Greedflation

[Cheerful Charlie]

Greedflation caused high inflation.

.....
Excessive profits were even larger in the US, where many important sections of the economy are dominated by a few powerful companies.

This surge in profits happened as wage increases largely failed to keep pace with inflation, and workers suffered their largest fall in disposable incomes since the second world war.
......

Greedflation: corporate profiteering ‘significantly’ boosted global prices, study shows

Multinationals in particular hiked prices far above rise in costs to deliver an outsize impact on cost of living crisis, report concludes

www.theguardian.com

 

[Derec]

According to Grauniad. But that's not how inflation works. Profits increased because of inflation - they were not the cause of it.

 

[Politesse]

According to Grauniad. But that's not how inflation works. Profits increased because of inflation - they were not the cause of it.

I assume we're meant to just take your word for this?

 

[Derec]

Neither should you take Grauniad's word for it - they have an ax to grind.

We went over this in some detail when the high inflation was happening. Prices are determined by supply and demand, not cost plus. That's where attempts at analysis like Grauniad's fail. They fundamentally misunderstand how economics works.

 

[Cheerful Charlie]

The Guardian article references a number of studies on greedflation. And googling greedflation demonstrates that this practice has not gone unnoticed and analyzed by economic experts. Knee jerk naysayers on the far right refuse to examine the facts.

 

[laughing dog]

Neither should you take Grauniad's word for it - they have an ax to grind.

We went over this in some detail when the high inflation was happening. Prices are determined by supply and demand, not cost plus.

What makes you think that supply is not influenced by cost-plus?

 

[bilby]

Prices are determined by supply and demand, not cost plus.

Only in an idealised economy with universal access to perfect information, and rational actors attempting to maximise their self-interest.

In the real world, almost all prices are set on a cost plus basis, by managers who are guessing that their competitors will be doing much the same; And it's not uncommon (despite being illegal) for those managers to collude to ensure that their actions are matched by those of their major competitors.

In my direct experience in a real manufacturing company with hundreds of product lines, prices are set by approximating COGS and adding a margin. I have zero reason to expect that that particular company was abnormal in this regard.

They fundamentally misunderstand how economics works.

Economics doesn't work. It's called "The dismal science" for a reason.

On average, much of the time, if we take a look at very long term trends (greater than a decade), many of the economic principles (such as "supply and demand") give us fairly good predictions for most industries.

This in no way implies that "Prices are determined by supply and demand" is an accurate statement about specific cases, or about short to medium term trends, or about, really, anything that anyone other than macroeconomic theorists care a jot about.

Certainly it gives zero comfort or assistance to the average grocery shopper, and it bears zero resemblance to anything done by the managers who decide what numbers should appear on the price tags in the supermarket.