3 ms·

If you're going to say there's a gap in theory, could you at least explain which economic theory is showing the opposite result here?

phkahler 4y ago
Show me an economist that uses the word hysteresis. Their models are quite primitive IMHO and not because they're powerful like the ones used in thermodynamics, but they act like they are.
- cuchoi 4y ago
  It is a pretty common concept among economists. IIRC it is even covered in Mankiw's Introduction to Economics textbook.
- ryan93 4y ago
  https://en.wikipedia.org/wiki/Hysteresis_(economics) https://en.wikipedia.org/wiki/Hysteresis_(economics) lol
- marcosdumay 4y ago
  Hum... They all seem to say "stickiness" instead, what means the same thing. Modern macroeconomics is all about it, or, well, at least the mainstream macroeconomics is all about it.
  - imtringued 4y ago
    What irritates me so much is that all of these things are bolted on afterthoughts. People point at their "beautiful" perfectly liquid models and then when you tell them the real world is "ugly" and illiquid they get angry and tell you, you are wrong. I mean the most classic example is the theoretical barter economy that doesn't exist because you need money to lower transaction costs for a high degree of the division of labor (which isn't disputed). The reason for that is that economists came up with this theoretical model and the text books want to teach barter first and then money which gives the wrong impression that barter economies actually existed. No, people either managed the economy the way we manage it internally within families and corporations or they straight up used a commodity as their money or some hard to forge symbol like precious metals. There is not much in-between because barter is inconvenient as hell and it causes social difficulties because the fairness of trades has to be evaluated very carefully, opening up the potential for conflict.
- abigail95 4y ago
  this gives me nothing i need an answer to >yet another example of the gap that always exists between economic theory and economic practice what is the practice and what is the theory? edit: if the person is saying food prices are sticky upwards, then they need to provide evidence for that because that's a very strong claim
- neilwilson 4y ago
  https://www.newcastle.edu.au/profile/bill-mitchell https://www.newcastle.edu.au/profile/bill-mitchell "We have known about the concept and relevance of hysteresis since the 1980s. In terms of the academic work, I was one of the earliest contributors to the hysteresis literature in the world. I published several articles on the topic in the 1980s that came out of my PhD research as I was searching for solutions to the dominant view in the profession that the Phillips curve constraint prevented full employment from being sustained " http://bilbo.economicoutlook.net/blog/?m=20200629 http://bilbo.economicoutlook.net/blog/?m=20200629
lauraste1 4y ago
Google the Phillips curve - it's from the 1960s
- abigail95 4y ago
  explain why the phillips curve shows the opposite result to "every player in the food chain has taken advantage of supply shortage"
neilwilson 4y ago
Post Keynesian theory and endogenous money show how it works. Firms don't charge a 'market price'. They put a mark up on costs and sell as much as they can at that price. In other words marginal productivity theory is nonsense. When you do that, and you get a supply crunch as we have now, then prices will go up as we are seeing. It's fairly obvious. I will try to sell my stuff for the highest price I can get for it. Your only choice as a buyer is to go somewhere else, or refuse to buy. Prices are controlled by excess capacity to supply. When that capacity vanishes, particularly amongst needed goods and services, you get price gouging. It's similar to overstretching a spring. We have damaged the supply side and it won't go back to its prior path.
- MrVandemar 4y ago
  > refuse to buy Few do this. Television tells them they want things, and they'll get angry if they can't have them. So they put it on their credit-cards and kick the can down the road.
theonlybutlet 4y ago
Once again information assymetry rears its head. Many people continued buying under the assumption it was cost inflation, they definitely would've purchased less if they knew they were merely being milked for profit. The article even addresses this.

phkahler 4y ago

Show me an economist that uses the word hysteresis. Their models are quite primitive IMHO and not because they're powerful like the ones used in thermodynamics, but they act like they are.

cuchoi 4y ago
It is a pretty common concept among economists. IIRC it is even covered in Mankiw's Introduction to Economics textbook.
ryan93 4y ago
https://en.wikipedia.org/wiki/Hysteresis_(economics) https://en.wikipedia.org/wiki/Hysteresis_(economics) lol
marcosdumay 4y ago
Hum... They all seem to say "stickiness" instead, what means the same thing. Modern macroeconomics is all about it, or, well, at least the mainstream macroeconomics is all about it.
- imtringued 4y ago
  What irritates me so much is that all of these things are bolted on afterthoughts. People point at their "beautiful" perfectly liquid models and then when you tell them the real world is "ugly" and illiquid they get angry and tell you, you are wrong. I mean the most classic example is the theoretical barter economy that doesn't exist because you need money to lower transaction costs for a high degree of the division of labor (which isn't disputed). The reason for that is that economists came up with this theoretical model and the text books want to teach barter first and then money which gives the wrong impression that barter economies actually existed. No, people either managed the economy the way we manage it internally within families and corporations or they straight up used a commodity as their money or some hard to forge symbol like precious metals. There is not much in-between because barter is inconvenient as hell and it causes social difficulties because the fairness of trades has to be evaluated very carefully, opening up the potential for conflict.
abigail95 4y ago
this gives me nothing i need an answer to >yet another example of the gap that always exists between economic theory and economic practice what is the practice and what is the theory? edit: if the person is saying food prices are sticky upwards, then they need to provide evidence for that because that's a very strong claim
neilwilson 4y ago
https://www.newcastle.edu.au/profile/bill-mitchell https://www.newcastle.edu.au/profile/bill-mitchell "We have known about the concept and relevance of hysteresis since the 1980s. In terms of the academic work, I was one of the earliest contributors to the hysteresis literature in the world. I published several articles on the topic in the 1980s that came out of my PhD research as I was searching for solutions to the dominant view in the profession that the Phillips curve constraint prevented full employment from being sustained " http://bilbo.economicoutlook.net/blog/?m=20200629 http://bilbo.economicoutlook.net/blog/?m=20200629

lauraste1 4y ago

Google the Phillips curve - it's from the 1960s

abigail95 4y ago
explain why the phillips curve shows the opposite result to "every player in the food chain has taken advantage of supply shortage"

neilwilson 4y ago

Post Keynesian theory and endogenous money show how it works. Firms don't charge a 'market price'. They put a mark up on costs and sell as much as they can at that price. In other words marginal productivity theory is nonsense. When you do that, and you get a supply crunch as we have now, then prices will go up as we are seeing. It's fairly obvious. I will try to sell my stuff for the highest price I can get for it. Your only choice as a buyer is to go somewhere else, or refuse to buy. Prices are controlled by excess capacity to supply. When that capacity vanishes, particularly amongst needed goods and services, you get price gouging. It's similar to overstretching a spring. We have damaged the supply side and it won't go back to its prior path.

MrVandemar 4y ago
> refuse to buy Few do this. Television tells them they want things, and they'll get angry if they can't have them. So they put it on their credit-cards and kick the can down the road.

theonlybutlet 4y ago

Once again information assymetry rears its head. Many people continued buying under the assumption it was cost inflation, they definitely would've purchased less if they knew they were merely being milked for profit. The article even addresses this.