. I don't care where he writes it either. It's not as if the WSJ is going to publish an argument like this. So maybe we can get away from "I hope <X> understands supply and demand" and actually tackle the evidence that has been presented by many economists and economic pundits regarding the relative contributors to the current inflation.

paulmd 4y ago

> 1) how the goods in the CPI basket are monopoly priced This actually is not as far-fetched as you're implying. for many types of commodity goods (baby formula, chicken, etc) there really are only 2-3 major suppliers left in operation. Agribusiness has taken over and consolidated many types of produce as well. As we recently saw with baby food - disruptions localized to a single supplier can severely affect the entire product segment - this outcome can only occur in a highly-consolidated market. It wasn't like there was some problem at the baby farm and nobody could make babyfood, this was one supplier that took some lines offline and it caused national shortages. And it's not just babyfood, it's meat production, meat processing, and many other food products besides. Smithfield controls a majority of the meat market for several types of products too. "monopoly power" as regulated in the US has never required a literal monopoly situation and that would be incredibly unrealistic in a market economy. In practice, oligopoly pricing is sufficient to be very commanding if the participants decide to collude or to otherwise exert their power. > 2) why all these monopolies decided to raise prices now instead of 3 or 10 years ago. because consumers are generally primed to accept it right now, and there are legitimate supply-chain disruptions and increases to allow to you to handwave your increases away (price increases are far outpacing cost increases). If everyone else is increasing prices 20%, and your competitors probably are too... why not increase your prices too, even if you only needed 5-10%? Never let a good crisis go to waste, and all that.