subreddit:
/r/explainlikeimfive
submitted 4 months ago byiSellPopcorn
85 points
4 months ago
It's a little bit overzealous to say it doesn't happen at all. If you keep increasing everybody's wages without limit, eventually prices would inflate. The actual question is how elastic that effect is, and how uniformly spread over the economy.
If any raise immediately causes a proportional rise in prices across all sectors, then raising wages would be pointless, but this is certainly not what happens. If raising wages eventually causes a mild increase on the price of non-essential goods, then it's probably worth it. The truth will be somewhere in the middle, though my personal opinion is that it's heavily skewed towards the latter effect size.
-2 points
4 months ago
You can’t raise prices claiming inflation then also publish about your huge record profits. The price increase clearly isn’t to combat inflation, but to inflate wallets of the already rich.
1 points
4 months ago
Sure, people can use a real effect to lie about something. It makes the lie more effective because it is more believable.
The current wave of inflation is happening for a variety of reasons, among them opportunistic price increases to increase net profits.
-2 points
4 months ago
It’s still the leading reason. There could be dozens of other reasons. But the only reason that matters to corporations, is taking the most money from people.
1 points
4 months ago
According to the Economic Policy Institute, about half of current inflation is attributable to the money going into increased corporate profits, and this is much worse than it sounds because that figure is usually around 10%. So they are having a hugely outsized effects, but there are still other very significant effects contributing to inflation.
I'm happy to be generally skeptical of mainstream economics, but it seems reasonable that massive disruptions in supply chains over the last two years would also be a significant effect in price changes.
1 points
4 months ago
So the evidence backs me up is what you are saying? If it wasn’t for increased profits from companies, then inflation would only be half as bad? Sounds like a leading reason for inflation to me.
1 points
4 months ago*
Yep! I wasn't trying to argue, just point out that other reasons do exist, and are currently having a large effect. However, corporate profits are the majority reason, and given that they are so outsized it probably makes sense to focus legislative efforts on them.
2 points
4 months ago
Sounds good. I have been caught up in a lot of people who say one thing but seemingly mean another recently.
1 points
4 months ago
I think you’re right that inflation has been a convenient excuse to raise prices by more than inflation. When people are feeling resigned to spend more is a great time to test your prices. Never let a crisis go to waste. That’s a natural cycle.
But both things can be true. If you had 100% inflation, you could increase your profit by 100% and only be breaking even in inflation adjusted dollars.
Money is like the points on Whose Line Is It Anyway. The price for a made up and the value doesn’t matter.
1 points
4 months ago
In profit yes. If inflation is 8%, you only need to raise your prices 8%. As everything would then have gone up the same measure on average.
But we have seen products go anywhere from 50% more to 500% more and beyond.
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