Supply chains, worker wages and the price of energy has been blamed for the current bout of high inflation. But central bankers around the world are starting to clue in to something consumers have been aware of for a while — corporations just aren’t afraid to raise their prices anymore.
There’s a solution: legally mandating price ceilings. Good luck getting through Congress but the solution to market coordination can’t be market forces.
Oh he was talking about America on an article about Canada in a Canadian community. Because he doesn’t read articles, just posts uninformed hot takes that he expects everyone to agree with.
That leads to unexpected consequences of them. Shrinkflation, strong-arming suppliers even more, etc. And then adminstrating/enforcing against infractions just becomes prohibitive to maintain.
Maybe. But we already do this for a lot of things. Drugs is the most well-known. If we know what the production cost is (and the government can just request that info), we can set the price ceiling to ensure the profit floor still exists. This is pretty common in government contracts: % profit.
The ceiling would have to still be profitable. And if this is a thing people need but can’t afford while profitable, the government should provide it.
People need to learn from history and realize corporations exist to serve the people and at the people’s pleasure. You have to apply for a corporation and a we’ve seen with Trump, can be dissolved. Which should really happen a lot more often.
It can be a vicious cycle. Someone raises price for whatever reason. Their competitors see that and think “well, if it works for them, it’ll work for us”. Their suppliers see the price rise and want a share of it, so raise theirs too. New players entering the market will likely set prices based off competition, even if the competition has actually set inflated prices. Eventually even companies that wouldn’t want to raise prices arbitrarily has to because it’s now inflation and their costs have risen.
Even without direct colusion, many companies still end up all following each other.
This is the real problem. Companies had always and always will raise prices as much as they can, that should be a surprise to anybody, but how much they can raise them depends on the demand and the competition they have. We dont have healthy competition here in Canada for a lot of sectors. You want better prices? Break down monopolies, open the market to more foreign companies and enforce real consequences for collusion.
Part of this is due to sprawly car infrastructure and lack of density. In Vancouver, there are small immigrant run grocers where the price has barely gone up at all. Persia Foods, Kim’s, etc.
At the peak of car culture, there were independent or small-chain grocery stores in every small city, town, or neighbourhood. You don’t need that much density to support a grocery store. They went away because the richer stores bought out competitors or drove them out of business, with the realization that removing some competition ad being the biggest fish in the pond left them in the position to dictate prices, both with suppliers, and with consumers.
This is a fundamental issue with our economic system. Everyone talks about competition in the market, and how the lack of it is the problem, but they all ignore the part where competitions are meant to be won, and this is what it looks like when winners start to be crowned.
Our current system relies on the economic externality of relying on private vehicles and private transportation on local infrastructure to artificially lower the transportation costs for grocery logistics. It’s much cheaper to run an 18-wheeler to a large grocery store on the edge of suburbia than running box trucks all over town. It doesn’t actually lower food costs, because people pay a large fraction of their income to that private transportation so that they can access that super-grocer, and then the grocer seems to jack up the price of food anyway.
I agree that there is more than one factor, but disagree that car culture is not one of them.
What is this mythical historical period of the “peak of car culture”? That’s today. Fewer people walk or cycle today than they did in the 50s, 60s, 70s, 80s or 90s. We’re barely reversing course just recently. There are more big box stores and strip malls than in the past, which concentrates the market and doesn’t allow small competitors. Some significant portion of the blame goes to our shitty suburban sprawl city design.
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Collectively agreeing to raising prices is anti-competitive collusion and illegal.
Collectively raising prices is anti-competitive coordination and legal.
Pandemic and supply shocks is a perfect excuse to do the latter.
Good luck to whoever is trying to solve this.
There’s a solution: legally mandating price ceilings. Good luck getting through Congress but the solution to market coordination can’t be market forces.
We don’t have a congress in Canada, so it would be impossible.
Couldn’t your parliament enact such price caps?
Yes they absolutely could.
Oh he was talking about America on an article about Canada in a Canadian community. Because he doesn’t read articles, just posts uninformed hot takes that he expects everyone to agree with.
I did the same thing, but it’s because we’re all seeing the same things as far as cost increases and governments sitting on their hands.
There’s a solution to price controls: bread lines
We already have those. It’s called EBT/food stamps, and we just outsource it to local grocers and philanthropy food banks.
That leads to unexpected consequences of them. Shrinkflation, strong-arming suppliers even more, etc. And then adminstrating/enforcing against infractions just becomes prohibitive to maintain.
Maybe. But we already do this for a lot of things. Drugs is the most well-known. If we know what the production cost is (and the government can just request that info), we can set the price ceiling to ensure the profit floor still exists. This is pretty common in government contracts: % profit.
This populist idea has been done many times and it always leads to the same outcome: businesses stop stocking unprofitable items.
Learn from history, people.
The ceiling would have to still be profitable. And if this is a thing people need but can’t afford while profitable, the government should provide it.
People need to learn from history and realize corporations exist to serve the people and at the people’s pleasure. You have to apply for a corporation and a we’ve seen with Trump, can be dissolved. Which should really happen a lot more often.
It can be a vicious cycle. Someone raises price for whatever reason. Their competitors see that and think “well, if it works for them, it’ll work for us”. Their suppliers see the price rise and want a share of it, so raise theirs too. New players entering the market will likely set prices based off competition, even if the competition has actually set inflated prices. Eventually even companies that wouldn’t want to raise prices arbitrarily has to because it’s now inflation and their costs have risen.
Even without direct colusion, many companies still end up all following each other.
Doesn’t help when there’s really no competition in many areas. They are oligopolies.
This is the real problem. Companies had always and always will raise prices as much as they can, that should be a surprise to anybody, but how much they can raise them depends on the demand and the competition they have. We dont have healthy competition here in Canada for a lot of sectors. You want better prices? Break down monopolies, open the market to more foreign companies and enforce real consequences for collusion.
Part of this is due to sprawly car infrastructure and lack of density. In Vancouver, there are small immigrant run grocers where the price has barely gone up at all. Persia Foods, Kim’s, etc.
At the peak of car culture, there were independent or small-chain grocery stores in every small city, town, or neighbourhood. You don’t need that much density to support a grocery store. They went away because the richer stores bought out competitors or drove them out of business, with the realization that removing some competition ad being the biggest fish in the pond left them in the position to dictate prices, both with suppliers, and with consumers.
This is a fundamental issue with our economic system. Everyone talks about competition in the market, and how the lack of it is the problem, but they all ignore the part where competitions are meant to be won, and this is what it looks like when winners start to be crowned.
I think you mean the advent of car culture.
Our current system relies on the economic externality of relying on private vehicles and private transportation on local infrastructure to artificially lower the transportation costs for grocery logistics. It’s much cheaper to run an 18-wheeler to a large grocery store on the edge of suburbia than running box trucks all over town. It doesn’t actually lower food costs, because people pay a large fraction of their income to that private transportation so that they can access that super-grocer, and then the grocer seems to jack up the price of food anyway.
I agree that there is more than one factor, but disagree that car culture is not one of them.
What is this mythical historical period of the “peak of car culture”? That’s today. Fewer people walk or cycle today than they did in the 50s, 60s, 70s, 80s or 90s. We’re barely reversing course just recently. There are more big box stores and strip malls than in the past, which concentrates the market and doesn’t allow small competitors. Some significant portion of the blame goes to our shitty suburban sprawl city design.