Greedflation

I think the answer has less to do with traditional economic theory and more to do with behavioral factors. Customers perceive prices to be relatively less fair (leading to lower shopping intentions) when the motive is increased profits compared to some motive that is perceived to deal with increased costs or some other issue. When there is a wide increase in costs (especially one that is highly known by consumers but in which the consumer doesn't know your actual prices), you can increase prices on products without running into nearly the change in fairness perceptions, resulting in lower changes in shopping intention (essentially, lowering price sensitivity).

Add in the ability to implicitly collude through signaling (edit: which I see that you mentioned while I was typing this), and you have the possibility of this sort of thing happening.

 

I do agree supply side was a significant piece and you are seeing it abate. Capital owners piled on.

Demand increase from stimulus was a one time bump gone in weeks not a major or long lasting impact. Not like 3 years later it’s still in the market.

 

That could be, but it seems there is lower hanging behavioral fruit. If you think prices will be higher in the future, what are going to do now?

 

But, you are ignoring the role of expected inf on demand. That was 1 of the FEDs biggest concerns just months ago, & probably still is. Pretty much every house that's sold in Ft. Collins in recent years, has gone well above the asking price......those damn greedy sellers!

 

You are assuming you need more concentration to collude more. In post pandemic there was massive unorganized collusion.

Also your insults are childish. You’ve been wrong on this and the data is pouring out supporting it. I’ve linked credible studies before.

 

Housing is supply constraints. There isn’t enough housing.

 

You being the company or the consumer right now?

But I see where you are going with here and that could be true as well. My main point is that, setting aside the ethics debate, there would be some reasons that could suggest that companies utilized inflation to raise their profits by engaging in increased pricing without cost increases. This likely was one of the factors that drove inflation across sectors that might not have been as affected by the initial supply chain issues.

 

well, there is empirical evidence & typically this a a major reason why folks advocate for anti-trust enforcement. 2nd, doesn't common sense tell you this? Third, wrong about what? I've repeatedly argued, that regardless of the many causes, we should raise rates.

 

What do you find unappealing about an increase in demand causing prices & profits to increase? You seem to think only 1 side of the mkt matters.

 

*Snooty Econ 101 response*

As I just said in another thread, is it greed when you choose a lower price, but could afford a higher price? Is it greed when you don’t go to a local family business selling made is USA who charges more vs mega store selling stuff from China?

The whole notion of “greedflation” due to higher profits is just childish. Snooty enough for you?

 

I agree that all things being equal less competition raises collusion. Post pandemic all things weren’t equal. Massive shipping increases allowed companies to move prices early and farther in unison.

You’ve basically ridiculed any discussion that producers can move prices that drives short term profits that could multiply inflation impacts. In many industries 2 years is short term.

 

Seems you don’t like the name. Call it something else. Company profit increases impacted inflation by a large factor.

 

Mergers can provide economies of scale and larger companies have more price leverage on their suppliers. They also are more able to afford expensive technologies that can drive costs down. It isn’t just about profits.

We have been going towards megacorporatons for decades and inflation has been almost non existent until recently.

 

It certainly could matter. There are some factors that could explain higher demand (e.g., the propensity to engage in education/job training during the pandemic and the acceleration of labor shortages due to increased marginal retirements and deaths due to Covid), but I haven't seen huge evidence that points to that side being the primary driver. There were certainly consumption shifts, but I haven't seen huge evidence for cross-sector consumption expansion.

 

prices that a seller tries to charge are irrelevant. Asking ain't getting. The prices at which goods are exchanged are what matters & that involves consumers. Yes, I am ridiculing the notion of the all powerful seller that can change what they want. C'mon, we see huge demand despite crazy prices for non necessities. Book a ski trip.

 

No I don’t like the name. But also to me the whole discussion gets cause and effect backwards. It is supply and demand driven. Companies charge prices to optimize profits. That is what they are supposed to do.

 

There was absolutely increased demand for stuff during the pandemic. People were home and bought stuff from Amazon. The numbers were pretty striking.

Annual Retail Trade Survey Shows Impact of Online Shopping on Retail Sales During COVID-19 Pandemic

Then to a partial degree it went back to stores

https://www.wsj.com/articles/the-pa...push-all-shopping-online-it-didnt-11650081652

Both of those shifts contributed to inflation.

 

That isn't really evidence of increases in demand, just shifts in demand from one company to another. Why would shifting towards online (lowering sales offline) increase inflation while shifting to offline does as well? Shifts can cause category level price increases (and decreases), but there is no reason to suspect that they caused overall inflation without a substantial acceleration in total spending, which the first link does not show.

 

the article which is the subject of this thread sez:

"Analysis of the financial accounts of many of the UK’s biggest businesses found that profits far outpaced increases in costs, helping to push up inflation last year to levels not seen since the early 1980s."

Seems like pretty good evidence of an increase in demand, no?

 

GDP barely decreased in 2020, and in 2021 substantially increased over 2019. Demand definitely increased. Government spending/deficits and money supply increased substantially. That money has to go somewhere.