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Interesting read, good to see information on it from the German perspective, as the phenomenon seems to be playing out in most of the West. Weber has been fair

Interesting read, good to see information on it from the German perspective, as the phenomenon seems to be playing out in most of the West. Weber has been fair vocal about the directionality here: https://www.newyorker.com/news/persons-of-interest/what-if-were-thinking-about-inflation-all-wrong https://www.newyorker.com/news/persons-of-interest/what-if-w... With an interesting take on why it is occurring now (contrasting coming out of the pandemic & coming out of WW2, where industry needs to rejig supply lines, different things are in different places profitability wise). Meanwhile, most of the wage-price spiral talk has been coming under a lot of fire, from both the right and left of economics. For instance, the Libertarian / right Cato Institute: https://www.cato.org/commentary/wage-price-spiral-explanation-inflation-dangerous-myth https://www.cato.org/commentary/wage-price-spiral-explanatio... or an Australian thinktank's take: https://www.theguardian.com/business/2023/feb/24/an-economic-fairytale-australias-inflation-being-driven-by-company-profits-and-not-wages-analysis-finds https://www.theguardian.com/business/2023/feb/24/an-economic... while the Australian Treasurer says similar things: https://www.smh.com.au/politics/federal/australians-hit-by-largest-fall-in-real-wages-on-record-20230222-p5cmhn.html https://www.smh.com.au/politics/federal/australians-hit-by-l... and the IMF struggled to find good evidence of them: https://www.imf.org/en/Publications/WP/Issues/2022/11/11/Wage-Price-Spirals-What-is-the-Historical-Evidence-525073 https://www.imf.org/en/Publications/WP/Issues/2022/11/11/Wag... These critiques have been glad to see, given it seemed everyone seemed to want to blame workers in the first instance, when they are still doing just a lot of catch up with their household inputs. Of course, even Cost-push inflation itself is poo-pooed as an idea by lots of mainstream economists (like Milton Friedman and co), so this pressure on greedy companies (which I think is their default position) might find a better audience (although Friedman would just say, where is the extra quantity of money coming from). The mainstream media seem to throw everyone under the bus as they try and write an article about whichever statistical release happened on any given day, but I'll take greedy companies over greedy workers for today.

USB5 3y ago
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zwieback 3y ago
This seems like a pretty good take [PDF] from the Kansas City Fed: https://www.kansascityfed.org/Economic%20Review/documents/9329/EconomicReviewV108N1GloverMustredelRiovonEndeBecker.pdf https://www.kansascityfed.org/Economic%20Review/documents/93...
remich 3y ago
The whole wage-price spiral theory is such bunk. The last time we in the U.S. saw significant inflation that could be directly tied to that was a time when union membership was at a much higher % of the workforce, and many unions had clauses in their CBAs that _automatically_ triggered wage increases in response to inflation. The economy in the U.S. is in such a different place now, falling back to that explanation seems almost like intellectual malpractice.
- bboygravity 3y ago
  Anything goes to have the public look away from the government's insane over-spending. Enabled by central banks.
  - nerdponx 3y ago
    This is a non-sequitur.
- roughly 3y ago
  The wage-price spiral theory is the sort of thing that would lead to a boom in the guillotine supply industry if it were more widely known or understood. “Worker wages going up is intrinsically bad and should be fought by intentionally causing a recession and putting people out of work” is the kind of thing economists can say out loud in public because there’s no such thing as class solidarity outside the billionaire class anymore.
resolutebat 3y ago
The concept of "greedy companies" is IMHO counterproductive. If a kid is being greedy, and that's the default state for a young child, you tell them to share and eventually they learn to do so (well, most of us, anyway) because it's in their best interest to do so. But companies are explicitly designed from the ground up to maximize profits at the expense of everything else, to the point where they get sued if they don't maximize shareholder value. So of course they're going to be "greedy" and yank up prices as much as they can, and telling them to "share" is going to accomplish nothing: it's going to need much more fundamental reforms to actually change the way they're incentivized to operate.
- kwhitefoot 3y ago
  > to the point where they get sued if they don't maximize shareholder value. I'm pretty sure that 'maximizing shareholder value' is not a requirement for a company. Not even in the US. > they get sued I've seen this claim before but no one ever provides a link to any cases. So, do they? Are there any easily accessible descriptions of such events?
  - Quarrel 3y ago
    In the US, Director's have a fiduciary duty to the company, and in particular a duty of loyalty. The duty of loyalty largely means that you must act in the interests of the company and its shareholders- this is where I think most people get to the 'maximizing shareholder value'. However, afaik, as long as you act in good faith, and take due care, then I don't think there is any case law saying that if you decided that a lower profit margin (for instance), would be better for the company long term, even if some shareholders disagree, that you'd have any issues. (ie, I think you're correct, it is totally overblown on the net that they MUST MAKE MONEY)
    - wasimanitoba 3y ago
      That characterization might be over blown, but it's functionally equivalent to reality because hostile takeovers are a thing. Any board of directors that isn't ruthlessly maximizing profit is likely to be replaced by a temporary majority of anonymous shareholders with no attachment to the underlying company beyond whatever quick buck they can make off the stock.

USB5 3y ago

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zwieback 3y ago

This seems like a pretty good take [PDF] from the Kansas City Fed: https://www.kansascityfed.org/Economic%20Review/documents/9329/EconomicReviewV108N1GloverMustredelRiovonEndeBecker.pdf https://www.kansascityfed.org/Economic%20Review/documents/93...

remich 3y ago

The whole wage-price spiral theory is such bunk. The last time we in the U.S. saw significant inflation that could be directly tied to that was a time when union membership was at a much higher % of the workforce, and many unions had clauses in their CBAs that _automatically_ triggered wage increases in response to inflation. The economy in the U.S. is in such a different place now, falling back to that explanation seems almost like intellectual malpractice.

bboygravity 3y ago
Anything goes to have the public look away from the government's insane over-spending. Enabled by central banks.
- nerdponx 3y ago
  This is a non-sequitur.
roughly 3y ago
The wage-price spiral theory is the sort of thing that would lead to a boom in the guillotine supply industry if it were more widely known or understood. “Worker wages going up is intrinsically bad and should be fought by intentionally causing a recession and putting people out of work” is the kind of thing economists can say out loud in public because there’s no such thing as class solidarity outside the billionaire class anymore.

resolutebat 3y ago

The concept of "greedy companies" is IMHO counterproductive. If a kid is being greedy, and that's the default state for a young child, you tell them to share and eventually they learn to do so (well, most of us, anyway) because it's in their best interest to do so. But companies are explicitly designed from the ground up to maximize profits at the expense of everything else, to the point where they get sued if they don't maximize shareholder value. So of course they're going to be "greedy" and yank up prices as much as they can, and telling them to "share" is going to accomplish nothing: it's going to need much more fundamental reforms to actually change the way they're incentivized to operate.

kwhitefoot 3y ago
> to the point where they get sued if they don't maximize shareholder value. I'm pretty sure that 'maximizing shareholder value' is not a requirement for a company. Not even in the US. > they get sued I've seen this claim before but no one ever provides a link to any cases. So, do they? Are there any easily accessible descriptions of such events?
- Quarrel 3y ago
  In the US, Director's have a fiduciary duty to the company, and in particular a duty of loyalty. The duty of loyalty largely means that you must act in the interests of the company and its shareholders- this is where I think most people get to the 'maximizing shareholder value'. However, afaik, as long as you act in good faith, and take due care, then I don't think there is any case law saying that if you decided that a lower profit margin (for instance), would be better for the company long term, even if some shareholders disagree, that you'd have any issues. (ie, I think you're correct, it is totally overblown on the net that they MUST MAKE MONEY)
  - wasimanitoba 3y ago
    That characterization might be over blown, but it's functionally equivalent to reality because hostile takeovers are a thing. Any board of directors that isn't ruthlessly maximizing profit is likely to be replaced by a temporary majority of anonymous shareholders with no attachment to the underlying company beyond whatever quick buck they can make off the stock.