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Isn't Greedflation just inflation with different people profitting? (self.nostupidquestions)

submitted 1 year ago* (last edited 1 year ago) by sheeeep to c/nostupidquestions

19 comments fedilink hide all child comments

Hey there,

The last year or so I keep hearing the term 'Greedflation' pop up more and more. The Idea here is that there are greedy capitalists that are raising the prices on goods and services faster than their own costs are increasing and this is causing prices to rise.

Now if I think about it inflation is always based on some price increasing, and sometimes because there is some shock that limits how mch of something is available. Oil is scarce because of some natural disasters or war, food is scarce because of drought, etc.

Most of the time there are other sources of the same resources (different crops), or the resource was horded before ('strategic' oil reserves), in both cases someone is able to charge more (eg Profit) from the situation.

So now it sound to me that normal inflation and greedflation are both simply based on one entity in the supply chain increasing the price to take advantage of the situation. Whether you call it greedflation or not depends on whether your personal "in" group is profiting from or or not.

Where is my thinking error here? Is greedflation a real thing?

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[–] drphungky 13 points 1 year ago

I think everyone should probably listen to this great report from NPR that dissects this issue. The Tl;dr: is greedflation is not really a real thing.

The deeper answer to your question of, "can one party increase prices in a market?" is sort of basic economics, and the answer is, "Usually, no." In a competitive market, the answer is no. In a monopolistic market (meaning one company controls most of the market, think like Google with browsers) with no government oversight, the answer is yes. Things get complicated when you add in government regulation or oligopolistic markets (markets where only a few players control the market). In those cases, it depends on how strong government regulations on price-gouging are and any anti-monopoly or anti-anticompetitive practice laws are, and also depends on how oligopolists behave. Sometimes, particularly in industries with few big players, the big players will make the same decisions independently. If they do this cooperating it will usually violate antitrust laws, but if they both decide they'll be better off say, not paying workers as much, or charging super high markups, them that can happen. A lot of economic research shows that kind of "tacit collusion" happens in real life, like in the oil and gas industries. But other times oligopolies will behave very competitively, only uniting through lobbyist trade groups if at all (think Microsoft and Amazon in cloud software).

So that's the facts, but here's my economic musing: The reason it feels like greedflation is a thing is a combination of factors:

Inflation was very real, and very salient.
Corporations (as mentioned in the NPR piece) crowed about their "record profits" in the short term, and also mention them when they are absolute record profits, not just record profit margins (something not mentioned but very real - a company can make twice as much money but also have spent twice as much, making way "more" money but with identical margins)
In the US at least, we are seeing the highest numbers of industry consolidation and monopolies/oligopolies since the Gilded Age, so it feels like companies should be able to raise their prices if they want to.
Media coverage and online spaces have become extremely polarized, so "corporations bad" is a very easy refrain to find if you're watching or reading anything remotely left-wing, and it has been parroted by many democratic politicians as well, because it scores cheap and easy political points (also, and this is just my opinion, it helps vilify corps more in the public eye to help get more support for better antitrust legislation and enforcement, the actual end goal. I don't think senators like Bernie Sanders don't actually understand what's going on with profit margins, I think they're using it to generate political will, but that may be my own bias creeping in).