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'Greedflation' study finds many companies were lying to you about inflation
- bediger4000 3y agoWhy were they able to get away with it? Market forces should prevent this.
- FirmwareBurner 3y agoWhich market forces in a monopoly>
- neodymiumphish 3y agoWhere's there a monopoly?
- a_gnostic 3y agoJust off the top of my mind: IP, entry, justice, and enforcement of these. Non exhaustive, tbs.
- neodymiumphish 3y agoWho specifically has a market on which industry?
- a_gnostic 3y agoThe things I listed are enforced by government, resulting in monopolies.
- neodymiumphish 3y agoAh, gotcha. I was responding to a comment which suggested that there was a lack of market forces due to the existence of monopolies, which makes very little sense in the context of the OP.
- quantified 3y agoExcept for oligopolies. Competitors match each others' price rises too sometimes. Why compete too hard when everyone can make more profit?
- contravariant 3y agoMarket forces only provably work in a steady state. Unsurprisingly they're not that good at dealing with sudden swings.
- recursivedoubts 3y agoMaybe you were lied to about how "market forces" work?
- SSchick 3y agoI think they were being sarcastic.
- recursivedoubts 3y agoa possibility, but we can't be too safe!
- HighFreqAsuka 3y agoThere's a theory, price-over-volume, that the sudden shift in demand and expectation of inflation gave companies room to explore a different point on the revenue curve, where they increase the price and simply sell less volume. Prior to the pandemic this was risky and people assumed they were near optimal already. During the pandemic a bunch of companies learned they could push on price, sell less, but still make more revenue. All companies did this independently and simultaneously so the usual competitive effects didn't kick in. And now we're at a new equilibrium that the few companies in each industry are happy with.
- listenallyall 3y agoPlenty of industries raised prices with very little effect on volume, however, it was not truly "independent", companies can easily coordinate by sending signals via forecasts, press releases, news leaks, etc. If P&G and Unilever both decide to raise the price of soap and toothpaste, are you going to shower or brush less? Meanwhile demand exploded on discretionary spending like travel, restaurants and recreation despite price increases.
- HighFreqAsuka 3y ago> however, it was not truly "independent", Of course I don't mean to imply they operate in a vacuum. They can obviously see competitors raising their prices. I just mean to say they don't get into a room and actively decide on a price.
- azinman2 3y agoExcept price fixing does occur. I’m not saying everything is the result of it, but they absolutely do.
- bugglebeetle 3y ago“Market forces” create monopolies that buy off politicians and entrench their price-fixing power.
- astrange 3y agoWithout looking it up, do you know what a monopsony is? If so, why are you claiming any given middleman business is only one of them and not the other? Since they have opposite effects. I also don't think the monopoly model applies outside industries like energy where there's obvious physical reasons to have one, but there are reasons it helps to grant one to a business in exchange for heavier oversight. It's hard to regulate a lot of small companies. In general though, "big monopoly corporations" causing everything is a leftover of 70s New Leftism, which was a failure and worse than their prior Marxist analysis.
- devindotcom 3y agoI can't tell if this is a joke!
- DannyBee 3y agoBecause free markets are not in fact efficient, despite economists really wanting them to be, and there is zero form of rigorous proof that they are.
- deleted 3y ago[deleted]
- rrrrrrrrrrrryan 3y agoNot sure if you're being sarcastic, but in case you weren't: Normally when a business raises costs, regular customers react by blaming the business and taking their business elsewhere. But when all your customers are reading headlines about inflation, you kind of get a free pass to raise prices on your customers, and direct their ire toward the ambiguous specter of "inflation", regardless of whether or not you actually need to raise prices. When your competitor across the street sees you do this, and sees your customers still patronizing your business, and your profits skyrocketing, they do the same. Some portion of inflation was real, but a nontrivial part was simple herd mentality by the businesses and using pricing psychology to exploit their customers' irrational decision making.
- beezlebroxxxxxx 3y agoThere's a famous saying in economics about market forces: > In the long run we're all dead.
- jauntywundrkind 3y agoWe need effective anti-trust regulation to keep markets competitive. And that hasn't been the case for decades. A huge % of the goods & services in this world are in the hands of a couple dozen massive conglomerates, after endless consolidation. This particular narrative seems so believable to me, that a couple companies lead the way jacking up prices in a time of crisis while bandying about shitty airless crap about inflation & costs while profits soared. The very big giants doing this set a precedent & narrative, created a vibe that could perpetuate & extend greedflation. The exact same hype & fury lead us to believe retail theft was astronomically worse: again, now that the chips are falling, we see: this was a boldfaced lie.
- didibus 3y agoThe linked study explains this, it's a mix-up of market power, global shake-ups, supply chain issues, and essential needs that affected normal market forces to self-regulate. You've got these big companies that dominate and make it tough for competitors to get a foot in the door. The pandemic threw supply chains into a tailspin, leaving folks with fewer choices and companies with the goods charging top dollar. Post Covid/Ukraine, these same companies found themselves suddenly holding all the cards, letting them hike prices. Everyone kinda expected to shell out more, because of the looming inflation, so companies were able to slide in bigger price tags under the radar. And this was all for stuff people can't live without, like energy, so they payed up even if it hurts. And it's not really clear to average folks what these companies real cost are, so it's easy to believe the price increase are all legitimate and due to some "real increase in cost".
- throwawaymanbot 3y ago[dead]
- friend_and_foe 3y agoMarket forces amount to "the price is what people are willing to pay." You dump a bunch of paychecks in the bank accounts of every american for 2 years, they're willing to pay more. All these arguments about the price going up due to money printing vs due to price gouging are a red herring. Whenever money is printed, capital gets soaked up by someone. When it's given to banks, they employ economists, so they soak up as much as they can. When it's given to regular people they thank their lucky stars that they can now afford what they're about to run to the store to blow it on, the people selling the things they want profit. Debasing the money always hurts the little guy, no matter whether he's the recipient of the newly minted money or not.
- drewcoo 3y agoThank goodness it's only consumers suffering, or market forces might have to bail someone out!
- lamontcg 3y agoDue to aggregate supply constraints due to the pandemic there were not enough aggregate goods. Also the pandemic dramatically constrained spending and increased savings, which then rebounded sharply after it was done, creating a tidal wave of aggregate demand. The result was rising prices. And that is against a background of 10 years of ZIRP and the government threw money at corporations through PPP and blunted the effect of the pandemic recession and we were clearly against the inflection point of the short-term phillips curve. Market forces should entirely predict all of this. (And companies are ALWAYS ALWAYS ALWAYS "greedy", the headline line should probably be something like "Millennials wake up one morning and discover how capitalism has worked all along [SHOCKED]").
- astrange 3y agoI can think of scenarios that explain this without the explanation being "corporate greed". eg if you had cheap suppliers and expensive suppliers, then the cheap ones went out of business, the expensive ones' profit would rise without their actively doing anything. That's what happened with eggs in the last year; the price went up because nearly all the suppliers' chickens caught bird flu and had to be culled. So the surviving ones made a lot of profit as a reward for still operating. But prices are back to normal now. Easier than explaining this: > Inflation is now beginning to regulate in most major economies and coming closer to most central banks’ targeted 2%. Some companies that previously passed rising costs on to customers to continue making a profit have now sought to repay them with price cuts. Good thing those companies that were greedy in 2021 are apparently negative greedy in 2023. I guess greedflation is transitory.
- stavros 3y agoWait, give me a minute, I think I might be able to come up with some explanation: Corporations inflated prices when they could get away with it, and deflated them when they no longer could. I think my explanation is actually easier than the supplier thing.
- AnimalMuppet 3y agoDefine "could get away with it". What normally prevents this is competition, not regulation. Normally, if someone raises prices of something like eggs "too far", then people buy their competitor's eggs. So "could get away with it" means that competition no longer prevented them from raising prices. So that brings you right back to the supplier thing, or something very much like it.
- s1artibartfast 3y agoOr consumer demand was a lot less price sensitive than it was in the past. I have enough money that when the price of eggs goes up, I grumble and buy them anyways. I dont skip the eggs and go buy dried beans.
- slibhb 3y agoIn every social mileu there are insane things that are commonly believed. Believing in "greedflation" is like believing in vaccine microchips.
- stavros 3y agoI see a lot of ultra-dismissive comments like yours whenever this is posted, but it seems to me like putting "believes there are microchips in vaccines" and "believes corporations will try to raise prices when they think they can get away with it" in the same league is a conversational gambit so daring that I have to wonder what your motives are.
- slibhb 3y agoMicrochips are actually a more defensible belief. I can deduce that inflation isn't caused by greed with an extremely basic knowledge of economics. Meanwhile, while it seems a priori extremely unlikely that Bill Gates has been spiking our vaccine supply, in order to actually disprove it, I'd need a microscope and some time.
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- hakdbha 3y ago[dead]
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- lm28469 3y ago> I can deduce that inflation isn't caused by greed with an extremely basic knowledge of economics Nobody is saying inflation doesn't exist. By your logic any price hike is to be accepted and not questioned because "basic economics"... You have a lot of faith in a lot of people who's sole purpose in life is to make more money than they did last year.
- CodeWriter23 3y agoWell I can’t actually read the study behind their paywall but I can tell you unless these so-called “scientists” got companies to open their books, they don’t know shit. And are also if ignoring the fact that every product or service requires energy, and energy prices are on the rise.
- dlp211 3y agoWTI crude has fallen for 7 weeks straight. NatGas futures have been in an unbelievable steady state at around $2.50-2.75 after coming down from pandemic highs. Why do you all insist on making shit up?
- astrange 3y agoThis is true but inflation isn't happening right now either, it mostly already happened. There were a lot of other supply interruptions; one is Ukraine produces a lot of wheat, but also neon gas, which is needed for computer chip fabs.
- CodeWriter23 3y ago146 > 7 and have not yet settled back to Jan 2021 levels and won’t until Trump is re-elected.
- xcv123 3y ago> unless these so-called “scientists” got companies to open their books, they don’t know shit Public companies. Publicly available information.
- didibus 3y agoThis is the study link: https://www.ippr.org/files/2023-12/1701878131_inflation-profits-and-market-power-dec-23.pdf https://www.ippr.org/files/2023-12/1701878131_inflation-prof... > And are also if ignoring the fact that every product or service requires energy, and energy prices are on the rise The study tackles this head on. It mentions that the rise in energy prices due to the invasion of Ukraine is one of the initial triggers of high inflation, but that market power held by some corporations in certain sectors, including energy, amplified the inflationary effects of these initial triggers. Resulting in price increases peaking higher and remaining more persistent than they would have been in a market with less corporate market power. Basically, it says there shouldn't have been this much inflation, but it got amplified because of lack of competition, and of being able to justify price hikes due to customers expecting there to be inflation. They talk about the energy sector specifically, and how their costs did not increase, but they found themselves in a position of market dominance, where they could raise prices above their increase in cost and get away with it.
- abdullahkhalids 3y agoArchive: https://archive.ph/pkhfT https://archive.ph/pkhfT
- cosmin800 3y agoMoney printing? Anyone? Any link to inflation?
- astrange 3y agoFunny thing about this is 1. it certainly can be true. 2. but also if other countries print money, it can still cause inflation in your country. 3. and you can't stop them from doing that. So "don't do it" won't save you. You also need diplomacy and an army. Also, a better explanation of the theory isn't "money printing" but "higher money velocity" aka MV=PY, which is why it's managed with interest rate hikes.
- thegrim33 3y agoAny theory that suggests a grand conspiracy involving most of the companies in the country (and world) simultaneously all changing their behavior in an immoral way, in tandem, is a pretty much instant rejection for me.
- deleted 3y ago[deleted]
- xcv123 3y agoThe article is not making claims of any conspiracy. The companies can act individually to exploit a situation. Corporate greed. You're missing the context of higher reported inflation being used as an excuse to increase prices beyond what was necessary.
- deleted 3y ago[deleted]
- notadev 3y agoIt would only take a few of the 17 companies that own nearly everything to affect hundreds of millions of products worldwide. https://buildremote.co/companies/own-everything/ https://buildremote.co/companies/own-everything/
- nickff 3y agoThat article provides no data to show that the conglomerates mentioned “own nearly everything”. It would be quite easy to add up their US revenues and compare that number to US consumer spending, but they didn’t even bother. In addition to the post’s polemical nature, it is crammed full of pop-up autoplay ads.
- beebmam 3y agoPlenty of goods with substitutes (ex: fast food items) have increased substantially in price since the pandemic. People are more than willing to pay historically higher prices for plenty of items that could be replaced with cheaper items. If people are willing to pay these prices, why should companies not be raising their prices? There has been an enormous increase in net worth of all age brackets in the US in the last few years (as of 2022 data[1]), all data points adjusted for inflation. I think this is enough to explain why consumers are paying for these items. Feel free to experiment with this graph tool from the US Federal Reserve's website and please respond if you have any other explanations: 1. https://www.federalreserve.gov/econres/scf/dataviz/scf/chart/#series:Net_Worth;demographic:agecl;population:1,2,3,4,5,6;units:median https://www.federalreserve.gov/econres/scf/dataviz/scf/chart...
- strawhatguy 3y agoTerrible article, focused entirely on "bad" companies, and no words expended for the total disruption the lockdowns caused and bailouts that made such things not only possible, but inevitable. You can't shutdown all production plus pump money into it at the same time, and not expect inflation.
- didibus 3y agoActual study (super easy read): https://www.ippr.org/files/2023-12/1701878131_inflation-profits-and-market-power-dec-23.pdf https://www.ippr.org/files/2023-12/1701878131_inflation-prof...
- zxt_tzx 3y ago> While this obviously contributed to rising prices, the report finds that company profits increased at a much faster rate than costs did, in a process often dubbed “greedflation.” I think there is this expectation that companies "should" only raise prices necessary to cover their cost increases. But companies charge what the market can bear and, depending on the specific circumstances, this could be equal to, less than, or more than the cost increases. To use a HN-friendly example, let's say AWS cuts their EC2 costs. If you're providing an undifferentiated computation service using EC2, you'll likely have to cut your costs or you will lose all your business to your competitors. If you're providing a highly differentiated SaaS product, you can probably keep the cost savings to yourself. You can reason in the opposite direction for price hikes. Depending on the exact company in question, they could be in a privileged position of the supply chain or have marketing power that allows them to increase prices even more. One main difference here is price stickiness [1], i.e. prices tend to be fixed for a period of time, even if the underlying economics has changed. I think this is underlying reason for perceptions of "greedflation" because, during period of inflation, prices become less sticky and companies use this to adjust prices to better match the underlying economics. [1] https://en.wikipedia.org/wiki/Nominal_rigidity https://en.wikipedia.org/wiki/Nominal_rigidity
- cratermoon 3y ago"It's time we stopped believing in the Free Market Fairy." <https://bitworking.org/news/2008/01/the-free-market-fairy/ https://bitworking.org/news/2008/01/the-free-market-fairy/>
- felurx 3y agoIt still fucking sucks that price increases put even more pressure on people under and around the poverty line. The economy isn't just some abstract numbers game, there are real people living in it. The expectation that companies shouldn't juice more money out of customers who will suffer (or at the very least have to lower their living standards, which isn't as bad but is still not awesome) because of it is a very justified one.
- slibhb 3y ago
- friend_and_foe 3y agoInflation = prices going up. That's it's definition. "Prices aren't going up because of inflation" has got to be the dumbest talking point ever invented. Could there be a more transparent propaganda term than "greedflation"?
- gnabgib 3y agoA day ago: "Greedflation: Corporate profiteering 'significantly' boosted global prices,study"[0] (218 points, 172 comments, different URL, same source) [0]: https://news.ycombinator.com/item?id=38562946 https://news.ycombinator.com/item?id=38562946
- RickJWagner 3y agoGreedy corporations! If only there were some way for common people to share in the profits. Take a small ownership in the corporations. That would address so many issues!