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Really? Could you kindly inform my local grocery store? I just spent $45 to buy a pot roast.

chii 4y ago
if you assume that the pot roast took labour to produce, the increased wages from the year is one of the cause of the higher prices of said pot roast.
- FinalDestiny 4y ago
  The article mentions that there's little evidence for this kind of "wage-price spiral" Not to say that this isn't a one-off example of this!
- seadan83 4y ago
  Well, that and corporations have been pointing the finger at inflation, raising prices without meaningful competition, and we see profits at record levels. [1] Which is to say, the cost of labor has not been increasing that fast. Though, it's not a single faceted issue. I want to emphasize that. With that said, I do suspect this inflationary era has a slightly different character than previous due to a very different corporate landscape (eg: it wasn't previously the case that there were only 3 main airlines, just a couple companies owning the more than majority of grocers, etc..) [1] https://www.statista.com/statistics/222127/quarterly-corporate-profits-in-the-us/#:~:text=Corporations%20in%20the%20United%20States,and%20Product%20Accounts%20(NIPA) https://www.statista.com/statistics/222127/quarterly-corpora.... U.S. corporate profits 2012-2022, by quarter - Statista
  - rsj_hn 4y ago
    > Well, that and corporations have been pointing the finger at inflation, raising prices without meaningful competition, and we see profits at record levels. [1] There are a few object lessons in "how to lie with economic data" here. Let's tease them apart. 1. The original chart is in billions of dollars, across long time periods. So the first error is use of long run time series in nominal values. In that case, most of your time series are going to be "at record levels". Care to guess why? 2. If you look at the source of that chart, which is NIPA data, you'll see those magic words "without CCA and Inv adj". What do they mean? What it means is that you are ignoring depreciation of fixed assets and revaluation of inventory. So for example, if you run your business and pay $10 in labor and inputs and obtain $20 in sales, then you have a profit of $10, right? Well, not if you wore down your equipment by $5. Then you only have a profit of $5. So capital consumption must be taken into account if you want a measure of profits that is close to what an actual business would use. For the same reason, if you have a pile of unsold inventory, do you value it at your purchase cost or at the cost you would be able to sell it? It should be the latter, so again you do want the inventory valuation adjustment. The net result is you want to be looking at net operating surplus if you are mining your NIPA data for a measure of profits, not profits before capital consumption or inventory valuation adjustments. Of course NIPA style net operating surplus is not the same as GAAP profits because a number of other adjustments are made, but it's a reasonable proxy when looking at macro data. 3. Mixing non-financial and financial is a big no-no, especially as you are talking about inflation, and this means non-financial goods. So if we fix all of that, then what do we see? Record profits? Nope. Here you go: https://fred.stlouisfed.org/graph/?g=Y4h3 https://fred.stlouisfed.org/graph/?g=Y4h3 As a pro-tip, it generally pays to have an awareness of economic history. So, for example, if someone shows you a chart that says there was low inflation in the late 1970s, then you know they are lying somehow, because you understand this was a period of high inflation. This is something you should know without a chart, and use it to check the chart. Similarly, a basic fact of US corporate history is that the corporate profits in the 1950s and 1960s were enormous. Higher than any period since. That was the golden age of corporate power in the U.S., when we were told "What's good for General Motors is good for America". It was also the conglomeration mania. Additionally, Baby Boomers were having kids and buying tons of stuff, borrowing and spending heavily. Credit was loosening. The US was the undisputed king of the world, without foreign competitors of any serious measure, and they were raking in the cash.
    - seadan83 4y ago
      Thank you for the response. The data I presented was not well researched on my part, it getting perspective and frankly torn apart was illuminating. Though, is the overall thesis (that corporate profits are a significant factor to recent inflation) still incorrect? I'm really curious what your take is to this marketplace.org segment and Rep Katie Porter's presentation on the subject. Links here: https://www.marketplace.org/shows/make-me-smart/corporate-profits-we-see-you/amp/ https://www.marketplace.org/shows/make-me-smart/corporate-pr...

chii 4y ago

if you assume that the pot roast took labour to produce, the increased wages from the year is one of the cause of the higher prices of said pot roast.

FinalDestiny 4y ago
The article mentions that there's little evidence for this kind of "wage-price spiral" Not to say that this isn't a one-off example of this!
seadan83 4y ago
Well, that and corporations have been pointing the finger at inflation, raising prices without meaningful competition, and we see profits at record levels. [1] Which is to say, the cost of labor has not been increasing that fast. Though, it's not a single faceted issue. I want to emphasize that. With that said, I do suspect this inflationary era has a slightly different character than previous due to a very different corporate landscape (eg: it wasn't previously the case that there were only 3 main airlines, just a couple companies owning the more than majority of grocers, etc..) [1] https://www.statista.com/statistics/222127/quarterly-corporate-profits-in-the-us/#:~:text=Corporations%20in%20the%20United%20States,and%20Product%20Accounts%20(NIPA) https://www.statista.com/statistics/222127/quarterly-corpora.... U.S. corporate profits 2012-2022, by quarter - Statista
- rsj_hn 4y ago
  > Well, that and corporations have been pointing the finger at inflation, raising prices without meaningful competition, and we see profits at record levels. [1] There are a few object lessons in "how to lie with economic data" here. Let's tease them apart. 1. The original chart is in billions of dollars, across long time periods. So the first error is use of long run time series in nominal values. In that case, most of your time series are going to be "at record levels". Care to guess why? 2. If you look at the source of that chart, which is NIPA data, you'll see those magic words "without CCA and Inv adj". What do they mean? What it means is that you are ignoring depreciation of fixed assets and revaluation of inventory. So for example, if you run your business and pay $10 in labor and inputs and obtain $20 in sales, then you have a profit of $10, right? Well, not if you wore down your equipment by $5. Then you only have a profit of $5. So capital consumption must be taken into account if you want a measure of profits that is close to what an actual business would use. For the same reason, if you have a pile of unsold inventory, do you value it at your purchase cost or at the cost you would be able to sell it? It should be the latter, so again you do want the inventory valuation adjustment. The net result is you want to be looking at net operating surplus if you are mining your NIPA data for a measure of profits, not profits before capital consumption or inventory valuation adjustments. Of course NIPA style net operating surplus is not the same as GAAP profits because a number of other adjustments are made, but it's a reasonable proxy when looking at macro data. 3. Mixing non-financial and financial is a big no-no, especially as you are talking about inflation, and this means non-financial goods. So if we fix all of that, then what do we see? Record profits? Nope. Here you go: https://fred.stlouisfed.org/graph/?g=Y4h3 https://fred.stlouisfed.org/graph/?g=Y4h3 As a pro-tip, it generally pays to have an awareness of economic history. So, for example, if someone shows you a chart that says there was low inflation in the late 1970s, then you know they are lying somehow, because you understand this was a period of high inflation. This is something you should know without a chart, and use it to check the chart. Similarly, a basic fact of US corporate history is that the corporate profits in the 1950s and 1960s were enormous. Higher than any period since. That was the golden age of corporate power in the U.S., when we were told "What's good for General Motors is good for America". It was also the conglomeration mania. Additionally, Baby Boomers were having kids and buying tons of stuff, borrowing and spending heavily. Credit was loosening. The US was the undisputed king of the world, without foreign competitors of any serious measure, and they were raking in the cash.
  - seadan83 4y ago
    Thank you for the response. The data I presented was not well researched on my part, it getting perspective and frankly torn apart was illuminating. Though, is the overall thesis (that corporate profits are a significant factor to recent inflation) still incorrect? I'm really curious what your take is to this marketplace.org segment and Rep Katie Porter's presentation on the subject. Links here: https://www.marketplace.org/shows/make-me-smart/corporate-profits-we-see-you/amp/ https://www.marketplace.org/shows/make-me-smart/corporate-pr...