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On a market with free pricing there are, pretty much by definition, no shortages or surpluses. Instead prices go up or down until supply and demand meet. So t

On a market with free pricing there are, pretty much by definition, no shortages or surpluses. Instead prices go up or down until supply and demand meet. So talking about "shortages" in this context doesn't really make sense to me. Yet that's the terminology in this field, and the resulting confusion is unavoidable.

jltsiren 2y ago
A shortage is a situation, where the market cannot bring high prices down by increasing the supply. For example, if software engineers earn more than equally demanding roles in other engineering fields and the situation persists long enough, there is a shortage of software engineers.
- lastiteration 2y ago
  Who decides if the price is high or low? That should be the market. High salaries -> more people decide to pursue it as a career -> more competition -> lower salaries. They are trying to force salaries down quicker
cherryteastain 2y ago
> On a market with free pricing there are, pretty much by definition, no shortages or surpluses. Remember the "chip shortage" all throughout the pandemic? It's not like the whole world switched to a Soviet style command economy between 2020 and 2022 yet we still had it.
- whaleofatw2022 2y ago
  "Free market" folks tend to ignore the ladder-pulls and existing regulations that make it a non-free market.
- BurningFrog 2y ago
  That's an interesting case! ChatGPT mentions some factors for why suppliers didn't just raise prices until the demand met the supply: 1. The industry often has long term contracts that fixes prices months or years in advance. 2. Even without such contracts, the value of stable, long-term relationships with major customers made suppliers keep prices stable. 3. Governments intervened to prevent "price gouging" for favored industries, and even without such intervention, perceived price gouging can be more damaging long term than is made up for by near term profits. So you're right that there was a real shortage for a time. But note my original caveat: "On a market with free pricing". Unfree pricing (contracts/regulation) was one factor. But PR considerations, which I admit I didn't think of, was also a factor. So I learned something here!
- JSteph22 2y ago
  This example proves OP's point. It was only a "shortage" in name. If you were willing to pay more than the market rate, there was no problem in finding chips.

jltsiren 2y ago

A shortage is a situation, where the market cannot bring high prices down by increasing the supply. For example, if software engineers earn more than equally demanding roles in other engineering fields and the situation persists long enough, there is a shortage of software engineers.

lastiteration 2y ago
Who decides if the price is high or low? That should be the market. High salaries -> more people decide to pursue it as a career -> more competition -> lower salaries. They are trying to force salaries down quicker

cherryteastain 2y ago

> On a market with free pricing there are, pretty much by definition, no shortages or surpluses. Remember the "chip shortage" all throughout the pandemic? It's not like the whole world switched to a Soviet style command economy between 2020 and 2022 yet we still had it.

whaleofatw2022 2y ago
"Free market" folks tend to ignore the ladder-pulls and existing regulations that make it a non-free market.
BurningFrog 2y ago
That's an interesting case! ChatGPT mentions some factors for why suppliers didn't just raise prices until the demand met the supply: 1. The industry often has long term contracts that fixes prices months or years in advance. 2. Even without such contracts, the value of stable, long-term relationships with major customers made suppliers keep prices stable. 3. Governments intervened to prevent "price gouging" for favored industries, and even without such intervention, perceived price gouging can be more damaging long term than is made up for by near term profits. So you're right that there was a real shortage for a time. But note my original caveat: "On a market with free pricing". Unfree pricing (contracts/regulation) was one factor. But PR considerations, which I admit I didn't think of, was also a factor. So I learned something here!
JSteph22 2y ago
This example proves OP's point. It was only a "shortage" in name. If you were willing to pay more than the market rate, there was no problem in finding chips.