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> or prices are a function of supply and demand, or prices are where supply and demand curves intersect. You're assuming that the market is perfectly competiti

by qwytw 3y ago

> or prices are a function of supply and demand, or prices are where supply and demand curves intersect. You're assuming that the market is perfectly competitive which is almost never even close to being the case outside of some commodities. There might be enough surplus so that the effect of price controls on supply would be minimal

lotsofpulp 3y ago
Perfectly competitive markets are required for the lowest sustainable prices, but prices being a function of supply and demand is always the case regardless of how many buyers and sellers there are. >There might be enough surplus so that the effect of price controls on supply would be minimal "Might" being the operative word. Other things that might happen is sustainable businesses get driven out of business, misallocation of resources due to erroneous price signals hampering future investment in that field, etc. The error free solution to achieving lower prices is to increase supply and decrease demand, which are many times politically unachievable due to them requiring sacrifices (higher taxes, lower consumption, etc).
- AnthonyMouse 3y ago
  > The error free solution to achieving lower prices is to increase supply and decrease demand, which are many times politically unachievable due to them requiring sacrifices (higher taxes, lower consumption, etc). But in this case the lack of supply is due to a lack of competition, as a result of vertical integration. Suppose you want a logic board for your PC. Well, it's not a secret what goes in it. It's got a circuit board, a processor socket, some memory slots, a network port, etc. If you have an Asus board and it goes bad or you need one with more memory slots, you can go buy another one from Asus, or you can get one from Gigabyte or ASRock or Supermicro that can be mounted in the same chassis and use the same processor, memory and storage devices. Phones don't have to be any different. Some may argue that they can't be modular because of size and weight considerations. That's not true, companies have made modular phones. The Fairphone weighs about the same as the iPhone Pro Max, and in fact the Fairphone is marginally lighter. Shiftphone weighs 19g less than the iPhone 11. But no one can make a logic board for an iPhone, because it uses a CPU that Apple won't license to anyone else. Even if you could make a board that fits in an iPhone chassis and could source memory chips and a baseband modem and so on, you can't get the CPU. And then iOS is tied to that CPU. That's why you can't get a replacement iPhone logic board from Gigabyte or run iOS on a Fairphone. It's not because Gigabyte doesn't know how to solder chips to a logic board or make one in the right shape to fit in the chassis, and it's definitely not because they don't want to take your money.
  - qwytw 3y ago
    It's unfortunate that more innovation in the phone and laptops sectors has been driven by Apple than every other business. If you have a sector/market where everything is open and interchangeable you both can't (smaller profit margins) and don't want to (you'll only have an advantage over your competitors for a very short period) invest too much resources into innovating.
- qwytw 3y ago
  > but prices being a function of supply and demand is always the case regardless of how many buyers and sellers there are. Well technically.. but if we're talking about certain inelastic markets a minimal adjustment in supply can result in a significant increase in price (well it's the other way around to be fair). Monopolies and oligopolies do and did exist. If the government can increase supply by finding ways to increase competition that's great. If that fails price controls are a less optimal solution, sure. But they can still work perfectly fine in some cases (as long as the producer is allowed to keep some surplus there is not financial reason to reduce supply). In non-temporary cases were it would be justifiable in my opinion: "sustainable businesses get driven out of business, misallocation of resources due to erroneous price signals hampering future investment in that field, etc." are not actual issues because none of that is happening anyway, the producer has no incentives to invest anything into future improvements all the funds get absorbed by it's shareholds or the administrative apparatus. Or in some other cases it might make more sense for the government to do all that itself through targeted subsidies or concessions (.e.g. should consumers be charged fair market prices for public transport?)
  - lotsofpulp 3y ago
    > are not actual issues because none of that is happening anyway, the producer has no incentives to invest anything into future improvements all the funds get absorbed by it's shareholds or the administrative apparatus. I disagree, there is huge misallocation of resources. For example, medicine, housing, transportation, etc. And as you mention, the problem is monopoly and oligopoly, which is insufficient supply of sellers. So society can choose to fund taxpayer funded R&D for medicine that is in the public domain, or technology, or use land value taxes to disincentivize large landlords, or landlords at all. The point of my original claim though is that price should only be used as a signal of which way society needs supply and demand to go. Another way of saying which way society needs goods and resources to be allocated. Directly controlling price will always lead to corruption and inefficiencies.
    - qwytw 3y ago
      > Directly controlling price will always lead to corruption and inefficiencies. So does allowing monopolies or oligopolies to abuse their position. I mean obviously price controls are not the perfect solution and should only be the last resort but I don't see how forcing a monopoly to share some it's surplus with consumers could have a negative outcome if the price cap is set at such a level that it would not affect actual supply. > And as you mention, the problem is monopoly and oligopoly, which is insufficient supply of sellers. In certain markets that's unavoidable. Should we have multiple competing power grids, train/metro tracks, water supply or sewage networks etc? Probably not since that would be very inefficient. In these situations the only reasonable option is price controls (without or without subsides) and I can't think of any other solution.

by qwytw 3y ago

lotsofpulp 3y ago

Perfectly competitive markets are required for the lowest sustainable prices, but prices being a function of supply and demand is always the case regardless of how many buyers and sellers there are. >There might be enough surplus so that the effect of price controls on supply would be minimal "Might" being the operative word. Other things that might happen is sustainable businesses get driven out of business, misallocation of resources due to erroneous price signals hampering future investment in that field, etc. The error free solution to achieving lower prices is to increase supply and decrease demand, which are many times politically unachievable due to them requiring sacrifices (higher taxes, lower consumption, etc).

AnthonyMouse 3y ago
> The error free solution to achieving lower prices is to increase supply and decrease demand, which are many times politically unachievable due to them requiring sacrifices (higher taxes, lower consumption, etc). But in this case the lack of supply is due to a lack of competition, as a result of vertical integration. Suppose you want a logic board for your PC. Well, it's not a secret what goes in it. It's got a circuit board, a processor socket, some memory slots, a network port, etc. If you have an Asus board and it goes bad or you need one with more memory slots, you can go buy another one from Asus, or you can get one from Gigabyte or ASRock or Supermicro that can be mounted in the same chassis and use the same processor, memory and storage devices. Phones don't have to be any different. Some may argue that they can't be modular because of size and weight considerations. That's not true, companies have made modular phones. The Fairphone weighs about the same as the iPhone Pro Max, and in fact the Fairphone is marginally lighter. Shiftphone weighs 19g less than the iPhone 11. But no one can make a logic board for an iPhone, because it uses a CPU that Apple won't license to anyone else. Even if you could make a board that fits in an iPhone chassis and could source memory chips and a baseband modem and so on, you can't get the CPU. And then iOS is tied to that CPU. That's why you can't get a replacement iPhone logic board from Gigabyte or run iOS on a Fairphone. It's not because Gigabyte doesn't know how to solder chips to a logic board or make one in the right shape to fit in the chassis, and it's definitely not because they don't want to take your money.
- qwytw 3y ago
  It's unfortunate that more innovation in the phone and laptops sectors has been driven by Apple than every other business. If you have a sector/market where everything is open and interchangeable you both can't (smaller profit margins) and don't want to (you'll only have an advantage over your competitors for a very short period) invest too much resources into innovating.
qwytw 3y ago
> but prices being a function of supply and demand is always the case regardless of how many buyers and sellers there are. Well technically.. but if we're talking about certain inelastic markets a minimal adjustment in supply can result in a significant increase in price (well it's the other way around to be fair). Monopolies and oligopolies do and did exist. If the government can increase supply by finding ways to increase competition that's great. If that fails price controls are a less optimal solution, sure. But they can still work perfectly fine in some cases (as long as the producer is allowed to keep some surplus there is not financial reason to reduce supply). In non-temporary cases were it would be justifiable in my opinion: "sustainable businesses get driven out of business, misallocation of resources due to erroneous price signals hampering future investment in that field, etc." are not actual issues because none of that is happening anyway, the producer has no incentives to invest anything into future improvements all the funds get absorbed by it's shareholds or the administrative apparatus. Or in some other cases it might make more sense for the government to do all that itself through targeted subsidies or concessions (.e.g. should consumers be charged fair market prices for public transport?)
- lotsofpulp 3y ago
  > are not actual issues because none of that is happening anyway, the producer has no incentives to invest anything into future improvements all the funds get absorbed by it's shareholds or the administrative apparatus. I disagree, there is huge misallocation of resources. For example, medicine, housing, transportation, etc. And as you mention, the problem is monopoly and oligopoly, which is insufficient supply of sellers. So society can choose to fund taxpayer funded R&D for medicine that is in the public domain, or technology, or use land value taxes to disincentivize large landlords, or landlords at all. The point of my original claim though is that price should only be used as a signal of which way society needs supply and demand to go. Another way of saying which way society needs goods and resources to be allocated. Directly controlling price will always lead to corruption and inefficiencies.
  - qwytw 3y ago
    > Directly controlling price will always lead to corruption and inefficiencies. So does allowing monopolies or oligopolies to abuse their position. I mean obviously price controls are not the perfect solution and should only be the last resort but I don't see how forcing a monopoly to share some it's surplus with consumers could have a negative outcome if the price cap is set at such a level that it would not affect actual supply. > And as you mention, the problem is monopoly and oligopoly, which is insufficient supply of sellers. In certain markets that's unavoidable. Should we have multiple competing power grids, train/metro tracks, water supply or sewage networks etc? Probably not since that would be very inefficient. In these situations the only reasonable option is price controls (without or without subsides) and I can't think of any other solution.