'Blaming "greedy corporations" for price increases is like blaming the thermometer for a fever.' Agree! It's also like someone blaming their mirror for their ugly face. And as Charlie Munger said, "You show me the incentive, and I'll show you the outcome". Pity most politicians don't seem to know that.
I'm a newbie with all this but can anyone explain clearly to me what is really behind the oft used, 'supply and demand' phrase?
I've read some official, online explanations (e.g. by putting up prices supplies last longer and reach more customers because some people can't/won't pay the higher price) - however they do not actually (perhaps I just miss this in my ignorance) describe the actual, 'a causes b which causes c' mechanism when prices go up.
i.e. - someone selling widgets notices that there is a sudden increase in demand - ok then. I would ask, has Mr Widget's inputs/materials/rent/utility costs gone up? Have his wage costs gone up? This of course is often some of the mechanistic reasons behind price rise decisions. However, if NOT why then does Mr Widget put up his prices? What is forcing him/her to do this?
A democratic/liberal type supporter might say it's because Mr Widget is a greedy capitalist who thinks he'd be stupid not to.
I personally know of a few landlords in my social circle who admit to doing this because their estate agents recommend it and they(the landlord owners) say, "everybody else is doing it, I'd be mad to miss out!" Along the lines of, it's not personal, it's just business. This is anecdotal but a sober and cynical view of the world says there are some business owners who do this whenever they can, but all - really?
So again, my question is, what is this 'demand' mechanism that absolutely forces price/rent rise, What is going on besides the greed factor which absolutely is 'part' of the situation in some cases.
Seems to me to be as much a moral and ethical situation as it is an economic one.
I hate to disagree with such a word smith but I must. Right now I don't have all the words but there is a certain inchoate feeling that supply and demand are not all there is to the world of economic activity. It comes to mind that during moments of depressed economic activity, governments can gee up economies by actively spending, distributing largesse, public works, etc. Also, the notion that low taxes are a recipe for economic growth come out of the same cupboard as trickle-down theory, somewhat less shiny than when first trotted out. And so on. One thing I can agree with though is that the judicial and governance system needs to be something other than malicious.
Peter, you have neither responded directly to nor rebutted any of the arguments presented. You just have a vague feeling that intervention must work because it sounds good, and "trickle-down theory" is somehow evil on face. The plain reality is that market liberalization is a boon—the examples are everywhere—but people cling to feel-good interventions.
Lord Keynes would agree that in times of depressed economic activity, governments could and should stimulate the economy by spending on public works. of course, it would be preferential if they're spending on things that work as opposed to market interventions that have often been shown to be ineffective. But remember, Keynes also said that in good economic times, the government should practice austerity and put money aside for the bad times. Unfortunately, our modern governments are wildly spending during the good times, leaving nothing but borrowing for the bad times. Who will pay for their largesse? Future generations, that's who.
'Blaming "greedy corporations" for price increases is like blaming the thermometer for a fever.' Agree! It's also like someone blaming their mirror for their ugly face. And as Charlie Munger said, "You show me the incentive, and I'll show you the outcome". Pity most politicians don't seem to know that.
I'm a newbie with all this but can anyone explain clearly to me what is really behind the oft used, 'supply and demand' phrase?
I've read some official, online explanations (e.g. by putting up prices supplies last longer and reach more customers because some people can't/won't pay the higher price) - however they do not actually (perhaps I just miss this in my ignorance) describe the actual, 'a causes b which causes c' mechanism when prices go up.
i.e. - someone selling widgets notices that there is a sudden increase in demand - ok then. I would ask, has Mr Widget's inputs/materials/rent/utility costs gone up? Have his wage costs gone up? This of course is often some of the mechanistic reasons behind price rise decisions. However, if NOT why then does Mr Widget put up his prices? What is forcing him/her to do this?
A democratic/liberal type supporter might say it's because Mr Widget is a greedy capitalist who thinks he'd be stupid not to.
I personally know of a few landlords in my social circle who admit to doing this because their estate agents recommend it and they(the landlord owners) say, "everybody else is doing it, I'd be mad to miss out!" Along the lines of, it's not personal, it's just business. This is anecdotal but a sober and cynical view of the world says there are some business owners who do this whenever they can, but all - really?
So again, my question is, what is this 'demand' mechanism that absolutely forces price/rent rise, What is going on besides the greed factor which absolutely is 'part' of the situation in some cases.
Seems to me to be as much a moral and ethical situation as it is an economic one.
Thanks.
I hate to disagree with such a word smith but I must. Right now I don't have all the words but there is a certain inchoate feeling that supply and demand are not all there is to the world of economic activity. It comes to mind that during moments of depressed economic activity, governments can gee up economies by actively spending, distributing largesse, public works, etc. Also, the notion that low taxes are a recipe for economic growth come out of the same cupboard as trickle-down theory, somewhat less shiny than when first trotted out. And so on. One thing I can agree with though is that the judicial and governance system needs to be something other than malicious.
Peter, you have neither responded directly to nor rebutted any of the arguments presented. You just have a vague feeling that intervention must work because it sounds good, and "trickle-down theory" is somehow evil on face. The plain reality is that market liberalization is a boon—the examples are everywhere—but people cling to feel-good interventions.
Lord Keynes would agree that in times of depressed economic activity, governments could and should stimulate the economy by spending on public works. of course, it would be preferential if they're spending on things that work as opposed to market interventions that have often been shown to be ineffective. But remember, Keynes also said that in good economic times, the government should practice austerity and put money aside for the bad times. Unfortunately, our modern governments are wildly spending during the good times, leaving nothing but borrowing for the bad times. Who will pay for their largesse? Future generations, that's who.