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Comment by hansjorg | Hacker News Reader

This entire "greedflation" saga is a bit surprising to me.

That economic scholars are pushing hard against "greedflation" and for the idea that the main driver of inflation is greedy laborers and their excessive wage demands, is as expected.

Until very recently these were the only kind of scholars allowed airtime about this topic and their explanations to laymen seemed to hinge on very naive ideas about the level of competition in various markets.

What happened to make the "greedflation" story more palatable? Surely it must be something other than just disproving these seemingly ridiculous and ideologically driven ideas about the level of competition?

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Joseph Stiglitz agrees with greedflation.* He is a Nobel Prize winning economist. I believe greedflation is easy to prove - huge increase in profit margin without a corresponding increase in costs, and public corpo PR focused on “inflation” as an excuse. It’s easy to prove with data.

IMO there are economists who talk about economics as a cult/religion, described by alt-economist Steve Keen as “economism”. One needs to distinguish between them.

* here is Stiglitz’s talk on the subject if you want to hear his opinion and corresponding dataset: https://youtu.be/4BAsZIHp9HI

>greedflation is easy to prove - huge increase in profit margin without a corresponding increase in cost

But how would the cost of the previous few years (uncertainty from covid, war etc) show up in the current price? I doubt they have a line item for the risk/hardship the business had to go through over the past few years, but it's definitely going to have some cost that's expressed at a later time in prices. How would you account for that?

Stiglitz has a talk about this where he discusses exactly this.

Can’t think of the time though: https://youtu.be/4BAsZIHp9HI

I know some (now retired) marketing execs, and they were saying “just watch” about greedflation all last year.

“Once there’s an excuse to raise prices, you raise them - high and fast - until sales fall”

"Joseph Stiglitz agrees with greedflation. He is a Nobel Prize winning economist"

Personally, I am not forming an opinion until I hear what Paul Krugman, another "Nobel Prize" winning economist, has to say.

He says many things as well. Big brain on him.

Joseph Stiglitz has a 50 minute presentation on inflation, greedflation and monetary theory you can watch here: https://youtu.be/4BAsZIHp9HI

Feel free to debunk it.

Of course there are serious people that also disagree with it (I'm pretty onboard fwiw).

"Industries that raised prices more didn't tend to also make high profits":

https://twitter.com/Noahpinion/status/1663865153039790081

I can't find the graph now, but I saw a good one showing that largely the profits aren't in the companies with workers demanding higher wages.

So, like in all things economic, a Nobel Prize isn't going to bring consensus.

(and you could easily find Nobel Prize winning economists on the other side of Stiglitz- probably most of them are in any given topic)

Sure I just think Stiglitz has been more right than wrong on virtually everything I’ve seen him talk about, which makes me have a high level of trust on his work.

Here’s his talk on the subject: https://youtu.be/4BAsZIHp9HI

Yeah, it isn't that mainstream though. I like his take on this and largely agree with him.

Is the mainstream consensus on important matters actually correct most of the time or all of the time?

Or is it actually wrong, misleading and/or imprecise at least some of the time ?

Particularly on this issue, I think the mainstream consensus is what Central banks are doing in response to inflation.

Are they wrong at least some of the time? Hell yeah.

Stiglitz main points of his talk is he believes the central banks are mostly wrong. He says they will succeed in taming inflation only by slowing down the economy / destroying economic activity (one way of doing it?) he suggests that there are far better avenues of action to pursue but the consensus is so strong on “let’s do what worked before” (Volcker) that they are doing things that are sometimes even counter to their anti-inflation goals in some markets.

I believe (from memory) he says particularly in housing he believes the current policy will lead nowhere since increased interest rates disincentivise construction.

I want to point out that the argument has never been “greedy laborers” in the pejorative sense. The argument has been that laborers need to rationally account for future inflation, which itself contributes to inflation.

The reason that corporate profits aren’t often mentioned is simply that people had expected competition to naturally curtail profits, since in a competitive market, manufacturers should happily lower prices (a bit) to capture more market share and thus more profits. The fact that doesn’t seem to be happening is why this cycle is interesting and why we are now talking about it.

Yes, and that expectation seems either naive or ideologically blinkered to me. Especially after so many decades of consolidation with antitrust being a thing of the distant past.

Seems to me it can't be merely a gathering of facts and deliberations that have now made it allowable to talk about a profit-price spiral without being heckled or laughed out of the room.

It will be interesting to see if this shift in the discourse on inflation could precipate a change in the discourse on antitrust in the US as well.

> What happened to make the "greedflation" story more palatable?

Maybe it's better communication or more of a willingness by people to admit they're struggling and broke. When you talk to everyone you know and no one is making any more money than they were 3 years ago, but the prices of everything have increase substantially, it's not illogical to think there's someone else getting all that extra money.

In Canada everyone knows people that work in the resource industries. No one doing the actual work is getting paid significantly more, so it must be the mill owners, mine owners, oil rig owners, etc. that are starting the chain reaction, right?

> Until very recently these were the only kind of scholars allowed airtime about this topic

I’d gently suggest that there may be some selection bias in your news consumption (as there is in mine, too!)

I saw a large number of explanations beyond wage-price spiral, on sources as varied as CNBC, The Atlantic, and gen-z-Tik-Tok folks.

You may be observing a shift from commentary “pissed about the people saying wages = inflation” (because it’s false) to commentary about “it’s actually the execs” (which seems true)

I hate the word “greedflation”. Greed is always there, reduction in competition and price fixing is not.

Economy shut down for almost 2 years for COVID - that productive supply was lost while people continued consuming (at record pace). There has not been any real policy adjustment to address the imbalance. The rentiers didn't take any of the pain, they're trying to pass it all along on the productive class in the form of increased financialization of the real economy and higher interest rates. It's disturbing

The "rentiers" aren't the ones who shut down the economy (that would be bureaucrats and politicians at every level) and have any say over interest rates (that would be central bankers). Seems strange to blame them for all of that.

Besides, why do you say that higher interest rates are harmful to the "productive class"? For every consumer who has to pay extra in their mortgage or auto loan due to higher rates, there sits a saver on the other end who gains from it.

No because fractional reserve. The money for mortgages and loans are created ad nihlo

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