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All the HN threads on this have people arguing from first principles about why this is impossible while all the CEOs are like, “LOL look at what we’re getting a

All the HN threads on this have people arguing from first principles about why this is impossible while all the CEOs are like, “LOL look at what we’re getting away with.” Textbook example of why business schools and economics are generally separate departments.

pjc50 3y ago
There are two "fixed views" that will come up here, regardless of evidence for or against: - hardcore monetarists who think that inflation is always and only a monetary phenomenon - hardcore Efficient Market Hypothesis believers who think that all markets are always perfectly efficient, so therefore all companies are always already charging profit-maximising prices (These come up every single time and are immune to evidence. Also a bunch of people are going to ignore the UK and Euro qualifiers of the OP article and talk about US inflation) Personally I'd like to offer a couple of extra lines of inquiry: labour market tightening due to COVID losses, and the impact of huge natural gas price spikes in Europe due to the war. See the IMF quote in OP: > "Rising corporate profits account for almost half the increase in Europe's inflation over the past two years as companies increased prices by more than spiking costs of imported energy. Now that workers are pushing for pay rises to recoup lost purchasing power" That presents a proposed mechanism for actual price changes ("menu reprinting" in economics jargon). Energy spike forces price rises -> once you're changing the prices, makes sense to change them by more than you need -> wages less elastic than consumer spending -> increased profits because prices have gone up faster than wage bills AND energy prices have now come down again.
- bugglebeetle 3y ago
  …sure, but this is essentially the same thing as greedflation. An exogenous shock created the circumstances for a price increase, but instead of restabilizing relative to inputs, companies decided (arguably conspired) to set this as a new price floor. And because of a lack of government regulation around monopolies and collusion, are getting away with doing so.

pjc50 3y ago

There are two "fixed views" that will come up here, regardless of evidence for or against: - hardcore monetarists who think that inflation is always and only a monetary phenomenon - hardcore Efficient Market Hypothesis believers who think that all markets are always perfectly efficient, so therefore all companies are always already charging profit-maximising prices (These come up every single time and are immune to evidence. Also a bunch of people are going to ignore the UK and Euro qualifiers of the OP article and talk about US inflation) Personally I'd like to offer a couple of extra lines of inquiry: labour market tightening due to COVID losses, and the impact of huge natural gas price spikes in Europe due to the war. See the IMF quote in OP: > "Rising corporate profits account for almost half the increase in Europe's inflation over the past two years as companies increased prices by more than spiking costs of imported energy. Now that workers are pushing for pay rises to recoup lost purchasing power" That presents a proposed mechanism for actual price changes ("menu reprinting" in economics jargon). Energy spike forces price rises -> once you're changing the prices, makes sense to change them by more than you need -> wages less elastic than consumer spending -> increased profits because prices have gone up faster than wage bills AND energy prices have now come down again.

bugglebeetle 3y ago
…sure, but this is essentially the same thing as greedflation. An exogenous shock created the circumstances for a price increase, but instead of restabilizing relative to inputs, companies decided (arguably conspired) to set this as a new price floor. And because of a lack of government regulation around monopolies and collusion, are getting away with doing so.