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This is an opinion piece. It speculates about reasons why companies have increased prices faster than their input costs have risen: "The resulting resilience

This is an opinion piece. It speculates about reasons why companies have increased prices faster than their input costs have risen: "The resulting resilience in demand has given companies the confidence to raise prices faster than costs. In addition, the power of storytelling has conditioned consumers to accept price rises. Imagine a story about a farmer who takes wheat to the windmill, where it is ground into flour, and then baked into bread. In that fantasy world, a rise in the cost of wheat of say 22 per cent might be used to justify a 15 per cent rise in the price of bread." The argument is neither complete nor convincing. Unless there's some bread cartel/oligopoly, a bread seller can't just increase prices and use a story to convince people it's unavoidable.

toomuchtodo 4y ago
https://oversight.house.gov/news/press-releases/subcommittee-analysis-reveals-excessive-corporate-price-hikes-have-hurt https://oversight.house.gov/news/press-releases/subcommittee... https://youtu.be/30_H33mS76Y https://youtu.be/30_H33mS76Y https://www.epi.org/blog/corporate-profits-have-contributed-disproportionately-to-inflation-how-should-policymakers-respond/ https://www.epi.org/blog/corporate-profits-have-contributed-... https://www.npr.org/2022/02/13/1080494838/economist-explains-record-corporate-profits-despite-rising-inflation https://www.npr.org/2022/02/13/1080494838/economist-explains...
- gruez 4y ago
  >https://oversight.house.gov/news/press-releases/subcommittee-analysis-reveals-excessive-corporate-price-hikes-have-hurt https://oversight.house.gov/news/press-releases/subcommittee... >Below are key findings from the staff analysis: > ... >Certain corporations are using the cover of inflation to raise prices excessively, resulting in record profits and profit margins. Is this a bad thing? The paragraph later goes list examples which were shipping, rental car, meat processing, and oil and gas. All of them experienced some supply/demand imbalance (ie. too little supply or too much demand). In that sort of situation, isn't it better to let prices go up until supply meets demand, rather than leaving prices as it is? Sure, paying higher prices suck, but if demand outstrips supply you'll have shortages. During the pandemic we saw this happen with GPUs and game consoles, because OEMs were reluctant to hike prices and/or institute an auction system. They avoided a PR backlash from it and were able to channel the hate towards "scalpers", but the situation for the consumer wasn't really any better. I doubt consumers would want empty shelves at the butcher, for instance.
  - deleted 4y ago
    [deleted]
  - uMeanPpl 4y ago
    Yes best to have full shelves of stuff that’s too expensive to buy
    - 988747 4y ago
      Yes, that's objectively better. At least you have a choice to buy less frequently, or in smaller quantities. I was raised during the communism, where you did have a lot of cash, and the goods were cheap (because government was deciding both salaries and prices), but they were simply never in stock. It took a lot of time, effort and sometimes actual bribes to buy anything. That's what you get when you try to artificially limit prices.
      - uMeanPpl 4y ago
        Your anecdote is not an immutable truth but a memory of an intentional political act and training. Very different early education can make a huge difference. But when you start out decades ago with a bunch of inept adults making an angry mess of their country, you get as you describe. Stop living in your memory as if it’s physical law and not the result of shit leadership.
neilwilson 4y ago
"Unless there's some bread cartel/oligopoly, a bread seller can't just increase prices" They can. Where else are you going to go? Due to lockdown the excess supply capacity that allows everybody in aggregate to leave supplier A and go to supplier B isn't there. Supplier B can't supply everybody and people don't want to or can't go without. Therefore Supplier A will sell their output at whatever price they decide. For competition to work the turnover curve on the price/sales volume graph has to be leptokurtic. It isn't at present. Price can be pushed way up before volume is affected.
ericmcer 4y ago
If the government dumps a shitload of cash on everyone and the demand for bread goes way up overnight then the bread seller would 100% raise his prices out of sync with the cost of wheat. The bread seller is either charitable or dumb if he doesn’t sell for whatever people are willing to pay.
- rhaway84773 4y ago
  So the US government dumped a shit load of cash on everyone and that’s why prices in the U.S. went up. Which doesn’t explain why other countries, where the government didn’t dump a shitload of cash, are seeing even higher price increases than the U.S. Also, what’s the mechanism for govt dumping shit load of cash allowing prices to go up? The usual suspects point to the fall in the value of the dollar, but the dollar is historically strong at the moment. Another mechanism could be a massive increase in demand, but that would be accompanied by a corresponding massive rise in GDP.
  - randomdata 4y ago
    > Which doesn’t explain why other countries, where the government didn’t dump a shitload of cash, are seeing even higher price increases than the U.S. Wheat is a global commodity, and the Chicago price is what the world works off of. > but the dollar is historically strong at the moment. As compared to what? It is historically weak compared to wheat, but presumably you mean compared to other currencies? Global transactions largely take place in USD, oil in particular, and the increase in monetary supply ended up in the hands of Americans first, so they have more of it to spend while the rest of the world does not, leaving those holding other currencies trying to buy up more USD all while Americans are trying to hold onto it over inflation fears.
impossiblefork 4y ago
Yes, but unless there is a bread cartel or oligopoly, the increased profit margins shouldn't have been possible, so the rising margins are proof in themselves. That demand is inelastic in itself shouldn't necessarily allow price increases.
deleted 4y ago
[deleted]
rhaway84773 4y ago
> Unless there's some bread cartel/oligopoly, a bread seller can't just increase prices and use a story to convince people it's unavoidable. This is trivially provable false. Companies can charge inflated prices based on story and/or advertising. The entire existence of high end fashion, for example, owes its existence to this being true. But even setting that aside, the primary driver of inflation, oil and gas prices, are set by a literal cartel. And what do you know, the companies in this industry are making record profits.
EdwardDiego 4y ago
An opinion piece by someone paid to be an economist, so you know.
somerandomqaguy 4y ago
> Unless there's some bread cartel/oligopoly, a bread seller can't just increase prices and use a story to convince people it's unavoidable. ...funny you should use bread as your example.... https://en.wikipedia.org/wiki/Bread_price-fixing_in_Canada https://en.wikipedia.org/wiki/Bread_price-fixing_in_Canada ------------------------------------- The senior officers of Canada Bread, since 23 May 2014 a Grupo Bimbo subsidiary,[6] and Weston Foods, now a sister company to Loblaws under parent George Weston Limited, colluded to boost bread prices, and later strong-armed retailers to increase their prices in tandem.[5] The two named companies became aware of the investigation on 31 October 2017, and decided to co-operate with investigators in December in exchange for receiving immunity from prosecution.[5] A statement issued by Canada Bread noted that the George Weston and Loblaw informants admitted to inappropriate conduct and accused "certain former Canada Bread executives" dating back to 2001 "while Canada Bread was under previous ownership."[5] -------------------------------------

toomuchtodo 4y ago

https://oversight.house.gov/news/press-releases/subcommittee-analysis-reveals-excessive-corporate-price-hikes-have-hurt https://oversight.house.gov/news/press-releases/subcommittee... https://youtu.be/30_H33mS76Y https://youtu.be/30_H33mS76Y https://www.epi.org/blog/corporate-profits-have-contributed-disproportionately-to-inflation-how-should-policymakers-respond/ https://www.epi.org/blog/corporate-profits-have-contributed-... https://www.npr.org/2022/02/13/1080494838/economist-explains-record-corporate-profits-despite-rising-inflation https://www.npr.org/2022/02/13/1080494838/economist-explains...

gruez 4y ago
>https://oversight.house.gov/news/press-releases/subcommittee-analysis-reveals-excessive-corporate-price-hikes-have-hurt https://oversight.house.gov/news/press-releases/subcommittee... >Below are key findings from the staff analysis: > ... >Certain corporations are using the cover of inflation to raise prices excessively, resulting in record profits and profit margins. Is this a bad thing? The paragraph later goes list examples which were shipping, rental car, meat processing, and oil and gas. All of them experienced some supply/demand imbalance (ie. too little supply or too much demand). In that sort of situation, isn't it better to let prices go up until supply meets demand, rather than leaving prices as it is? Sure, paying higher prices suck, but if demand outstrips supply you'll have shortages. During the pandemic we saw this happen with GPUs and game consoles, because OEMs were reluctant to hike prices and/or institute an auction system. They avoided a PR backlash from it and were able to channel the hate towards "scalpers", but the situation for the consumer wasn't really any better. I doubt consumers would want empty shelves at the butcher, for instance.
- deleted 4y ago
  [deleted]
- uMeanPpl 4y ago
  Yes best to have full shelves of stuff that’s too expensive to buy
  - 988747 4y ago
    Yes, that's objectively better. At least you have a choice to buy less frequently, or in smaller quantities. I was raised during the communism, where you did have a lot of cash, and the goods were cheap (because government was deciding both salaries and prices), but they were simply never in stock. It took a lot of time, effort and sometimes actual bribes to buy anything. That's what you get when you try to artificially limit prices.
    - uMeanPpl 4y ago
      Your anecdote is not an immutable truth but a memory of an intentional political act and training. Very different early education can make a huge difference. But when you start out decades ago with a bunch of inept adults making an angry mess of their country, you get as you describe. Stop living in your memory as if it’s physical law and not the result of shit leadership.

neilwilson 4y ago

"Unless there's some bread cartel/oligopoly, a bread seller can't just increase prices" They can. Where else are you going to go? Due to lockdown the excess supply capacity that allows everybody in aggregate to leave supplier A and go to supplier B isn't there. Supplier B can't supply everybody and people don't want to or can't go without. Therefore Supplier A will sell their output at whatever price they decide. For competition to work the turnover curve on the price/sales volume graph has to be leptokurtic. It isn't at present. Price can be pushed way up before volume is affected.

ericmcer 4y ago

If the government dumps a shitload of cash on everyone and the demand for bread goes way up overnight then the bread seller would 100% raise his prices out of sync with the cost of wheat. The bread seller is either charitable or dumb if he doesn’t sell for whatever people are willing to pay.

rhaway84773 4y ago
So the US government dumped a shit load of cash on everyone and that’s why prices in the U.S. went up. Which doesn’t explain why other countries, where the government didn’t dump a shitload of cash, are seeing even higher price increases than the U.S. Also, what’s the mechanism for govt dumping shit load of cash allowing prices to go up? The usual suspects point to the fall in the value of the dollar, but the dollar is historically strong at the moment. Another mechanism could be a massive increase in demand, but that would be accompanied by a corresponding massive rise in GDP.
- randomdata 4y ago
  > Which doesn’t explain why other countries, where the government didn’t dump a shitload of cash, are seeing even higher price increases than the U.S. Wheat is a global commodity, and the Chicago price is what the world works off of. > but the dollar is historically strong at the moment. As compared to what? It is historically weak compared to wheat, but presumably you mean compared to other currencies? Global transactions largely take place in USD, oil in particular, and the increase in monetary supply ended up in the hands of Americans first, so they have more of it to spend while the rest of the world does not, leaving those holding other currencies trying to buy up more USD all while Americans are trying to hold onto it over inflation fears.

impossiblefork 4y ago

Yes, but unless there is a bread cartel or oligopoly, the increased profit margins shouldn't have been possible, so the rising margins are proof in themselves. That demand is inelastic in itself shouldn't necessarily allow price increases.

deleted 4y ago

[deleted]

rhaway84773 4y ago

> Unless there's some bread cartel/oligopoly, a bread seller can't just increase prices and use a story to convince people it's unavoidable. This is trivially provable false. Companies can charge inflated prices based on story and/or advertising. The entire existence of high end fashion, for example, owes its existence to this being true. But even setting that aside, the primary driver of inflation, oil and gas prices, are set by a literal cartel. And what do you know, the companies in this industry are making record profits.

EdwardDiego 4y ago

An opinion piece by someone paid to be an economist, so you know.

somerandomqaguy 4y ago

> Unless there's some bread cartel/oligopoly, a bread seller can't just increase prices and use a story to convince people it's unavoidable. ...funny you should use bread as your example.... https://en.wikipedia.org/wiki/Bread_price-fixing_in_Canada https://en.wikipedia.org/wiki/Bread_price-fixing_in_Canada ------------------------------------- The senior officers of Canada Bread, since 23 May 2014 a Grupo Bimbo subsidiary,[6] and Weston Foods, now a sister company to Loblaws under parent George Weston Limited, colluded to boost bread prices, and later strong-armed retailers to increase their prices in tandem.[5] The two named companies became aware of the investigation on 31 October 2017, and decided to co-operate with investigators in December in exchange for receiving immunity from prosecution.[5] A statement issued by Canada Bread noted that the George Weston and Loblaw informants admitted to inappropriate conduct and accused "certain former Canada Bread executives" dating back to 2001 "while Canada Bread was under previous ownership."[5] -------------------------------------