6 ms·

Setting aside the almost impossible feat that every business could collude to arbitrarily double their profit margins, even if your assumption is granted, it wo

Setting aside the almost impossible feat that every business could collude to arbitrarily double their profit margins, even if your assumption is granted, it would ultimately have no effect on consumers as a whole. So, assuming businesses are more profitable, they ultimately have 2 things they could do with that extra profit: 1. Hoard it and do nothing with it 2. Invest it In the case of 1, doing this is tantamount to taking money out of circulation (i.e. lowering supply). When the supply is lowered then everyone else’s purchasing power increases which is a benefit to them. In the case of 2, investing it, either by starting new businesses or loaning it, means that they are effectively redistributing that money to others in the form of wages. Which is beneficial to workers who also happen to be consumers.

ydlr 4y ago
All of this is true is a company rises prices without affecting the behavior of others. When suppliers notice their customers raising prices, they raise prices to capture some of that increase. Likewise, workers will try to increase wages. The result is a profit-price spiral that gets misdiagnosed as wage-price spiral.
- finspeech 4y ago
  I’ll grant this, but no matter what it’s called, ultimately no group (consumer vs. business) is better or worse off. In such a spiral it’s just the nominal numbers that are changing and not the ‘real’ numbers What keeps this from happening, I think, is the presence of competition which would stop both cohorts, workers and businesses, from increasing their prices indefinitely
  - vineyardmike 4y ago
    > ultimately no group is better or worse off. In such a spiral it’s just the nominal numbers that are changing and not the ‘real’ numbers Except that wages tend to change less fluidly than prices so there’s usually a lag resulting in less purchasing power for consumers.
    - finspeech 4y ago
      Yes that is true, but under the assumption that prices are only raising due to corporations increasing them, then my original post comes into play where for everyone that is worse off, there is someone necessarily better off. Thus the consumer as a whole is unaffected. Because again, if that money is hoarded then that means the hoarder is consuming less and thus supplies are increased for everyone else. Or they are investing and just spending that money into the hands of a different group
  - ydlr 4y ago
    > I’ll grant this, but no matter what it’s called, ultimately no group (consumer vs. business) is better or worse off. In such a spiral it’s just the nominal numbers that are changing and not the ‘real’ numbers In the long-term, yes. In the moment, the experience of rapidly rising prices really sucks. It doesn't occur smoothly or evenly. > What keeps this from happening, I think, is the presence of competition which would stop both cohorts, workers and businesses, from increasing their prices indefinitely You are absolutely right. And inadequate competition in many sectors is definitely a contributor to current inflation.
klyrs 4y ago
Don't assume that this would happen overnight. Real wages have been essentially flat for median workers since the early 70s, while CEOs have greatly increased their own real salaries and companies have made a greater focus on short term profits and dividends for their stockholders. The common justification I see for 100:1 CEO to median income gaps is that "CEOs provide value to the shareholders." They do that specifically by depressing the wages of their employees to make room for dividends. And it's not like any of the above is some shadowy conspiracy. It's the mainstream practice that is literally taught in business schools worldwide and championed by politicians, most famously by Regan and Thatcher. You're paraphrasing the "trickle down" theory yourself.
- finspeech 4y ago
  > Real wages have been flat for median workers since the 70s Real wages for workers in what context? The US? The industrialized nations? Perhaps the better explanation for this (assuming it’s true) is that the median worker in industrialized nations has had productivity that has grown at a slower rate than the median worker in developing markets. Would be interesting to see what the worldwide statistics are for CEO to worker pay. > They do that specifically by depressing the wages of their employees to make room for dividends. Can’t “workers” also be shareholders? If not in their own companies, then at least in any publicly traded company. The world isn’t cleanly divided into “worker” and “owner”. People can be both. And again, those dividends have to go somewhere. My original post applies here, where it either gets hoarded or invested, and no matter which one happens, it is beneficial to the consumer at large. I’d consider “trickle down” to be quite the misnomer. I think “trickle up” is more apt because in the end, all it means is that the people who make the money in the first place, get to decide what they do with it as opposed to being taxed and sending their money off to a centralized (often divided and inefficient) govt to decided what to do with it.
  - vineyardmike 4y ago
    > Can’t “workers” also be shareholders? If not in their own companies, then at least in any publicly traded company. The world isn’t cleanly divided into “worker” and “owner”. People can be both. Yea but most people aren’t. Lower-income people barely have retirement accounts with index funds in it. The people that are “owners” in a meaningful sense are not workers.
vineyardmike 4y ago
> Setting aside the almost impossible feat that every business could collude to arbitrarily double their profit margins, 1. It doesn’t have to be collusion. They could even raise margins ahead of expected downturns to prep for savings. There could even be a global pandemic that reduces supply, leading businesses to raise prices in relation to demand and shortages, but those same companies not reducing prices when supply increased. 2. The article actually states that many businesses have recorded record profits recently while costs stayed the same. It’s literally happening in front of us, don’t deny it is a possibility while witnessing it as a reality. > In the case of 2, investing it, either by starting new businesses or loaning it, means that they are effectively redistributing that money to others in the form of wages. Why does that have to go to wages? They could distribute it to executives and shareholders as dividends or stock buybacks, or use it to invest into many schemes like private equity that don’t help average people eg. buying twitter and layoff half the employees… which is the opposite of increasing distribution.
- finspeech 4y ago
  > It doesn’t have to be collision It does have to be collusion, otherwise competition to keep prices low > don’t deny it is a possibility while witnessing it as a reality I’m not denying that profit margins (of some companies) are higher. I’m claiming that it is not to the detriment of the consumer at large. Also for every company that is seeing increased profits, there’s another one that is seeing a decrease > Why does it have to go to wages? It has to go somewhere, right? Even if it goes to “shareholders” or “executives”, or “private equity”, either they are hoarding it (increasing everyone elses purchasing power) or they are investing it (spending it on someone elses wages). The act of buying Twitter just transfers money from one person to a group of other people (shareholders) who are then free to do what they want with their newfound liquidity. Again, if they hoard that money, then it increases purchasing power for everyone else, and if they invest/save it, then it goes to paying peoples wages
  - vineyardmike 4y ago
    > It does have to be collusion, otherwise competition to keep prices low Competition works half as well as people think it does. It’s long shown that companies will see collective price rises for products even in the absence of direct collusion. Most products don’t trend to being sold at-cost, which is what you’d expect in this case. Why do any products have any product margin? Isn’t every product margin an opportunity for competition? > I’m claiming that it is not to the detriment of the consumer at large. I don’t know. I personally haven’t noticed inflation much but we’re talking about it an awful lot for nobody to be affected. The people affected the most are the people who can least afford it. > Even if it goes to “shareholders” or “executives”, or “private equity”, either they are hoarding it (increasing everyone elses purchasing power) or they are investing it (spending it on someone elses wages). Trickle down isn’t real. Lots of money gets spent in ways that doesn’t effectively help wages. Money does get hoarded, but it’s not enough to be meaningfully helpful at purchasing power.

ydlr 4y ago

All of this is true is a company rises prices without affecting the behavior of others. When suppliers notice their customers raising prices, they raise prices to capture some of that increase. Likewise, workers will try to increase wages. The result is a profit-price spiral that gets misdiagnosed as wage-price spiral.

finspeech 4y ago
I’ll grant this, but no matter what it’s called, ultimately no group (consumer vs. business) is better or worse off. In such a spiral it’s just the nominal numbers that are changing and not the ‘real’ numbers What keeps this from happening, I think, is the presence of competition which would stop both cohorts, workers and businesses, from increasing their prices indefinitely
- vineyardmike 4y ago
  > ultimately no group is better or worse off. In such a spiral it’s just the nominal numbers that are changing and not the ‘real’ numbers Except that wages tend to change less fluidly than prices so there’s usually a lag resulting in less purchasing power for consumers.
  - finspeech 4y ago
    Yes that is true, but under the assumption that prices are only raising due to corporations increasing them, then my original post comes into play where for everyone that is worse off, there is someone necessarily better off. Thus the consumer as a whole is unaffected. Because again, if that money is hoarded then that means the hoarder is consuming less and thus supplies are increased for everyone else. Or they are investing and just spending that money into the hands of a different group
- ydlr 4y ago
  > I’ll grant this, but no matter what it’s called, ultimately no group (consumer vs. business) is better or worse off. In such a spiral it’s just the nominal numbers that are changing and not the ‘real’ numbers In the long-term, yes. In the moment, the experience of rapidly rising prices really sucks. It doesn't occur smoothly or evenly. > What keeps this from happening, I think, is the presence of competition which would stop both cohorts, workers and businesses, from increasing their prices indefinitely You are absolutely right. And inadequate competition in many sectors is definitely a contributor to current inflation.

klyrs 4y ago

Don't assume that this would happen overnight. Real wages have been essentially flat for median workers since the early 70s, while CEOs have greatly increased their own real salaries and companies have made a greater focus on short term profits and dividends for their stockholders. The common justification I see for 100:1 CEO to median income gaps is that "CEOs provide value to the shareholders." They do that specifically by depressing the wages of their employees to make room for dividends. And it's not like any of the above is some shadowy conspiracy. It's the mainstream practice that is literally taught in business schools worldwide and championed by politicians, most famously by Regan and Thatcher. You're paraphrasing the "trickle down" theory yourself.

finspeech 4y ago
> Real wages have been flat for median workers since the 70s Real wages for workers in what context? The US? The industrialized nations? Perhaps the better explanation for this (assuming it’s true) is that the median worker in industrialized nations has had productivity that has grown at a slower rate than the median worker in developing markets. Would be interesting to see what the worldwide statistics are for CEO to worker pay. > They do that specifically by depressing the wages of their employees to make room for dividends. Can’t “workers” also be shareholders? If not in their own companies, then at least in any publicly traded company. The world isn’t cleanly divided into “worker” and “owner”. People can be both. And again, those dividends have to go somewhere. My original post applies here, where it either gets hoarded or invested, and no matter which one happens, it is beneficial to the consumer at large. I’d consider “trickle down” to be quite the misnomer. I think “trickle up” is more apt because in the end, all it means is that the people who make the money in the first place, get to decide what they do with it as opposed to being taxed and sending their money off to a centralized (often divided and inefficient) govt to decided what to do with it.
- vineyardmike 4y ago
  > Can’t “workers” also be shareholders? If not in their own companies, then at least in any publicly traded company. The world isn’t cleanly divided into “worker” and “owner”. People can be both. Yea but most people aren’t. Lower-income people barely have retirement accounts with index funds in it. The people that are “owners” in a meaningful sense are not workers.

vineyardmike 4y ago

> Setting aside the almost impossible feat that every business could collude to arbitrarily double their profit margins, 1. It doesn’t have to be collusion. They could even raise margins ahead of expected downturns to prep for savings. There could even be a global pandemic that reduces supply, leading businesses to raise prices in relation to demand and shortages, but those same companies not reducing prices when supply increased. 2. The article actually states that many businesses have recorded record profits recently while costs stayed the same. It’s literally happening in front of us, don’t deny it is a possibility while witnessing it as a reality. > In the case of 2, investing it, either by starting new businesses or loaning it, means that they are effectively redistributing that money to others in the form of wages. Why does that have to go to wages? They could distribute it to executives and shareholders as dividends or stock buybacks, or use it to invest into many schemes like private equity that don’t help average people eg. buying twitter and layoff half the employees… which is the opposite of increasing distribution.

finspeech 4y ago
> It doesn’t have to be collision It does have to be collusion, otherwise competition to keep prices low > don’t deny it is a possibility while witnessing it as a reality I’m not denying that profit margins (of some companies) are higher. I’m claiming that it is not to the detriment of the consumer at large. Also for every company that is seeing increased profits, there’s another one that is seeing a decrease > Why does it have to go to wages? It has to go somewhere, right? Even if it goes to “shareholders” or “executives”, or “private equity”, either they are hoarding it (increasing everyone elses purchasing power) or they are investing it (spending it on someone elses wages). The act of buying Twitter just transfers money from one person to a group of other people (shareholders) who are then free to do what they want with their newfound liquidity. Again, if they hoard that money, then it increases purchasing power for everyone else, and if they invest/save it, then it goes to paying peoples wages
- vineyardmike 4y ago
  > It does have to be collusion, otherwise competition to keep prices low Competition works half as well as people think it does. It’s long shown that companies will see collective price rises for products even in the absence of direct collusion. Most products don’t trend to being sold at-cost, which is what you’d expect in this case. Why do any products have any product margin? Isn’t every product margin an opportunity for competition? > I’m claiming that it is not to the detriment of the consumer at large. I don’t know. I personally haven’t noticed inflation much but we’re talking about it an awful lot for nobody to be affected. The people affected the most are the people who can least afford it. > Even if it goes to “shareholders” or “executives”, or “private equity”, either they are hoarding it (increasing everyone elses purchasing power) or they are investing it (spending it on someone elses wages). Trickle down isn’t real. Lots of money gets spent in ways that doesn’t effectively help wages. Money does get hoarded, but it’s not enough to be meaningfully helpful at purchasing power.