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I think there's a bit of Goodhart's law when it comes to inflation (When a measure becomes a target, it ceases to be a good measure), and honestly it's one of t

I think there's a bit of Goodhart's law when it comes to inflation (When a measure becomes a target, it ceases to be a good measure), and honestly it's one of the most BS of statistics. Clearly inflation is now because companies are raining prices. But is it because of costs, or profiteering?

lotsofpulp 3y ago
This is easily determined by looking at changes in net profit margins, at least for publicly listed companies with public financials. One source of data that might be useful is this: https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/margin.html https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile... I find it especially funny when people complain about retailers “profiteering” when their net profit margins are as low as ever in the low single digits. Edit: here is an updated report of profit margin changes over time by industry: https://www.yardeni.com/pub/sp500margin.pdf https://www.yardeni.com/pub/sp500margin.pdf Edit 2: nvm, above link is not so useful since it is showing operating profit margin, not net profit margin
refurb 3y ago
Clearly inflation is now because companies are raining prices. That isn't clear at all. If companies are raising prices, why didn't they raise them before?
- hsjqllzlfkf 3y ago
  I think that the argument is A) in a stationary scenario a company can't raise its prices arbitrarily because it will lose market share to its compatitors. Competition keeps prices low benefiting consumers while investors still get some profit. Capitalism works great! B) on sudden changes, textbook conclusions can't be trusted because they are arrived at for stationary scenarios 99.99% of the times, at least that's how I think. You have to go case by case and make your best judgement. The current narrative is that as consequence of the pandemic, when you have "supply chains are collapsing" fearmongering, even if partially true, sellers figured that customers would be more tolerant to price raises, or at the very least, that their competitors would reason in the same way and so everyone can raise their prices and customers don't have a choice anyway. Personally I find it believable that companies would make such a calculation.
  - refurb 3y ago
    Ok, but what changed with scenario A? Monetary inflation! If the argument is that inflation drives prices up, which allows businesses flexibility to raise them even further, then I won't argue against that. But the price increases above inflation, aren't real inflation (which is defined by an across the board decrease in the value of money). The same thing happens when sales taxes are increased. Singapore just increase their GST and many businesses just increase prices well above the increase in tax.

lotsofpulp 3y ago

This is easily determined by looking at changes in net profit margins, at least for publicly listed companies with public financials. One source of data that might be useful is this: https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/margin.html https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile... I find it especially funny when people complain about retailers “profiteering” when their net profit margins are as low as ever in the low single digits. Edit: here is an updated report of profit margin changes over time by industry: https://www.yardeni.com/pub/sp500margin.pdf https://www.yardeni.com/pub/sp500margin.pdf Edit 2: nvm, above link is not so useful since it is showing operating profit margin, not net profit margin

refurb 3y ago

Clearly inflation is now because companies are raining prices. That isn't clear at all. If companies are raising prices, why didn't they raise them before?

hsjqllzlfkf 3y ago
I think that the argument is A) in a stationary scenario a company can't raise its prices arbitrarily because it will lose market share to its compatitors. Competition keeps prices low benefiting consumers while investors still get some profit. Capitalism works great! B) on sudden changes, textbook conclusions can't be trusted because they are arrived at for stationary scenarios 99.99% of the times, at least that's how I think. You have to go case by case and make your best judgement. The current narrative is that as consequence of the pandemic, when you have "supply chains are collapsing" fearmongering, even if partially true, sellers figured that customers would be more tolerant to price raises, or at the very least, that their competitors would reason in the same way and so everyone can raise their prices and customers don't have a choice anyway. Personally I find it believable that companies would make such a calculation.
- refurb 3y ago
  Ok, but what changed with scenario A? Monetary inflation! If the argument is that inflation drives prices up, which allows businesses flexibility to raise them even further, then I won't argue against that. But the price increases above inflation, aren't real inflation (which is defined by an across the board decrease in the value of money). The same thing happens when sales taxes are increased. Singapore just increase their GST and many businesses just increase prices well above the increase in tax.