Hacker News Reader

Comment by stavros | Hacker News Reader

I see a lot of ultra-dismissive comments like yours whenever this is posted, but it seems to me like putting "believes there are microchips in vaccines" and "believes corporations will try to raise prices when they think they can get away with it" in the same league is a conversational gambit so daring that I have to wonder what your motives are.

View on HN

“corporations will try to raise prices when they think they can get away with it” is just firms being firms and has no additional explanatory power.

This has some explanatory power: they can get away with charging more dollars because more dollars are available.

The money supply expanded like never before in 2020: https://fred.stlouisfed.org/series/M2SL

It is now contracting, which is also unprecedented. We may well end up with deflation and while that sounds nice, we don’t know what might break.

We're not on target for deflation; American consumers love spending money and are currently doing it as hard as they can. We seem to, amazingly, be hitting the soft landing.

Some other countries are doing poorly at the moment, but that's always true.

If you want to see the money supply shrink more, I'm told a good way is better tax enforcement.

https://x.com/bbkogan/status/1733190102245888366 (sorry for the informal source…)

This has just as much explanatory power: They're able to charge higher prices because individuals are saving less than ever, believe that rising costs are due to inflation and not corporate greed, and don't perceive it as price gouging but rather as a consequence of the current situation in 2023, including the global pandemic and the war in Ukraine. Additionally, we're witnessing an unparalleled level of consolidation across various industries, significantly reducing competition compared to previous years.

"Greedflation" describes an observation that is independently verifiable. Publicly available data.

"the report finds that company profits increased at a much faster rate than costs did, in a process often dubbed “greedflation.”

Counterpoint: during COVID, supply costs of all types -- labor, transportation, raw materials -- were far less predictable than ever before. Therefore, a "risk premium" was embedded into prices.

You're the CEO -- for the past 5 years, costs rose steadily 2-4% annually, and you raised prices 3% each year. Now Covid hits, everything is in chaos, you expect costs to rise somewhere between 5 and 15%. Of course, there is also the possibility that you won't be able to access one specific ingredient at all, or that one element will spike in price. Now -- as CEO, how much do you raise prices? Just the average between 5 and 15, or do you err on the side of safety and raise prices 15%, or even more?

Perfect excuse to raise prices and make more profit than necessary, disguised as a "risk premium". Regulators would need to audit this.

a) what profit is "necessary"? a business's goal is to maximize profit.

b) risk premiums exist in every form of economics. it's why, typically, stocks return more than bonds over time, for example. Why would regulators be interested in auditing companies for acting rationally?

Necessary to cover increased costs and manage actual risk. Where there is a lack of competition or opportunity for collusion companies can and do exploit the situation rationally. Just because it is rational doesn't make it legal or ethical.

A minute ago you dismissed the concept of a risk premium and claimed regulators needed to step in. Now it's ok for businesses to manage actual risk?

Why is this so difficult for you to understand? This is not complicated.

I am not dismissing the concept of a risk premium. I am saying they can exploit the concept of a risk premium to justify an excessive increase in prices, beyond what is reasonable. Companies can collude to set higher prices and blame inflation.

Antitrust laws and regulations exist for a reason. Companies have been cheating since the beginning of the history of companies.

> I am not dismissing the concept of a risk premium

You wrote:

disguised as a "risk premium"

Saying something is just a disguise for something else and, for additional emphasis, putting air quotes around it is an unmistakable dismissal of the concept. Hard to imagine how you could have been more clear.

So there is a risk premium, and then there is a "risk premium".

Neither is a dismissal of the concept itself. It's about the intentions of the companies.

Cool it with implying bad motives. It's against HN guidelines.

Of course corporations will try to raise prices when they think they can get away with it. The question is, why did they think they could get away with it? Or, put the other way, why didn't they think they could get away with it before?

I assert that what prevented them before was competition - if you raise your price, and the other vendor doesn't, you lose business. Well, what happened? Did that mechanism just take a holiday? Did competitors disappear? Or what? Why did companies think they could get away with it now, when they didn't think that before?

That's where all these "greed" explanations fall short. Of course companies are greedy. They were greedy five years ago, too. Why weren't they raising prices then?

The way I heard it, energy prices rose, some companies increased prices in anticipation of much higher costs, everyone followed suit, fearing the increased costs, and the prices all surged.

And they didn't get punished enough in the market to make them back off? Plausible. That isn't quite "greed", though. That's fear.

It also could be a self-fulfilling prophesy. Companies' costs did in fact rise, because all their suppliers raised their prices...

Don't fixate on the term 'greedflation,' as it's based on the widely accepted notion of corporate greed. The primary counterargument to greedflation is that companies have always been greedy; it's not a new phenomenon. The concept of greed is entrenched in capitalist economies. However, the theory is that demand should naturally regulate this greed—if a company becomes excessively greedy, they risk losing customers who may opt to spend less, save more, or patronize other businesses. Thus, there's an assumption that the system self-regulates, allowing only as much greed as the market can bear.

Microchips are actually a more defensible belief. I can deduce that inflation isn't caused by greed with an extremely basic knowledge of economics. Meanwhile, while it seems a priori extremely unlikely that Bill Gates has been spiking our vaccine supply, in order to actually disprove it, I'd need a microscope and some time.

> I can deduce that inflation isn't caused by greed with an extremely basic knowledge of economics

Nobody is saying inflation doesn't exist.

By your logic any price hike is to be accepted and not questioned because "basic economics"...

You have a lot of faith in a lot of people who's sole purpose in life is to make more money than they did last year.

> Nobody is saying inflation doesn't exist.

Bizarre non sequitur.

> By your logic any price hike is to be accepted and not questioned because "basic economics"...

No it doesn't. But by your logic, surge pricing is theft.

I have no particular faith in people. I observe that there's all kinds of irrational, nonsense beliefs scorned by mainstream economists that are popular among certain groups. "Greedflation" is dumb economic populism, nothing else.

Idk how to dumb it down enough because your logic is so flawed:

X causes Y doesn't mean Z cannot cause Y too.

You might want to reconsider that your 'basic knowledge of economics" isn't enough to explain everything.

https://australiainstitute.org.au/post/oecd-confirms-that-in...

https://www.npr.org/2023/05/19/1177180972/economists-are-rec...

https://www.investmentmonitor.ai/news/corporate-profits-resp...

https://www.ineteconomics.org/perspectives/blog/profit-infla...

I feel like you're an LLM having a fit of hallucinations.

Like I said, in any social mileu there are insane things that are commonly believed. Providing evidence that people believe in "greedflation" doesn't contradict that at all.

how would you do this with a microscope? Would you watch all blood flow through it and then check for microchips? Sounds interesting.

Bingo.

> I can deduce that inflation isn't caused by greed

Try actually reading the article before commenting. The article does not say that inflation is caused by greed. Not even close.

"Greedflation" is the theory that the 2021 spate of inflation was caused by greed.

You didn't read the article. Greedflation is a theory that some companies exploited inflation to create excessive profits, not that greed was the sole cause of inflation.

Here is the study: https://www.ippr.org/files/2023-12/1701878131_inflation-prof...

I don't have to read the article to know what "greedflation" means. You read the article and don't know!

So you are proud of being stupid and illiterate. Instead of accepting a correction you double down on the stupidity. Childish.

Reply on news.ycombinator.com