It seems these days we're ambivalent toward the production of stuff, or even antagonistic to it in many cases. So we have less stuff. Combine this with giving people more money and you get inflation.
I cannot emphasize this enough. Wealthy Western nations have been wealthy for so long that people know how to cut up the pie in different sizes more so than they know how to bake more.
Besides, even if we're generous and say that half of California is too mountainous to live in and another quarter is too desert-y to live in, leaving only a quarter of the state's area suitable for habitation, that leaves roughly 40 million people living in roughly 40,000 square miles, or about a thousand heads per square mile. That's comparable to Israel or Belgium in terms of population density, and certainly not as though people are packing into Kowloon.
A city in Japan would build new dense neighborhoods and a new commuter rail line to serve them. A city in California would refuse to build new homes nearby, so people are forced to live in a far-away suburb and commute 2 hours by car. Then Californians complain about increasing traffic congestion.
https://www.reddit.com/r/ImTheMainCharacter/comments/11aqayg...
Japanese people are NOTHING like Americans. Stop saying CA should build like Japan unless you're willing to kick out the loud assholes.
For example, just enabling additional supply can create second order effects in terms of perverse incentives to overproduce creating all sorts of knock-on effects. We can stimulate the supply of corn and end up with distorted food markets and high-fructose corn syrup as a near-ubiquitous food additive. All I’m saying is we need to be mindful of these systemic effects and creating a false dichotomy tends to turn a blind eye towards them.
Any mechanism with the explicit intent to increase supply is tantamount to a subsidy. Tax breaks are an informal “subsidy” to spur business, with a cost incurred by other societal goals. Decreasing environmental regulations are an informal subsidy to increase energy production with externalities borne by others. Etc etc. The broader point is that defining the utility function that captures these societal costs/benefits is complex and your false dichotomy misses all that nuance.
We should not equate rent seeking and genuine innovation as the same things.
You might say there's then an incentive to undercut, sure, but if you undercut too much you'll be left with no inventory as the rest of the manufacturers decide on fixed prices as a cartel (which has now become the norm in most industries). The trust busting has been nowhere to be seen in the last decades and the results are in.
Price gouging usually leads to producing more stuff, if it goes on long enough and you are allowed to produce more.
Healthcare is an example where this doesn't work, because you aren't allowed to produce more stuff. You can gouge all you want, but can't provide any additional quantity of services. (See: Certificate of Need laws in the US)
If the providers of those necessities possess a monopoly, either natural or through regulatory capture, humans will pay whatever they have to get those necessities. It is important for social prosperity to prevent extracting excess profits through monopolisation, either by destroying the monopoly or by taxing it and reducing other taxes on the individuals.
If they doubled the price consistently, they would no longer be a low margin business. The fact that they are low margin is evidence that they are not gouging.
I think there's also a misperception of the public on a lot of items. Many of the dramatic price increases we see are deferred inflation from not raising prices (and subsequently eating the added supplier cost). We generally don't see steady 2-5% price increases every year, but rather large step increases every few years. Many of those step increases are catching up for the previous years where there was no increase.
FWIW, I'm not saying there isn't opportunism going on, but it's much less likely in low-margin commodity businesses.
People seem to think inflation is temporary but it seems much more stubborn and central banks are very scared of it, hence rate rises when the banks might collapse.