Unchecked corporate pricing power is a factor in US inflation

This is auction-style pricing. Good for lumber and some other commodities, but not great if you want to buy eggs, bread, medicine, or gas on the way to work.

>We always sell to the highest bidder. I have no idea how we'd even do it otherwise -- a lumber lottery? All of this reporting about corporate greed is truly dumb.

Well, the other way to sell it is to put a price on it and sell it to the first person willing to pay that price!

You mentioned that you have a lot of competition. That along with auction-style pricing will normally get very close the the WTP ("ideal") price of a product. This is not always possible. It is usually difficult to dial in the "right" price of a consumer product. They can just not buy your chips or cheese! It is no big issue for them and the psychological effect of raising prices for no reason will cause just that reaction. That is why shrinkflation has been a thing.

Imagine having to outbid someone at the grocery store for milk. Or having to outbid someone at the pharmacy for your child's insulin. You can see why certain products cannot be sold to people that way.

Another way of looking at this whole situation is that every company is greedy to some extent. Pricing is hard. And they took advantage of certain events and situations to try new pricing. Many lied about why (claiming supply issues, because saying "we just want more of your money" doesn't sit well with people), which is not cool. If the new pricing sticks then it is probably closer to the "real" price. If it is too high, people will not buy the products and the price may go back down. I say "may" because there is always the possibility that selling fewer items at a higher price might produce more end profit than selling more items at a lower price.

I remember that the day before gmail went into beta, yahoo mail was charging 25 dollars a month for 100mB of storage. Gmail went beta and offered 1 GB for free, and the next day, yahoo mail offered the same thing. They always could have done that, they just had no competition to force them to do it. So they charged artificially inflated prices.

This is what many older people don't understand. Back when they were young, there were many competing businesses in many fields, but now, there are often one or a small number, and they engage in widespread price gouging. Because they can.

This is the natural evolution of a capitalist economy- no conspiracy is required. The point of competition is, after all, to win, and after you win, you get to set the price of goods and services to be whatever you want it to be. Just ask Martin Skreli. Price fixing in this country is ubiquitous and standard practice. In that case, sometimes the government can step in and introduce competition to a market where there is none- as California is doing to insulin- or they can regulate prices- as they do with power.

I mean its a real indictment of the state of America if a $1200 check can just radically reshape the economy. I guess its possible the even larger corporate checks were a factor here too, but I was really surprised that restaurants and other establishments didn't take the time as an opportunity to remodel or update, but obviously there was a lot of fear, probably a lack of willing workers, etc that prevented a lot of that.

As a personal anecdote, I didn't receive any stimulus funds of any sort, but thought a nice covid-safe project would be to get my driveway redone- its a pretty simple outdoor concrete driveway, but no one would do this in all of 2020. I still can't get anyone to do my punch list of small $5-15k projects.

Now, your iPhone, prescription drugs, favorite personal products, chicken, meat and eggs are a different story. These markets are controlled by a few dominant producers that distribute through tightly controlled retail markets and hold great pricing power.

There's all this reporting about corporate greed because the average person think corporations wouldn't do this, and that it is quite bad for corporations to do this.

Or that the media is making a mountain out of a molehill, like they often do.

I think rather than pricing regulation we just need better antitrust enforcement.

minimum wage in most places is still $7.25, and in some places as low as $2.13

It's pretty intuitive. If you're going to change the price due to an increase in costs, why not increase it a bit more and then just blame it on inflation?

Or, if costs come down later, why reduce prices unless you have to?

This is why inflation is can be so stubborn, increase costs in a single input can ripple though the system, then cycle back and increase costs even further (say cost of labor).

The reality is probably less than 10000 people globally control more than half the wealth in the world, these people control that wealth both individually (billionaires) and professionally (fund managers and board members). This is a result of unequal outcomes from the rise of globalization and the Internet. The world is a more interconnected place, including in finance and business, which squeezes out smaller players and rewards more handsomely cooperation on a global scale.

Nonetheless, all of the evidence, at least in the US, points to small business ownership as being one of the best pathways to financial independence and familial wealth. It is not necessary to create a globally recognized publicly traded company and to become a billionaire to set your family up for success in a way that is not open to most in the world, you can do this simply by finding a niche and excelling in either global niche markets or in your local market.

"Your pay is not tied to any cost of living index."

"Our costs have gone up so we're raising our prices."

Sigh

People pay for it because they don't have a choice.

>Change nothing, allowing the first customers to buy everything and leave shelves empty

The ridiculous economic rationalization. "Hey everyone, we increased the price by 30% so we keep more on the shelves by pricing out the lower/middle class!"

You sound like you are just out of a micro economics class and think everything "has to work this way". What you don't realize is that your ENTIRE MINDSET is viewed on MAXIMIZING PROFITS for that SPECIFIC CORPORATION and not the overall welfare of society. You also assume EVENLY DISTRIBUTED WEALTH if you are disregarding the welfare of society.

If I run a donut shop and can produce 100 donuts a day. According to you, the only way to run the business is to charge as much as possible to still sell ~100 donuts so I can make the most profit. What if by selling them at a reasonable price, everyone is able to afford them and we are still able to pay our workers and ourselves well? Gasp! Another solution presents itself which makes the overall society better off. It doesn't have to be about charging as much as possible, where that extra money will just go to the owner and not the workers anyway.

This is a common misconception. One big reason it's not true is because the vast majority of the wealth in the economy is stored in assets other than money (real property, stock, bonds, etc.), so doubling the money supply is very different from doubling the amount of wealth everyone has.

Now I imagine some might still be skeptical, but luckily this has been studied, and there are metrics like M2 that represent money supply. If you look at a graph of M2 vs inflation, they look pretty independent, and indeed studies have failed to find any statistically significant correlation between the two.

Politically, people can disagree with the lockdown, or later stimulus checks and later rounds of PPP.

But I have trouble critiquing the initial response in quickly getting money into the economy.

The study authors have a different answer about why than you do, though. What they are claiming is that in concentrated markets (like most markets are), shocks like the pandemic allow for firms to raise prices beyond their increased costs, and so increase profits. They have a very interesting graph of after tax profit margins showing that firms in the US are more profitable now than they have been for 70 years, in fact.

Then as inflation increased, companies used that as an excuse too. "We have to raise prices because of inflation! It's not our fault your wages aren't keeping up!" and people believed it even as companies were making money hand over fist and pulling in record profits.

But when Covid lockdowns forced temporary price increases, companies didn't see the backlash. And so they just continue to do it, knowing the average consumer has no choice in many cases.

If I raise my prices but my competitor down the road doesn't, then I probably lose. At the very least consumer watchdogs will be all over me.

The massive media blitz about how we're in a recession and facing hyper inflation is creating the perfect smokescreen. If I raise my prices now, in current climate, ky competitors will likely follow suit. Because we all know we can get away with playing dumb and pretending it's just inflation.

/s

It's all pretty silly.

I can go to the store and buy a TV for half of what it cost me 5 years ago, even with inflation.

Companies push prices down as well as up.

Not that shame was a huge pressure in 2019, but it's even less of one now.

Some percentage of people, even here on this very site, will argue with these conclusions, and say it's the pandemic, or wage pressure, or anything but pricing power, and that percentage of people is higher today than it has been in the past.

The pandemic and political environment provides an excuse that wasn't handy in 2019. The political environment provides cover. The naked greed has always been there (the motive), but the means and opportunity are stronger today than before.

How does corporate taxation reduce inflation?

I have a very hard time believing that most people in the US simply have too much money. I suspect that most people are struggling, and were struggling even before the pandemic and that people's standard of living is declining, their debit is climbing, and they are just a few missed paychecks away from disaster.

I think that as the pandemic situation improved, people were simply desperate for a sense of normalcy and for the things they'd gone without and they spent more than they could afford, even going farther into debt.

It wasn't "but it is a few extra bucks I can afford right now, and things will eventually calm down" it was "this is more than I can afford, but I need it, and I deserve it, and the world is burning anyway so fuck it". I think to a lesser extent that mentality is still going on, but people are suffering heavily under the increased costs of rent, food, and everything else. Evictions and bankruptcies are increasing and homelessness is rising (https://www.huduser.gov/portal/sites/default/files/pdf/2022-...) and has been for years.

I can't say to what extent greed is the cause of inflation, but I'm pretty confident it's a bigger factor than how much money most Americans are comfortably sitting on.

In supermarkets I noticed a surplus on top of inflation, and my thought was that people would swallow that because their reference frame for proper pricing was out the door. So they wouldn't notice the surplus, blaming all to inflation. And subsequently getting used to new above-inflation levels as their new reference.

I'd also guess we get supermarket price wars, when inflation get under control, whereby the supermarkets keep their extra margins and pressure the supply chain below to get prices down.

I don't think businesses, or rather the boards and shareholders that run them, care about sustainability - especially if it has a neutral (or, god forbid, negative) impact on short term growth-of-growth or stock prices. If a business goes under because of a lack of sustainable practices, everyone just moves on to a different company.

I'm starting to think that anymore if you want a sustainable business, you can't go public.

Relevant quote: "In contrast, we argue that the US COVID-19 inflation is predominantly a sellers’ inflation that derives from microeconomic origins, namely the ability of firms with market power to hike prices."

Personally I'm glad we're not. Some things are more important than making as much money as possible, and democracy/self-determination is one of them. It's a terrible message to send if you say that democracy is important, unless you manage to hurt our economy then we'll support anything that gets us back to the status quo growth trajectory.

I know that might be controversial and I'm certainly not suggesting that the US is consistent in it's application of these ideals, but at least today it's nice to see us not immediately roll over once there start being 2nd- and 3rd-order economic impacts.

In that context, raising interest rates to combat "wage inflation" seems misguided.

Edit:

> Before May 2020, M1 consists of ... (3) other checkable deposits (OCDs), consisting of negotiable order of withdrawal, or NOW, and automatic transfer service, or ATS, accounts at depository institutions, share draft accounts at credit unions, and demand deposits at thrift institutions.

> Beginning May 2020, M1 consists of ... (3) other liquid deposits, consisting of OCDs and savings deposits (including money market deposit accounts).

> Seasonally adjusted M1 is constructed by summing currency, demand deposits, and OCDs (before May 2020) or other liquid deposits (beginning May 2020), each seasonally adjusted separately.

This means the balance of all savings accounts was added to M1 beginning may 2020. If you want to look at "money printed", look at M2. AIUI the definition of M2 was not changed that date and you can indeed see some ~2 trn covid stimulus spread out over a few months in M2.