Why are things expensive? | Hacker News Reader

Why are things expensive?

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Experiences are expensive. Things are cheap(er).

A medium-quality dinner for two in an expensive city costs 100$. A beautiful kitchen knife costs about that much, but lasts 20 years.

A Broadway musical for a family of 4 costs about 800$. A good mattress costs about that much, but lasts for 20 years.

The given wisdom seems to be that we should value experiences more than things. Good things also cause small dose of repeated joyful experiences.

I am 50 years old, and live a reasonably opulent, upper-middle class, big city life. I am guessing here - all the items in my apartment put together, is probably worth 6 months of my work. A bargain, compared to the joy they give me.

Taking a couple of tennis balls to the local park and throwing them with your kids costs about $5, depending on how many you lose. Going for a run along the beach costs a bus fare. You can camp on the weekend for an initial outlay of a few hundred dollars of secondhand gear plus perhaps $40 a trip. Having everyone bring a plate for a potluck dinner costs slightly more than you'd normally spend for a meal.

I think experiences can be as cheap or as expensive as you like. Essentials are the crux of the article, and without essentials most experiences are harder.

Those things aren't what are meant by "paying for an experience". They're paying for the ingredients and DIY the experience.

I'm not really sure I see the difference. The point is the experience and how much it costs, whether or not you pay that cost financially or through DIY. And as the previous poster points out, you can get great and life-changing experiences for very little money.

I think what's interesting here is that that's not so true for things. For example, I'm looking into custom ergo keyboards at the moment, and there's lots of off-the-shelf options, but there's also lots of DIY options where you print and solder lots of parts yourself. DIY keyboards tend to be cheaper, but not usually by very much, because fundamentally, the cost of the product is driven by the cost of its constituent parts.

Fundamentally, both things and experiences are driven by supply and demand. Rare experiences that have a low supply but high demand are naturally going to be expensive, just like rare or hard-to-manufacture things. Experiences that can be found everywhere - like throwing a ball around with friends or family - are cheap, just like many common things are.

That said, my intuition would be that the cheapest experiences are pretty much always cheaper than the cheapest things, and the most expensive things (e.g. one-of-a-kind art, rare objects, etc) are generally more expensive than the most expensive experiences.

Well, I think there is a clear difference that I'll try to make clearer. Most people, when they talk about buying an experience, essentially want to do something fairly passive, that is directed by someone else. Like going bungee jumping - pay lots of money, turn up, do as you're told. Or go to a concert - buy tickets, turn up, do as you're told.

As opposed to something like a hike, where you need to contribute a lot of your own decision making and energy into creating the experience. The dollars you spend on food and gear are a bit beside the point.

> Rare experiences that have a low supply but high demand are naturally going to be expensive, just like rare or hard-to-manufacture things.

I don't think the rarity of the experience is relevant. Watching the aurora australis in Australia is rare, but it doesn't cost anything. The cost of experiences is mostly about the labor. Very niche experiences might be expensive because there's a high staff-to-participant ratio, but I wouldn't call that a scarcity cost exactly.

International flights are common but expensive. So are 4 star hotels and fancy meals. And escorts for that matter.

> That said, my intuition would be that the cheapest experiences are pretty much always cheaper than the cheapest things, and the most expensive things (e.g. one-of-a-kind art, rare objects, etc) are generally more expensive than the most expensive experiences.

Probably. Though it gets a bit fuzzy how you define experience. Running for US president is extremely expensive and kind of an "experience". Probably the most expensive genuine experiences you can buy are space tourism trips, which cost in the millions. Although arguably high stakes poker is just an expensive experience for some people.

Renting a tennis court will cost you more than 5 dollars, even in a public park.

Rent... a tennis court? I've never even heard of such a practice before. You just wait until there's a free court, then use it. I can imagine places where it's exceptionally popular and the perfect weather where a rental system would be viable, but I'm curious if it's the norm in places.

This is a very US-centric view, where public subsidies for tennis courts exist. In Germany for example, there's no such thing as a public tennis court, as far as I can tell.

In Menlo Park, you have to pay something like $50/yr to get a key to the courts. The key price is higher if you live outside the city limits, in unincorporated Menlo Park (I assume because you're not paying city taxes). Fortunately there are unlocked courts in Palo Alto.

You don't need a tennis court unless you're getting serious. I used to play cricket with apples[0]. As a kid I always had more fun from freeform play than from rules.

(Also strken wrote "throw" so I think they were thinking of a game of catch).

[0] Not sure which exactly https://en.wikipedia.org/wiki/Malus — unless they've been replaced since I was a kid, the ones on the right as you leave the cul-de-sac: https://maps.app.goo.gl/bsdmAm5cXtDyxwYy9?g_st=ic

You're being surprisingly overly specific with those tree links.

There are dozens of public tennis courts within a 5 minute walk from my house that are all free all the time.

I’m sort of shocked to hear they aren’t free everywhere. Which park system charges for tennis?

The one where there's too many people for two few courts.

I could look harder, but I think my local parks only have basketball courts and a large field. The biggest park in my town has a baseball field. Never had a public access tennis court.

There are tennis courts in town, but they tend to be part of clubs or whatnot, similar to golf courses. Not public parks.

Do you live in a densely populated area? There are free ones where I live too but I guess it might be different in the middle of a large city.

Why is your local government paying for construction and maintenance of tennis courts if they're not being used?

The government does not have to charge for tennis courts, it simply has to have too few of them.

> Renting a tennis court will cost you more than 5 dollars, even in a public park.

A great example of how even similar experiences can cost whatever you want to pay. You can throw some balls for free or rent a tennis court to do it. Some rich people rent an entire venue for themselves when they go out. You can camp in some nearby woods or go on safari in Africa. Experiences cost however much you want to pay for them. Exclusivity though, that's expensive.

Why would you need to rent a tennis court to throw balls with your kids though?

I think baseballs or Footballs (both American and normal) would have been a better metaphor. tennis balls have this odd air resistance to them that make them less satifying to throw with your hands. Which makes sense, since they are designed to be whacked with a racket.

Respectfully, this doesn't have much relevance to the fact that basic necessities like rent and food are significantly more expensive than they were just two years ago.

Housing, transportation, and food account for over 60% of all spending.

Experienes and goods aren't my problem. My problem is that my dwelling costs $500 a month more than it did in 2021 and I live in the exact same place, and I haven't gotten a raise.

https://www.bls.gov/news.release/pdf/cesan.pdf

Housing is an auction, and a bet on how well the area is going to do. If you live in a place that has very high demand, prices are going to go up if there's no building being done. But it's not all rising prices: My house's value hasn't outpaced inflation through the last 20 years, because it's in the wrong part of St Louis. People with blue collar occupations have no problem buying around me: You can buy a 4 bedroom house for under 300k, and their salaries have gone up far more than the price of the houses.

So house pricing problems? Just localized regulatory problems. We'd have a much smaller problem if more metro areas were attractive to people, instead of having such a big separation between of winners and losers.

There is a documented housing supply shortage on a national level.

https://www.cnn.com/2023/03/08/homes/housing-shortage/index....

Plus, mortgage rates are set at a national level. Your house price went up dramatically in the last two years even though the purchase price didn’t increase because someone new to the neighborhood has to pay a higher monthly payment to buy.

I would argue that the amount of homes that lost value enough to fully compensate the rapid increase in interest rates is going to be extremely low, even in towns and neighborhoods facing rapid decline.

It’s also the case that more metro areas grew than declined: https://www.businessinsider.com/2020-census-fastest-growing-...

In other words, pick any random person in the US and it’s more likely than not that they live somewhere that is growing.

Who do you think are the winners, and who do you think are losers.

You can buy in the wrong part of a city but you will pay much less. Who wins, people who pay less or people who pay less? I think it depends on what they are after.

>Housing is an auction

Between the recent (nationwide) realtor fee debacle and RealPage et al.'s (multi-state) price-fixing, it's probably more accurate to say that housing is a (national) grift.

> basic necessities like [...] food are significantly more expensive than they were just two years ago.

Here on the farm, the price I'm getting when selling food is half of it was two years ago. If I, the farmer, am selling the food for less than two years ago, while you are paying more than two years ago, then it seems experiences are you problem – e.g. you are paying more for the experience of shopping in a grocery store.

... people didn't shop in a grocery store two years ago?

People seemingly value the experience of shopping in a grocery store more now than two years ago.

You're presumably in America, where they essentially have two kinds of produce: cheap and expensive. Not too much of a middle ground there.

If you produce the former, the shop will purchase large amounts and distribute them to a large audience. You couldn't possibly sell that quantity yourself. The value added is obvious, and their margin is relatively low anyway.

If you produce the latter, the shop will be taking higher margins, but they're much more involved in marketing your product, since they're taking a risk by associating it with their upper-class lifestyle brand. Again clear value added.

Best price for the farmer is always to sell it themselves, but you can only sell a limited amount that way. In Netherland, some smaller farms have a little stall outside where they sell their produce. It's very cheap and fresh for the customer, and the farmer gets a much better price. But the total amount they're selling that way is never going to be big. I suspect it's just a nice bonus to them.

My brother in law has cows, and he recently switched to producing organic milk. That gets him a much better price, and he also recently started making his own cheese and grow his own grain. I love the diversification and we buy directly from him, but his reach is more limited than when he just has Campina pick up all his milk (which still happens).

> they essentially have two kinds of produce: cheap and expensive. Not too much of a middle ground there.

In fact, there is middle ground as the least expensive product goes for animal feed. The middle ground is the lesser quality, but still high enough quality, product that human consumers are still willing to purchase.

You, of course, set out to grow the highest quality product you can – it fetches the highest value, after all – but Mother Nature often has other plans.

Whose pockets is the money going into? Fuel companies? Shipping companies? Distributors? Retail grocers?

The last time I shopped at a farmer's market the quality was great, but the selection was limited and it was still expensive.

The pockets of the entire economy. Ultimately, food is mostly sold on futures contracts, so realistically the end consumer is currently paying the price from one to two years ago when the farm gate price was double what it is now. Within the next year or so, retail food will no doubt crash hard as those old contracts start to clear and the much lower contracts of today start to come into force.

Or it means that the farmer and buyer are both screwed up by third parties.

The third parties provide an experience.

Not to put any blame on you or anything, because rents are crazy, but median wages have risen pretty significantly over the last few years. You definitely should be looking for a raise, or a new place of work.

If the only way for people to keep apace of rising costs is to get a new job, that's got to be massively disruptive to businesses.

If both prices and wages have risen than it means you have inflation.

Yes? Everyone knows there was more inflation than usual. It has literally dominated headlines for the last year and a half.

On a personal level I feel the same strains, but all sources I’m finding have median wages rising more than median rent since 2020 and certainly since 2021.

However, that would not be true for buying a home especially when factoring in borrowing costs.

https://ipropertymanagement.com/research/average-rent-by-yea...

That's because rents temporarily cratered when people couldn't move due to lockdowns. But that was monthly, during the latter half of 2020 and the early half of 2021. Moving season is early summer, so people were locked into leases until prices rose again. Then, those leases were hiked in a massive price-fixing scheme, I mean raised in observance of inflation.

That's probably true for Bezos, too. Except that he got a raise.

To be more precise : wages in big cities are high. Most “things” are made in low cost of living / low wage areas.

Therefore, paying a local to cook for you is expensive. Buying a kitchen knife made by someone in a low cost of living area is cheap.

This also means that buying a custom knife handmade by a local artisan in your city will be expensive.

Also the industrial revolution happened, which massively drove down the cost of things. Nothing comparable happened for experiences. A restaurant today needs a similar amount of labor to make your meal as a tavern did 400 years ago. Their ingredient costs went down, but waiters and cooks do about the same amount of work, and property values haven't gone down. Meanwhile the amount of work to make a knife has been drastically slashed through technological progress.

There was some story once that a quality handmade tailored suit costs about the same amount of gold centuries ago compared to today.

Would love to see this fact checked.

Given the volatility of gold prices, you can just pick a date when that was true.

>Nothing comparable happened for experiences.

it kind of did. Fast food sacrificed the experience for the core consumption. Then you have chain restaurants like Denny's that exist to give the bare minimum "experience" without throwing it all away like modern drive-thrus.

Did they cut down enough to eliminate fine dining? Doesn't look like it. But I haven't done a deep dive into the ecnonomics of that. Just general wisdom that food as a business has always operated on razor thin margins.

There was fast food 2000 years ago with no real "experience". Nothing has changed in that regard.

https://www.bbc.com/news/world-europe-55454717

> Fast food sacrificed the experience for the core consumption

Going to fast food restaurants is a social outing for a lot of people. McDonald's is one of the best hangout spots, really.

environmental awareness, map of the whole world in your pocket, ebooks, 20Ah power banks, good thermal clothing, good cars

skiing/snowboarding, surfing, slacklining (highlining), biking, motorcycling

cinema, 4K/HDR, IMAX, streaming, youtube, single multi tabletop gaming, VR/AR/geocaching

music, festivals, amazing sound quality, headphones

psychedelics

sex (toys, porn, acceptance)

...

ordering basically any kind of AMAZING food for ridiculously cheap in most big cities.

The equivalent to the industrial revolution's impact on material goods pricing, in the domain of labor, did happen. It was slavery. Clearly, that did not persist.

What you say is that bigger cities have bigger inflation. If you live in a smaller city, earn half, but everything costs half, then, you don't have any incentive to move to a big city.

True if you save zero or negative percent of your earnings.

If you always save 10 percent of your earnings, then clearly the multiplier works in your favour.

If inflation is higher than what you can earn from a saving account, then how is it rational to "save" anything? You’ll have a bit bigger number on the account, but in the end you can actually buy less.

You can of course go with more risky placements and hope to go higher than a saving account, but then you have to spend attention on the market circus with additional worrisome mental load that you can actually lose everything.

2x salary, 2x costs, 2x savings. The savings are far greater if they compound in investments, and if you're remitting income to someone who lives in the lower cost of living area, it can be worth it.

100% this. Maxing out the 401k annually at the relatively low salary of 150k in NYC is easy. Doing that in St Louis at 50k livable wage is super hard. Car payments? Ditto.

2x savings does not matter if you have 2x prices.

Also explains why housing is a "thing", but not cheap at all.

> A Broadway musical for a family of 4 costs about 800$. A good mattress costs about that much, but lasts for 20 years.

Am I the only one that read that and thought "Since when does a mattress last 20 years?" That certainly doesn't match my experience, even for mattresses much more expensive than that.

I think this depends a lot on your build.

My friends who are 250 lbs linebackers have to regularly replace their sofas and suchlike because they're 'worn out' i.e. the springs and foam aren't springing and foaming back into place like they used to. On the other hand, I come from a family of 140 lbs marathon runners, and for us that simply does not happen.

Not sure about the US but that price and statement might have been true 15-20 years ago in the UK.

These days a high quality handmade king size mattress of natural materials starts closer to £2,500 and might have a guarantee of 10 years.

I’m lying on a small, high quality mattress purchase 6 years ago for £1,100 from a small boutique business and it started to dip in the middle a bit about 2 years ago but I think it’s got a 2 or 3 more years life left in it.

£630 ($800) will get you a very cheap mattress today and if it’s both comfortable and lasts 20 years that’ll be like winning the lottery

To be fair there are 2 markets by now

One with in-store shopping & the above mentioned high prices(and 600 is rather on the low side there)

But quit a lot of the mattresses winning the usual testing reports here are around 200€(single 80x200) to 550€(200x220) for a bigger one

Only available online but with nice return terms

Here in the UK you can buy a mattress in IKEA for between £99 and £799. https://www.ikea.com/gb/en/cat/spring-mattresses-24828/

I think you’re referring to those modern foam mattresses which are made of horrid manmade materials, are cheaper for manufacturers, have better margins, don’t last as long and are too hot. Lord knows what you’re breathing in

I don’t understand why they’re so popular. Sex is far worse with them too.

Their marketing is so aggressive I think many people don’t even know pocket sprung mattresses exist.

But they’re selling in droves so maybe there’s I don’t get

But interestingly, out of the all the hotels I’ve stayed at in the past few years, I can only recall one that had a foam mattress (which was awful). Wonder why the hospitality industry favours pocket sprung too…

Foam topped I can understand. But all foam/latex… no thanks.

What’s telling is that all the very high end manufacturers use natural materials and pocket springs. They weight a tonne and are supremely comfortable (I stayed at a hotel with a €5,000 mattress. Was like sleeping on a cloud)

Depends on which part of the UK. In Northern Ireland you can still get delivery and installation of a Respa bed and mattress-for-life, plus collection and recycling of old mattress all for easily under £1000. I think they're sold under the Silentnight brand in GB[0].

Why do you want all(?) natural materials, that doesn't sound hygienic for something you want to have for more than 10 years?

[0] Not all Silentnight would be Respa though, as far as I know.

Definitely can last 10-15

Since we are on this topic. Yes, maybe 10 years. And since when does _one_ mattress work for a family of 4?

I certainly don't have the same mattress as I did in 2003.

This is true in the US, but the opposite was true abroad. Which is I prefer to spend on experiences abroad.

Here in the US, experiences are very expensive. Going to a spa for a few hours, $300 to $500+. Buying the things they use at the spa, it's like $60.

Eating at a restaurant, going on a cruise or going to spa are not experiences I care about.

Spending time with your loved ones, spending time with friends, going outside and walking, reading a book are experiences that I care more about, and they don't cost much, if anything.

Some people living in poor countries report that they are happier than people living in rich countries.

Why is that? Because they have better experiences.

>Spending time with your loved ones, spending time with friends, going outside and walking, reading a book are experiences that I care more about, and they don't cost much, if anything.

oh, it really depends on the loved one. Hanging out but BYOB? Well, that's $20 a case or so, and you probably bring a few varieties. Cooking or ordering out also incurs some cost on someone. house hangouts are "free" (I won't nitpick on rent), but there's not really any third places these days to really hang out otherwise. You got a park and maybe a dying mall. The natural terrain from there really shapes how much "experience" you can get without someone nickle-and-diming you.

And ofc books vary: my "reading" right now is on game animation and that was a book I paid $100 for or so a few years back. Worth every penny, but not really "cheap" by any metric.

>Why is that? Because they have better experiences

definitely true. experiences vary on your environment, and when there isn't much business to make (for obvious reaons in such a country) you will have more natural experiences. I do yearn somewhat for that, but it again stems down to the dwindling third place; there isn't a "town circle" in many places in the US, which I imagine is a more common aspect of such 3rd world countries.

Yes, in poorer contries, there are lots of third places. This is exactly what I mean. Those third places are where artists often congregate, vendors sell tasty food at less than sit down restaurant, history tours are available as well as other random stuff/festivals. Many of these are outright free or low price.

The US is overly commercialized and overly regulated. Someone owns every square foot and they are trying to make as much money as possible. There aren't as many parks. Vendors certainly aren't allowed to sell anything in most parks. There aren't many creatives congregating in certain areas because they are priced out and must work to make a living way beyond just being able to buy food. So while you might see their once a year event, they certainly aren't out every month.

It is what it is. The US is for making money. With remote work being available, one can now optimize on location and have the best of many worlds.

That and because people in those countries still value the little things a lot, things we in rich coubtries, unfortunately, take for granted.

> Some people living in poor countries report that they are happier than people living in rich countries. Why is that?

My guess would be the hedonic treadmill, some people just have a higher baseline level of happiness.

Do you mean they become unable to enjoy good time with friends?

I wonder if it is poor countries. Or is it lower income countries.

If you have enough food, clothing, housing and entertainment. And you don't see too many people doing a lot better you can be pretty happy.

>And you don't see too many people doing a lot better you can be pretty happy.

This is key, people compare themselves to their neighbours. If everybody around you appears to be wealthier then it's going to take a great deal of fortitude to not feel bad about that situation.

This is one of the reasons social media is so insidious. No mater how good you are at something you can always find someone online who appears much better. Watching some rich arsehole flaunt his Ferrari on YouTube might make you question the value of your ordinary and perfectly good car.

It's also one of the insecurities that advertisers pray on. Modern advertising is full of images of people who appear healthier and wealthier than the target audience with the suggestion that if you buy the product then you too will become slim, happy and wealthy.

Comparison is the thief of joy.

>Experiences are expensive. Things are cheap(er).

Some experiences are expensive, some are free. Things are never free.

Why are things expensive? Because everyone will charge you the most they can get away with. Part because of supply and demand, part because they use your desires against you, part because they have to be profitable.

Things are expensive, as are experiences, because companies and people earn there living creating them. Man, I hate the take of "everyone else is charging too much", because we all do that, don't we? We negotiate higher salaries, switch jobs and move to improve living standards. And each and every dime we make is ultimately paid for by someone else.

Sure, but if prices rise high enough, that high demand induces more suppliers of those services. In cities, where rent is 3-5x that of rural areas, new suppliers cannot enter the market to provide more of that service unless it involves wages high enough to pay for rent. There is a finite amount of space in a city, especially those as extremely zoning-constrained as American cities.

https://en.wikipedia.org/wiki/Baumol_effect

This "everyone will charge you the most they can get away with" doesn't always have to mean prices go parabolic forever; we can enact simple urban land use reforms that allows more housing units and commercial spaces to be built, which can reduce the price of rent for businesses and the rent of housing units that businesses pay indirectly via wages.

well, no, there are a lot of places where you can get used things (or sometimes even new) for free that still in good condition

Not where I live.

The idea with "buy experiences, not things" is that things often come with upkeep costs, even if it is just a spot to store them. A knife needs cleaning and sharpening, a mattress takes a lot of space, needs clean sheets, etc...

And your examples are somewhat biased in that they are things you need anyways. You can't really live without a mattress and some kind of knife. The question is more about what to do with your disposable income. Do you buy a thing you don't really need or an experience you don't really need. The reason to favor experiences it that they don't come with upkeep costs.

> Do you buy a thing you don't really need or an experience you don't really need. The reason to favor experiences it that they don't come with upkeep costs

On the flip side, I regularly sell the things I don't need anymore. I can't sell my experiences, can I?

The other thing you appear to be missing is that there are few experiences you really need, while there are many things you really need, so any comparison of expenses to things is going to be comparing an unnecessary experience to a necessary thing.

>I am 50 years old, and live a reasonably opulent, upper-middle class, big city life.

This indicates to me that you don't actually know the price of anything, particularly post-pandemic. E.g., a middle-of-the-road mattress costs $800. A good one sets you back 2 grand.

It’s the big three: real estate, tuition, and health care. Real estate is the biggest and most pervasive problem as it affects the most people.

Younger generations are wealthier in terms of almost everything but these three things whose cost growth has greatly exceeded inflation.

I don’t think it’s a coincidence that we simultaneously restrict supply and subsidize demand in those areas.

> The given wisdom seems to be that we should value experiences more than things.

It's not. It's just it's easier and cheeper to produce things nowadays than experiences, thanks to the industrial revolution.

It hasn't been like this in the past. People valued things much more.

On other hand "experience things" are pretty cheap. Specially in second-hand market.

Second-hand books can be very cheap, same goes for music in form of CDs, or movies as DVDs. Or you can rent them pretty cheap. And even new ones are pretty cheap.

So if experience is mass produced as item it can be very cheap too.

In San Francisco, these numbers are wildly cheaper than the reality. Except a broadway musical.

> all the items in my apartment put together, is probably worth 6 months of my work

Is that after tax? I'm refurbishing and trying to define a budget.

Depends which 'things'. I cook every day and do the grocery shopping. Average food prices have gone up 2x - 3x over the last two years.

Probably not for the typical HN crowd, but for many people food is a substantial part of the monthly family budget.

Average food prices most certainly have not done that.

Things alone will leave most entertained and lonely.

I naively thought the article would answer that question : ) Still an interesting analysis though.

According to Betteridge's law of headlines [1], any headline that ends in a question mark can be answered by the word "no".

[1] https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headline...

Why are Things Expensive?

No.

The law doesn't apply because "Why are Things Expensive?" is not a headline. It's the title of a website.

Even better - HN usually trims off a leading "Why".

Are things expensive? No

Has this law no counter examples?

By application of the same law: no.

In many parts of the World, taxes are very high. That will push prices up.

In Europe, we have to pay for the recklessness we threw money during the pandemic, for the money we borrowed, for the money we printed out of thin air, for the very high energy prices due to failed green policy and for the war in Ukraine.

People in other parts of the world have their share of problems, too.

IMHO there's another structural issue: Expansion of the "landed gentry" class.

That is, people who own a property can live their whole life of it without single contribution to the society. They might own the property due to a sizeable contribution they made early on but lately a lot of people simply got lucky to be at the right place at the right time due to policies that favoured them or events that happen outside of their control or simply inherited the property.

Those people are taking large portion of the output of the productive people and because of the regulations and market dynamics their wealth doesn't come down but even keeps climbing.

Normally this would be reserved for the elites and can be tolerable and maybe even desirable but when you have that elite class large as today, the resources they take out of productive people gets very significant.

For example, if someone who happened to own a shitty house in an area where a lot of people suddenly start come to work, they can extract much of the productive output of the companies and people there simply because its not feasible to build new housing due to regulations.

When a company happens to solve the navigation needs of the world from SV, they happen to pay very significant chuck of their money to landlords in SV. The people who solved the worlds navigation needs might appear to be compensated handsomely actually don't keep the money for long, they transfer significant amount of it to landlords.

Then you end up with something like 2 people who solved the navigation, 5 people who produced and serviced the consumption needs but 10 people compete for the output of these 5 people since 3 people did nothing but just got richer by keeping owning a property.

Actually, these 3 people don't have to be property owners only, it can be anything that brings enough income for life without any further input to the society. Ideally, this wouldn't cause a problem because ideally they should have been living the good life for some huge contribution they made early on but due unfair market situation they ended up like lottery winners.

I disagree with a few things youre saying, though I think your heart is in the right place, allow me a moment. People who own property pay property taxes, the truth is that almost no one owns property in america, even the rich, we only lease it from the government. Further, a rich persons contribution to society is that cellphones are cheap and powerful, that you can have anything from a couch to a christmas dinner delivered to your door, that any of us have free time enough to talk on the internet rather than sustenance farming.

There is a big trick, they are robbing you, but knowing how is half the battle. As you say regulations push out competition, that is one factor; along with government spending which will always flow to connected interests; lastly a monetary system where the money can only exist when its loaned into existence by a private corporation, the Fed.

Each of these have their respective mythos of justification, and an underlying purpose. Regulation is to protect the public despite the fact that the regulations only come after working conditions have already improved, and are passed after the well connected corporate interests have gained some advantage that would be difficult for smaller businesses to replicate. Government spending is sold as defending citizens from ner-do-wells foreign and domestic, or more modernly for providing for the downtrodden, whereas the vast majority of money flows into the military industrial complex, the pharmaceutical industry, the banks and other well connected interests. The existence of a private organization responsible for the creation of our money is sold as a way to keep prices stable, when the reality is it gives them dominion over the wealth of the population, by manipulating interest rates and banking regulations they can chronically steal the wealth out of the paper you work for.

I agree with some of what you’re saying, but “regulation is to protect the public despite the fact that the regulations only come after working conditions have already improved” seems to be pretty patently false, historically, for workplace, health, and environmental regulations.

I think the

>people who own a property can live their whole life of it without single contribution

is a big part of why economic growth is slow in the UK these days whereas in the 1800s it was the workshop of the world. The economy shifted from making stuff to getting a levy on asset prices, either housing or financial transactions.

The developed world turned into rent-seekers, which worked fine up until the the developing world developed enough not to need every service the rent-seekers provided by renting out their assets to service providers. Suddenly, the service providers no longer have the fat margins but the rent-seekers still want the same rent increasing at the same pace when all need to consume the stuff produced by the people who were left out of this system.

IMHO the developed world will have to go through restructuring and bring back "makings stuff" home. The inflation is supposed to help with this, when enough architects are willing to pay high enough for cheese maybe some of the architects will get into making cheese.

Overall, I think the adjustment will be good for everybody. Although specialisation in a global trade can be beneficial, it can't be expected that the people of one country will work in sweatshops forever and others will have the good life simply because of their location. Eventually, things should stabilize in a more meritocratic world. A person baking bread in the Philipines shouldn't be having drastically shittier life quality than a person person baking bread in London and people baking bread in general should't have much shittier lives than people who inherited a house or works in finance. Of course, the value of contribution can be different and its all determined on the free market but it shouldn't be priced based on structural issues.

You have hit the nail on the head, and many countries have an invisible tax on services due to company owners selling to private equity companies / large majority shareholders that extract profits to other countries. American (and other) multinationals make owners wealthy and as a quick turnaround start extracting profits outside the nation.

In the UK you can buy a £100m apartment and pay virtually zero tax each year on it. That doesn't sound very high to me. Maybe taxes are high on the wrong people?

> failed green policy

What is a failed green policy? Sounds like a soundbite.

Whatever policies we have, haven't really reduced out CO2 emissions nearly as much as they should. The biggest reduction was probably last winter when everybody turned the heat down to save gas because of the war in Ukraine. I think I heard somewhere that that was a 25% reduction in gas use.

> everybody turned the heat down

and the weather was unusally warm. If it had been a bad winter, i doubt people will be so willing.

> haven't really reduced out CO2 emissions

nobody wants to pay the costs (neither collectively, nor privately) to do this. It's the fundamental reason why climate policy doesn't work. It has to be based on economics, and technological improvement - these takes quite a while methinks.

That a massive share of Europe is still dependant on natural gas for things like heating and cooking. In the Nordics housing in populated areas are mostly a mix of district heating or electric heating, and the rest either have wood or some oir burner (people far away from the grid).

In mainland Europe they don’t have a lot of wood to burn so gas from the Russian sphere of influence was a cheap solution that became an addiction that blew up in many peoples’ faces – even us in the north, due to the home energy markets being tied to natural gas

It's interesting that you're coming at my question from the pov of 'we didn't go hard enough and decarbonise earlier'. That's not the vibe I got from my parent post, which I thought was 'we've gone too far, green policies are unnecessary/futile' though it was entirely unclear, which was why I wanted clarification.

FWIW I basically agree with you. In the UK most people are reliant on natgas piped to the home for heating and hot water. It's a dense country and we have better options now.

>In the UK you can buy a £100m apartment and pay virtually zero tax each year on it.

You will pay £11,911,250 in stamp duty though.

I mean its public information that they were chopping down a historic and old growth forest for fuel and calling it green energy.

The original post said that energy costs were high due to failed green policy. Do you have anything to add on that matter?

In the UK we have Drax power plant in Yorkshire burning wood pellets shipped from North American forests and calling it green. I don't think it has much effect on overall global energy prices.

You're not explaining why prices are high, you are justifying your existing beliefs about "money printing" and taxation. Costs (including taxes) are only very loosely related to prices. They only serve as a lower bound, and not even always that.

Taxes are not the reason for the massive price increases. Indeed, you point out high energy prices, which were met with suspension of energy taxes in many European countries, with little effect. VAT was slashed for many sectors, still, prices went up.

If anything, taxes are too low. Many tax rates are at a historic low. European billionaires stole a trillion Euros from the population last year alone. Why people are always so enraged about the taxes that pay for every single public utility instead of the unlimited greed of the hyperwealthy who don't even know what to do with their money because the luxury wharfs are completely booked out and they already own two private jets?

> Why people are always so enraged about the taxes that pay for every single public utility instead of the unlimited greed of the hyperwealthy

Smoke and mirrors. They've managed to deflect the blame nicely, and we are dumb enough to believe that it is so. The same effect can be seen in the universal health care reactions in the US. Fascinating.

> stole a trillion Euros from the population

valuation of stocks growing higher is not stealing. Using hyperbole is not making your argument any more convincing.

Not paying their fair share of taxes on those million dollar bonuses, continuously inflating executive salaries, and realized capital gains is absolutely stealing. Failing to pay their fair share of taxes on their corporations’ income is similarly stealing.

We threw more money at the industrial-military complex and at banks after the banking crisis 2008.

seems like giving people money drives up prices more than giving money to big co's

Of course, big cooperations don't like it if ordinary people get more money => greedflation

Germany has higher taxes than Switzerland, but the prices are much cheaper. Why?

Rent, rent, rent, rent…

Taxes are a fixed percentage of whatever is sold, ubless taxes are raised (didn't happen yet) or new taxes are introduced (didn't happen neither), taxes have zero impact on prices.

The money we threw at the pandemic, like everyone else in the developed world, avoided an economic crash worse than 2008. It resulted in inflation so, among other causes. The high energy prices were temporary and caused by the war in Ukraine, green energy policiies had nothing to do with that (if you want to thank someone that would be Putin).

I agree with your point in general, and disagree with the OP's sentiment. However, seigniorage via central bank Interest Rates is considered a tax by most economists (or at least most economists would reasonably accept an argument that it was tax as legitimate), and does materially impact prices.

As a result, it's not entirely correct to say that tax rates haven't increased in Europe over the last 2 years.

Interest rates were raised, across the board after inflation hit post covid, those hikes were a counter measure. I am no economist so, but the take that all taxes are bad, all governments are incompetent that all wouod be good if we had just done some super easy thing is at best lazy and worse case really dangerous. Easy answers to comolex questions is what gives us populists.

Money printing didnt stop all the small businesses from closing down, its very easy to see the upward transfer of wealth that occured during the pandemic, it was the largest in history.

>> The largest in history

When do you think history started?

My cheap tablet doesn't want to smoothly render the linked site but going by the comments, it doesn't answer its own question. I was, however, asking myself the complete opposite question the other day, when browsing Aliexpress. Why are things so cheap? I think I know some of the answers (economy of scale, cheap labor) but still. I was looking for ESP32 related things, and I can get a very sophisticated, tiny little computer, delivered all the way from the other side of the world to my house (Canada) for the price of a coffee at Tim Hortons. So yeah, why are things so cheap?

It's due to the Universal Postal Union, which is a UN agreement that governs the costs and subsidies associated with international shipping.

The link below explains it well, but the gist is that China was rated to be a "poor" nation, whereas the USA was rated to be a "rich" nation. This rating essentially means that the USA is subsidizing packages shipped from China to the USA.

Trump (in a rare moment of not being an idiot) threatened to withdraw from the agreement over the subsidies. He didn't, but the agreement did get amended, and packages from China will start becoming less subsidized (more expensive) by 2025.

https://en.wikipedia.org/wiki/Universal_Postal_Union#2019_Ex...

I've noticed they've started shipping packages via central Asian countries like Kazakhstan. I've assumed this is to work around this rate change.

The amount of money was increased by a factor of 6 since 2008:

https://fred.stlouisfed.org/series/BOGMBASE

The amount of products and service we produce probably did not.

Most people think that M0 is only a small factor in price increase and other factors like credit given by banks, the speed at which money moves and spending/saving behavior play a bigger role. But I doubt that. To me, it seems those are all indirect, delayed outcomes of the money supply. So we don't see the prices increase linearly and instantly with the increase of the monetary base. But we see it eventually.

There are lots and lots of factors that can change the rate between government issued money and money available for consumers. Most of them wouldn't make the news even if the news cared about discussing anything in depth.

But the thing is, historically most governments kept those factors well regulated so that the government had a coarse control over that ratio. (A noisy but effective control.) But at the 2000's crisis, the US decided to loose their regulations so that there the ratio is completely defined by the market.

What that means is that no, it's not obvious that the dollar inflation is coming from the inflated money supply. But that's a problem by itself.

Inflation has been very low since the 1990s. The worry after the 2008 bank crisis was deflation. I suspect our recent blip in inflation which has now largely passed is a result of the covid supply shock.

https://tradingeconomics.com/united-states/inflation-cpi (click max)

Inflation has been hidden with outsourcing since the 90's. By moving manufacturing overseas the price of a lot of goods decreased while the items that you cannot outsource increased (Services, Healthcare, Education, Housing).

> Inflation has been very low since the 1990s.

Except for housing, food, healthcare, education, transportation, and energy. But yeah besides the eye watering increases in the prices of the things that make up the overwhelming majority of the typical household’s spending prices have barely increased. In fact you can get a bigger TV for less money!

I get the sense that people increase prices just because everyone else is increasing prices. Even if nothing increased for you since "everything" is increasing might as well increase because now is when you can get away with it.

You are mostly right.

Joseph Stiglitz, Nobel Prize winning economist, has said that most of the inflation we saw was markups - ie firms raising their prices due to inadequate amount of competition.

Here is an 50 min long talk on the subject https://www.youtube.com/watch?v=4BAsZIHp9HI&t=1217s

The idea that the expansion of money supply led to the price increases seems to be mostly a media narrative. Many people believe it however.

> The idea that the expansion of money supply led to the price increases seems to be mostly a media narrative.

Some would call it "common sense."

Robert Reich has been promoting a similar analysis on social media.

Why would Joseph Stiglitz, Nobel Prize winning economist be wrong?

Inflation correlates with the deficit spending.

I have the same sense - but they can only get away with it because a) people have excess savings b) people are willing to spend those excess savings.

When consumers start reducing demand, or substituting other products things will change - I’ve already started changing my behaviour - but it takes a little while, you buy a $7 jar of mustard, $12 bag of granola, or a $30 hotel margarita - and you’re f** that never doing that again, but it feels like it takes a while for that to work its way through the system.

Prices increase when costs go up. If you’re selling widgets and your wholesale price goes up, you have to increase the retail price or your margins drop.

Prices increase when a seller increases them. That could be because their costs went up, but it also could just be because they felt like people would pay more.

> Prices increase when costs go up

I'd contend that costs going up is _a_ cause of price increases.

The reason a soda costs more from a movie theater than a supermarket is not because a soda costs more to make in the movie theater, for instance.

It's not really a "get away with it" when you need more to afford the other increasing prices, though.

Monetary Base != Money Supply

M2 money supply, please read the part where the formula changed in 2020: https://fred.stlouisfed.org/series/M2SL

> I know that most people say that M0 is only a small factor in price increase and other factors like credit given by banks, the speed at which money moves and spendin/saving behavior play a bigger role. But I doubt that.

Please don’t take offense, but I doubt that you understand what you’re talking about given the fact that you confused monetary base and money supply.

It’s a peak Hn comment.

“I’m not an economist but here is my …”

edit Joseph Stiglitz, Nobel Prize winning economist, has said that most of the inflation we saw was markups - ie firms raising their prices due to inadequate amount of competition.

Here is an 50 min long talk on the subject https://www.youtube.com/watch?v=4BAsZIHp9HI&t=1217s

These comments at least try to use real economics, even when amateur.

Its refreshing when the vast majority of online discourse about inflation is just shouting “We have inflation because business are so much more greedy than they have EVER been!!!!”

>firms raising their prices due to inadequate amount of competition.

In a free market you can't have an inadequate amount of competition. If he is right, it means that regulations hampered competition.

Call Ripley's believe it or not, someone on the Internet is talking about something they aren't an expert in!

> Most people think that M0 is only a small factor in price increase and other factors like credit given by banks, the speed at which money moves and spending/saving behavior play a bigger role.

Well, what you seem to be describing is M2, aka actual money available for spending. Which is a rather large factor in the general price level.

No. That is exactly my point: That the change in M0 is the source of increased prices, not changes to M2 (apart from the changes that are in M2 because M0 is in M2).

Think about it this way: How can M2 increase without M0 also increasing? Then we can look at those mechanisms and determine if they are to "blame" for the recent price increases. I think they are not.

As I understand it, when people talk about the government "printing money" they don't mean literally producing more coins and notes (M0) but rather something metaphorically equivalent.

For every $1 in notes and coins, there are about $30 in bank deposits that exist as a number on a spreadsheet somewhere. So instead of actually printing more, when the central bank "prints money" it means they edit the number in their spreadsheet, increasing their own bank balance. Then they spend that balance buying things like government bonds and treasury bills (which also exist only on spreadsheets)

>Think about it this way: How can M2 increase without M0 also increasing?

It is quite simple. There are no reserve requirements anymore.

Isnt the whole point of economical growth that m2 will be more money than m0? Isnt it increasing by trade?

Yes, the parent comment is describing M2. Do you have any rationale for why you believe it is a large factor in general price levels?

MV=PY?

> To me it seems those are all indirect, delayed outcomes of the money supply.

Banks lending is an increase in the money supply.

When you lend money from a bank, you will not spend it on fancy restaurant visits. Because you know you will have to pay it back.

When you own a house and there is a cafe in that house which pays rent even though it is closed, because it gets the money from some governmental covid assistance program, then you do not have to pay the money back and can spend it consumer goods and drive prices up.

(In a fractional reserve banking system)

> Banks lending is an increase in the money supply.

And when the loan is paid off, it correspondingly decreases.

Asset prices have certainly reflected this increase.

The house my brother lives in was sold in 2011 for less than what the owners paid for it in 2006.

Now, its up 2.5x from what he paid.

You should listen to Steve Keen on this subject.

He doesn’t agree with you. He has a great podcast called Debunking Economics.

Nothing else explains the global rise in luxury spending and the global cost of living crisis. Steve Keen can bring out all his charts and theories but the lived experience of the people tells a different story.

> To me, it seems those are all indirect, delayed outcomes of the money supply.

Why do you think that? Suppose that Treasury minted $100,000,000,000,000,000 in coins and locked them up in Fort Knox and never spent them. By what mechanism would that increase in the money supply drive up prices?

People don't usually borrow money then leave it just sitting in their bank account. They borrow to spend. Same applies to the Treasury.

What do you think would happen if the Treasury decided to spend those coins?

You do realize that commercial banks create most of the money in the economy and QE is merely the central bank flooding the banks with reserves to back the money they already created?

Honestly, how can you be this dense. The difference in the past years wasn't QE or "money printing", it was that the government performed fiscal stimulus, which tends to put money into the hands of people more than letting their bank account be backed by government bonds.

The Economics Explained yotuber made a video about how hyperinflation is already there using a similar graph and where is it exactly?

I find a lot of things are expensive simply because the business owners live in an expensive area, and this unfortunately rarely results in a vastly superior product. Yes, I'm referring to a lot of DTC brands based out of SF. It's very telling judging from the marketing on just how much they spend to convince you their stuff is superior. I've started to negatively correlate ads vs quality and instead seek brands that don't spend much on marketing, but are still known. Those companies offer true value.

The weirdest thing to me is the variation in gas pricing. Within 100 miles I see gas under $4 and up to $6 on the same day. The most striking was two gas stations on a corner where one was $3.85 and the other $5.30. Even weirder (anecdotally), the cheapest gas seemed to come to the wealthier spots first while poor neighborhoods stayed high.

> Even weirder (anecdotally), the cheapest gas seemed to come to the wealthier spots first while poor neighborhoods stayed high.

Probably due to theft.

I live in Europe and gas is much more expensive than in the US. We figured out, we, Europeans, can save the planet by higher taxation.

I think money is a poor substitute to judge how expensive something is.

It's better to judge in time. How many ours do I have to work to buy this? Or even in breads or burgers. Is this worth x burgers?

Thinking like that made me buy much less than I would have.

I suspect you would be interested in seeing the time-prices of various goods, things like TVs continue to steadily get cheaper, whereas things like education and housing continue their upward climb.

Well, houses, it's simple: they (politicians) limit the number of new builds, otherwise prices would fall. It's always supply and demand in the end. Diamond extracting also: they control the amount of diamonds that 'enter' the market each year. Imagine if it was 'flooded': the diamond market would collapse.

Even in areas where building is effectively unlimited, land is effectively free (or less than $5k/acre) a new house is still moderately expensive. There's a minimum price below which you cannot realistically go, because of flat-cost items, and minimum building requirements.

So you end up where a smallish house costs $200k to build/sell at a modest profit, and a nice large house costs not terribly much more but can be sold at a much higher profit margin.

Sure, but those costs (including land costs) are reduced with triplexes/quadplexes/townhomes, which require moving a mountain to get approved in most zoning districts.

>Even in areas where building is effectively unlimited,

That's pretty much nowhere in the US. Or at any rate, not where people are.

Blaming this on politicians takes voters off the hook too much. There are plenty of homeowners, and ironically, pro-rental groups, strongly advocating for policies that limit supply of new housing.

Housing prices increasingly reflect labour costs, as those represent a higher percentage of the BOM year over year. North America has high wages and so the minimum threshold for a new 2000 sq ft hovers around $250K, bulk of it being labour cost, the rest materials.

This seems like a circle of inflation. High wages push prices up, which push wages up...

My Latin American friends working in construction would not believe this, they are paid crap, and is the American construction company owner who pockets most of the money.

Probably quite circular too, the labor costs are high because the housing/COL was allowed to become so high.

There's also growing competition from large companies buying up supply for one reason or another. Housing is being used as an investment option by hedge funds, and now there's whole companies running AirBnB rentals. The latter is being limited in some areas and there's a new bill in the Senate to stop the former, but at the moment it's hard for first-time homebuyers to enter the market when companies just pay 20% over asking price and outbid them.

This gets posted a lot and the reality is that hedge funds own a very small percentage of properties: it's hard to find numbers, but anywhere from <1% ("how many single-family homes do hedge fund owners own" / "how many single-family homes exist") to 3% (how many "institutional investors" own) [1]. They allegedly purchased ~27% of the new homes during the first 3 months of 2023 [1], which is a larger ratio (and not ideal), but still less than the majority. The majority of homes are owned by individuals [2], and the main reason prices are high is supply and demand.

[1] https://nationalmortgageprofessional.com/news/democratic-leg...

[2] https://sgp.fas.org/crs/misc/R47332.pdf

[2] https://todayshomeowner.com/blog/guides/are-big-companies-bu...

Institutional investors own less than 1% of SFHs. The only reason to invest in them in mass is because you think the area is dominated by NIMBYs who will prevent new supply. Otherwise theyre a bad investment. So funnily enough YIMBY policy fixes this issue too.

>Housing is being used as an investment

It seems a rather poor investment.

There is also, in the West, rapidly increasing housing demand caused by mass immigration. This also has the double effect of reducing wages.

For this to be true, you would expect to see rapid population growth. There aren't any Western countries with undue population growth levels - the immigrants are brought in to make up the numbers for the millions of babies that aren't being made.

Here in Norway the primary driver of the housing crisis is that people move from the countryside to larger cities, while hardly anyone does the reverse.

Ironically there's a shortage in the countryside as well, as many of those that move or inherit (ie kids moved) don't sell due to low prices, opting to keep it as a summer home.

And since prices are low it's difficult to get a loan, since sales price is often below the cost of building.

Average wages have never gone down since WW2 (stats are readily available), although immigration may be a factor in dampening the growth rate. For most people on HN, everything before WW2 is before your lifetime.

I don't know how immigration work in US but in Europe, most immigrants live on welfare with housing given by governments.

This is a take that would take serious evidence to convince me of. Population growth rates been declining in every western country to the point where, even with immigration, many are below replacement.

> mass immigration.

What are the statistics?

Also, we don't tax the capital gains of sold additional homes enough. We should tax those gains to the extent that it isn't profitable to own and sell additional property.

Renting shelter is an important piece of flexibility for many people. I was in no position to buy an entire shelter nor tie myself down long-term right after college (and in fact, moved 6 times in the first 8 years, all but one of those being based entirely on my evolving preferences [one was my landlord selling and moving away]).

If you agree that renting shelter is important to many people for valid reasons, someone or something has to be able to own that property that you call "additional" and others call "the place I live".

I agree with this argument, but it's unrelated to taxing capital gains.

Landlords should make money for the services they provide: upkeep of the building, providing living space, etc. But real estate capital gains do not come from productive investment such as in a productivity-boosting new company. Capital gains in real estate are unproductive rentierism, and are a drain on the economy.

One thing that all economists can agree on, from Adam Smith to Ricardo to Marx, is that land rent is bad and should be taxed away. Capital gains on real estate sales are a great way to do that, while preserving profit for those who productively improve land and rent it out to others.

As someone who rents and is hoping to buy a home eventually, I think both sides are somewhat right. No, I'm not in a position to buy, so I have to rent. However, I think that there's too many single-family homes that are owned simply to rent out right now. I'm okay with multi-family homes (apartments, townhomes, etc) being rented out more than I am with houses. Taxing additional single-family homes that aren't acquired through inheritance or similar means wouldn't affect apartment rentals and would still have the desired effect on single-family homes (which I think was the intent).

> they (politicians) limit the number of new builds,

This theory doesn't work very well, because there are lots of places where new construction is entirely uncapped (politicians are desperate for the new property tax growth), and prices still don't fall there. Prices are lower there than SF/NYC comparables, sure, but still up 300% over the past decade, and still rising every year.

I know everyone takes Econ 101, and then nothing else, but there's a lot more to pricing than just "supply v demand". We have lots of markets with high prices despite adequate supply, or even despite major oversupplies.

> Imagine if it was 'flooded': the diamond market would collapse.

The diamond market was already flooded decades ago (we can literally manufacture diamonds without mining now) and the market still did not collapse.

And of course, the supply price of diamond stones has almost nothing to do with the cost of a diamond ring, which is why Zales can still charge thousands of dollars for a loose diamond stone, that can be infinitely manufactured in lab for less than 1/4th of that price

Prices are almost never supply vs demand. And in a capitalist economy, prices are almost never competitive.

>This theory doesn't work very well, because there are lots of places where new construction is entirely uncapped (politicians are desperate for the new property tax growth), and prices still don't fall there

Can you give an example of such a place?

> the supply price of diamond stones has almost nothing to do with the cost of a diamond ring

Correct. But it does have something to do with the supply of *diamond rings*. Since there is a de-facto cartel between producers, middlemen and retail, it is not easy for new entrants to sell their rings to consumers. So no, there is not an oversupply of real diamond rings that would depress prices. Also, there is a sizeable % of people that want to spend more on a ring, which is quite rare in markets.

Also, I bet that there is a growing ecosystem of individuals and companies producing fake diamond jewellery and selling it direct to consumer (haven't looked into it).

Nobody’s buying property where they think the price will fall. If there’s a cartel keeping prices high, I’d have to be an idiot not to join.

> Nobody’s buying property where they think the price will fall.

Regular people do this all the time. Every renter on the planet is "buying property" that will have $0 resale value to them when they leave, for example.

If every house depreciated to exactly $0 upon move out (or even just depreciated at a controlled normal rate, similar to Japan's housing), most regular people would still buy houses. You still have to live somewhere, and plenty of people would prefer to own rather than rent -- even at a zero dollar resale value.

> almost never

Having agreed with everything up to this point, that's a rather bold claim. I would understand it as "supply and demand are not the primary factor in determining almost all prices". Is this really your claim? What are the factors then? Is there evidence?

I think one of the biggest things is the reduction in cheap energy. No Russian gas, no-one building nuclear plants, no fracking etc.

That's weird, gas costs $3/gallon in the US right now.

This the same price as was in 2004 ($1.88), adjusted for inflation.

No fracking is a big "citation needed." Did the US ban fracking?

https://www.cnbc.com/2023/03/07/a-new-nuclear-reactor-in-the...

https://www.businessinsider.com/more-solar-power-than-any-ty...

https://upload.wikimedia.org/wikipedia/commons/b/b6/US_Natur... (shale gas = fracking)

Who says I'm talking about America?

Who says you aren’t? You can’t be non-specific and then get pedantic about someone who is using specific examples.

https://www.cnn.com/2022/02/11/business/nuclear-power-france...

https://www.bbc.com/news/uk-politics-62820639

Yeah, big cuts in lifestyle are required to achieve climate goals. Underlying most initiatives is effective energy/capita reduction. No international travel for the middle class. Probably weekend only car use.

With the honestly astonishing ramp up in solar power and grid-scale battery production over the past decade, I have to disagree with this take. We're hurtling towards solving climate change through market forces alone — now, that doesn't mean we shouldn't also be using policy to speed the solution, but it is pretty clear that, as Noah Smith puts it, "Solar and batteries are going to win, and our thinking needs to adjust accordingly."[0]

The coolest statistic I've heard regarding solar and batteries is that 0.5% of worldwide GDP is being invested in it. One out of every 200 dollars spent is being spent on solar energy! It's truly incredible :)

[0]https://www.noahpinion.blog/p/our-climate-change-debates-are...

I agree. I believe the green shift is a big part of the underlying cost. Every good requires energy to produce, and clean energy is currently more expensive than coal and gas.

No it's not. The LCOE of both solar and wind are universally lower than that of coal, and almost always lower than that of natural gas.

This keeps getting touted again and again and it's wrong every time. The problem isn't generation, it's storage and distribution, in particular the last mile. Try running a steel smelter on solar power. Natural gas and coal can be transported directly to the factory, solar and wind cannot.

Additionally, dirty coal is very cheap in parts of the world, far cheaper than solar plus batteries. Remember, most of the stuff we consume is not produced in America, and is not subject to US energy policy.

Storage is irrelevant until they decommission the natgas plants. You're being disingenuous bringing steel mills since they don't use electricity.

But any industrial plant that does run on electricity runs fine using solar power during the day and natgas generated electricity at night.

How do you reconcile that with the rapidly increasing cost of electricity as more solar and wind are deployed? I would expect prices to go down.

Similarly, I can opt into paying a premium for green energy from my supplier. shouldn't that be a discount?

Because natural gas has gone up in price.

Econ 101: price is set at the margin.

The price of the good is the cost of the most expensive producer that satisfies demand. Since wind & solar can't (yet) satisfy demand, they're not the marginal producer and don't set the price.

The majority of new renewables are cheaper than fossil fuels.

https://www.irena.org/news/pressreleases/2021/Jun/Majority-o...

> No Russian gas, no-one building nuclear plants, no fracking

Good. We can instead invest in renewables.

Is this data taking into account language differences? Most people would Google such things in their native language.

Graphs without Y axis? That makes me not wanting to read the articles.

When the government needs money (to support Ukrain, Isreal , just a couple of examples), it will collect money from everybody by making money worth less

It's cute, but this only has search trends. Also it presumably only uses queries in English, so nothing useful from native language.

I wouldn't be sure about that, Venezuela is shown in the eggs search and that is a spanish speaking country.

Oeuf

As someone who did the whole math on modular synthesizers a few years ago because I wondered why many of those cost 3 to 4 times the electronic parts: This is the markup you need if you don't want to sell at a loss. The only reason other consumer electronics are cheaper, is because they are sold at a bigger scale where the costs of the parts go down and the design costs can be shared on more shoulders. There are some exceptions to this, where the designs are simple and the parts are few, but most of the stuff I ever saw was reasonably prized.

The issue is just that people not doing the math have no idea what reasonably priced is.

>I wondered why many of those cost 3 to 4 times the electronic parts: This is the markup you need if you don't want to sell at a loss.

Only in an indirect way. They cost 3-4 times the electronic parts because that is what customers are willing to pay for them.

A company ideally prices their products such that the net profit is maximized (theoretically). Markup is more of an indicator of whether the product is worth producing at all. If your margins are too high a competitor has room to sell a competing product that undercuts yours which will reduce the optimal price.

Well yes and no. If you price in operations, wages and other overheads and a modest margin you will typically land just there. Sure, it depends a lot on the thing, and that multiplier is only the lower limit. If you create a butique guitar fuzz pedal that consists of five parts that multiplier can easily be much higher, especially if you somehow convince people to pay for that.

But if it was any lower you will sell at a loss unless you sell huge numbers.

I thought the question of the subject can easily be googled/explained. The hard question is why are wages not keeping up? Greed? But greed has always been there. Shouldn't people stop affording certain things and that lead to a price drop?

I hope an economist answers this but my theory is that most businesses have consilidated/merged into larger businesses over that past two decades and this means they can get by for a couple of years with losing revenue so long as when customers come back the price that is acceptable to charge would make up the difference of whatever they lost

The pandemic disrupted supply chains of everything and so the supply of things went down. A short recession happened in 2020 but the US economy bounced back quickly thanks to small business loans (which were converted to grants), stimulus payments, and Americans staying home were able to build savings. Additionally, because of the Pandemic, labor was in high demand, and real wages and buying power grew sharply for the first time in a generation. You could get $15/hr working at McDonalds with a signing bonus. This lower supply and increased demand resulted in higher prices.

Two prices deserve special mention: Gas and Housing. Gas prices went up due to the war in Ukraine (Russia is a major oil exporter), and Housing has been increasing in price since the great recession due to low supply. The federal reserve also slashed interest rates to help stimulate the economy in response to the pandemic, which had the effect of subsidizing demand. With historically low supply and high demand, the cost of housing exploded and has not fallen yet.

Some of your points reiterate a framing I often hear from the establishment, which misleads people from understanding the more accurate causes.

Lockdown policies had much to do with supply chain disruption. Many businesses were willing to stay open but were forced to shut down, which obviously drove prices up due to lack of supply. The lockdowns were an unprecedented level of authoritarianism over what was a bad flu, very creepy and weirdly timed since it was a re-election year, but I digress.

Real wages haven't really increased given the level of inflation and economic distortions. If anything, real wages for average workers were steadily increasing during the Trump administration. According to the Fed analysis using CPI adjusted dollars, so take that with a grain of salt, we can see median weekly real earnings had previously peaked at 345 in Q1 of 2009, remained low during most of the Obama administration, finally returning to 345 in Q4 2015. This level steadily increased until Q1 of 2020 when it was 367. After some major distortions from stimulus checks, unemployment payouts, it spiked to 393 in Q2 of 2020, but is now back down to 365, slightly below where we were before the lockdowns. Except now there's less labor force participation, more homelessness, more crime, etc.

https://fred.stlouisfed.org/series/LES1252881600Q

Gas had been increasing since Biden took office, so it's not accurate to entirely blame it on the Russia-Ukraine war. As we all know gas was very cheap in the US during the Trump administration, at $2.63 per gallon in January of 2020, 2.42 in Jan of 2021 before Biden formally took office, then had increased 3.413 in Jan of 2022 right before the war started.

https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=e...

Much of the cause for high energy prices are due to green energy policies which subsidize inefficient sources like solar and wind, while penalizing reliable sources like natural gas and nuclear. I know that in California electricity prices have increased significantly, where the Electric Utility Retail Price was already high at 0.164 in January of 2020, and is now at 0.270. This is deceptively low, as I have to pay a connection base rate and peak usage pricing, so it's actually closer to 0.75 / kwH in the evening.

https://ycharts.com/indicators/california_electric_utility_r....

> The lockdowns were an unprecedented level of authoritarianism over what was a bad flu, very creepy and weirdly timed since it was a re-election year, but I digress.

lol

The link provides data about the question, but it doesn't answer the question. Here's a thought: https://fortune.com/europe/2023/12/08/greedflation-study/

The website is surfing on a trend of people worrying about the price of things.

However, I would argue most of things are cheap, even today. Their very low price in the last decade(s) was maybe an anomaly due to huge income inequalities in the world, global commerce expansion due to a very peaceful era, and very abundant energy. The price of things is still quite low, if yo try to imagine what it would cost to a small or even a large community to build most of the things we use, we would have to go back to the 1800's.

Writing this comment reminds me that things could get more expensive, and making them cheaper takes a huge amount of human effort.

The problem is really housing. The housing crisis overshadows the hundreds of smaller wins we've had in other goods like electronics, because housing is such a large proportion of expenses, and it's a compulsory expense. When you add in wage stagnation of the lower class, we've now got a big social problem. A generation of alienated young people. They have no hope of home ownership and rents keep increasing. This then creates political radicalization. My grandfather, a middle-class guy, grew up objectively poorer than people today but home ownership (without a mortgage!) was a given and that takes a load of stress off your shoulders when half of your paycheck isn't going to a landlord.

> a trend of people worrying about the price of things.

Rather dismissive.

There are whole chunks of the industrialized world struggling to afford basic necessities while working full time jobs. Calling it 'Worrying' is almost british levels of understatement.

Have I missed the bit where the site explains why things are expensive?

The article doesn't seem to answer why. Which is very answerable. Lets focus on the USA specifically.

https://tradingeconomics.com/united-states/government-debt-t...

Debt to GDP had a nice leap in 2020. The government took on significant increases in debt. While GDP did continue to increase.

The Treasury bill yields inverted. When this happens, nobody is buying their debt. So it goes on the 'balance sheet' the balance should be at basically 0. The pre-2009 nominal balance wasn't a problem.

https://tradingeconomics.com/united-states/central-bank-bala...

What you will see, during the financial crisis the USA federal government effectively went bankrupt. Has been bankrupt since. Nobody wants to hold enough of their debt anymore.

But countries can never go bankrupt.

https://tradingeconomics.com/united-states/money-supply-m2

Basically the federal government printed so much new money it caused high inflation.

https://tradingeconomics.com/united-states/core-inflation-ra...

Thusly resulting in a unusual huge increase in inflation.

This isn't free money. The USA will try its best to pull money out of their reserve currency balance but in so doing because of no gold standard will start removing the USA from being a reserve currency.

Or what is happening, anyone holding onto currency or currency likes that are returning below inflation are the ones who pay for the government's spending.

This will be exceptionally hard on people holding downpayment funds. Not to mention anyone who lives paycheque to paycheque and doesn't receive a raise in excess to inflation. They are the ones who pay for the government's deficit spending.

Basically, some things are expensive because underlying costs are high.

Others are expensive because they are overpriced. Regardless of the underlying cost.

Have I missed anything?

I'm absolutely bewildered by their "curvatures" chart:

> How to read the chart

> Each group of lines is a country

> Each line is a year

> The position of the curvature along the line indicates the top category by year

Uh...what? Vertical position of a bend on a line tells you...the...category? What?

Why?

Why did they do this? It makes no sense to me at all.

Two words, Fiat Money.

Better question - why is America so expensive?

Car culture. housing, and healthcare.

Healthcare costs an absolute fortune. If you're not paying it all out-of-pocket, it's being paid by insurance with big premiums from your paycheck. If you can't afford the full cost because you're too poor, middle-class people are subsidizing it for you from their paychecks. The middlemen (mostly insurance companies) are profiting hugely on the whole population here.

Housing costs a fortune thanks to America's NIMBYism, zoning laws, and lack of construction.

Finally, everyone needs an expensive car and all the costs associated (insurance, fuel, repairs), and I'm guessing America has the most lane-miles per capita of roads to maintain of any country (maybe Canada competes here).

All these costs add up, and mean that American workers need a ton of money just to have a basic lifestyle.

Personally, I think this is going to end up making American labor extremely uncompetitive on the global market. It already has in many industries, but it's just going to get worse, and other countries are catching up in development or have passed the US.

>Personally, I think this is going to end up making American labor extremely uncompetitive on the global market.

As long as most countries depend on the US and most international transactions and lending is done in USD, that does not matter. US can buy in dollars and then print some to cover their debts.

The only threat to this model is OPEC selling oil in other currencies and BRICS countries establishing a parallel financial system. But then, that's why US has the army and the three letter agencies, to assure against that.

That doesn't make American labor competitive at all, on the global market. It just props up labor prices domestically, so servers can get paid a fortune (in global terms) so they can afford a shitty overpriced apartment and a personal car, whereas servers in other countries just walk or bicycle to work and get inexpensive healthcare and don't need as much money to live. But no one is going to pay American labor rates for manufactured goods, unless it's for F35s. So in the end, most Americans are just working at bullshit jobs, and the whole economy is propped up by its currency being the reserve currency. That's not what I'd consider a good long-term strategy for your society.

It's generally not. Though, like everything, there are certainly expensive options.

Cost of living in the US seems low to me. I'm comparing to my travels in Europe and living in Canada. This is without taking into account that people earn more and pay less tax in the States.

Not sure where you got the idea that the US isn't expensive after traveling to Europe. Hotels, restaurants, and transportation are significantly cheaper in western Europe than in America, and those are the main costs you'll see as a tourist.

Not to mention food. Eating at a brasserie in Paris, two meals, two drinks was about 24-27 euros. When we came back from our trip we ate at a “French” restaurant in our town serving the exact same food and it was close to $80 plus 20% for a tip. Two meals and two drinks. Not to mention the quality was much less even though it’s highly reviewed.

America is expensive in a lot of ways you get much less than what you pay for.

> we ate at a “French” restaurant in our town serving the exact same food and it was close to $80 plus 20% for a tip

That's because French restaurants in US are considered fancy. They are always expensive. But if you compare say Thai restaurants, the prices are similar (I just did -- curry near me in suburban Paris €13.5, curry in suburban NJ $15+tax+tip).

>Eating at a brasserie in Paris, two meals, two drinks was about 24-27 euros.

We live on different planets. Eating in Bucharest or Sofia, one of the lower priced European capitals, will cost you far more than that.

In Paris it will cost around 200 euros, unless by brasserie you mean McDonalds. And even at McDonalds in Paris you don't get much for 25 euros.

>Cost of living in the US seems low to me.

I am not living in the US, nor did I visit it once. But from what I am reading, cost of living is totally dependent on where in US you live.

Avg wage is higher than most countries on the planet. High cost of living in tier 1 (international) cities. Not all parts of America are expensive, just the parts most people prefer to live in.

Because most markets have been turned into oligopolies in the last 20 years and inequality is skyrocketing.

Have you seen inequality statistics?

Define America. SF bay? Montana? Canada? Mexico? Cuba?

Bluntly, it's the Law of Supply and Demand at work. With inflation, it means there's more money in the economy than the goods and services, to the value of the money goes down, i.e. inflation.

Consider an economy with 10 people in it. Now double everyone's money. The prices will all double.

Where does all this extra money come from in the US economy? Federal deficit spending. The government (through various machinations) simply creates more money to cover the deficit.

This is why the government switched to a fiat money system in 1914 - then the government can just spend whatever they want with no constraints.

Fun historical fact: During the Civil War, the Confederacy experienced rampant inflation. The treasury was located in Richmond, VA. When the Union Army got close to Richmond, the Confederacy packed up the printing press and moved the Treasury, which took a few weeks. During those few weeks, inflation came to an abrupt halt. When they got the printing press running again, inflation resumed its gallop.

If you can't collect tax because of a war going on then printing money and inflating away the value of your currency is probably the next best alternative.

Inflation is just a hidden tax. Money printed by government mean that money already held by people will have less value. It's a legal way of stealing.

Fun historical fact: When the US currency was based on gold, there were two periods of inflation:

1. the California gold rush

2. the Alaska gold rush

Even more fun was the Spanish belief that looting the New World of gold and silver would make Spain rich. All it did was cause massive inflation in Spain.

My intuition tells me that if you need to explain your UI before presenting it then you've probably failed at designing it.

Maybe I'm too old school in that "Design of Everyday Things" sort of thinking.

Nobody has to explain to me what to do with a cup because it's not shaped like a banana.

What about a professional tool with a million features? Sure, sometimes designers create unnecessary complexity. But sometimes the problem is inherently complex.

A cup is something a baby can learn to use. A CAD package for designing rocket motors? Not so much.

A infographic website and CAD package for rocket motors are apples and oranges.

If someone is experienced at using CAD software and they can't navigate their way around a CAD software's UI then that software has a bad UI.

Anyone new to CAD software is going to have a difficult time navigating all of the tools it offers.

yeah it's slick on the surface but overwhelming to explore. i tried and quickly closed it out.

also, google trends about "why are things expensive" doesn't tell much about "why"

.....not sure if someone wanted me to learn something or wanted to show off their javascript skills.

And, to be honest, I had trouble learning anything from this confusingly formatted site...

Vote to make complaining about this sort of thing valid in the comments, some fancy presentations should be text files and it needs to be said.

If they wanted you to learn something, they would say somewhere what those colors actually mean or what the graphs measure.

agreed. I'm viewing this on mobile and the experience isn't "bad", I just like instant feedback.

The website doesn’t explain why things are expensive, it just presents the comparison between search terms frequency. Also, data visualization for “Top categories by country and year” reminds me how pimple cream companies illustrate pimples.

One word, greed.

Lol, I love these clueless takes. That's why the 1990s saw a low, steady rate of inflation -- because there was so little greed. But starting around 2022, we saw a sudden surge of greed, when there was so little greed beforehand. And that's how things got so expensive!

You might consider reading up on a subject called "economics".

"Economics" was invented by the wealthy elites as a tool of class control to justify their bottomless, insatiable greed. All "Economics" does is rationalize the obviously failing status quo.

Unless you're claiming people have become more greedy recently this can't be an explanation.

Many markets are becoming oligopolies and inequality is skyrocketing. So yes: greed.

Venezuela and Zimbawe have a higher percent of greedy persons than other countries, that explains all. Venezuelans, you should stop being so greedy!

I'm going to upvote it so it can be preserved as an example of why things are more expensive: People do not understand economics.

Inflation is everywhere and always a monetary phenomenon.

Cool website though!

I'm no economist but...

grabs macroeconomics book from shelf

Yeah it's definitely more than just monetary phenomena. I'd argue that bad fiscal policy makes it happen and jiggering the money supply is what we do to fix mistakes by terrible leadership, but that's certainly also an oversimplification.

Regularly requoting Friedman doesn't make it true. You're confusing cause and effect. Inflation can be fixed by adjust the money supply, but it may or may not have been caused by money supply.

You're correct in that not the requoting that makes Friedman's dictum true. It's the basic math.

The aggregate price level is equal to the money supply, times the velocity of money, divided by the volume of transactions. The duty of monetary policy is to size the money supply accordingly. When the central bank fails in that task, or is overwhelmed by fiscal recklessness, you get inflation. Everywhere and always. By "phenomenon", he's not talking about the proximal cause; he's talking about the policy point of failure.

And it sure as heck has zero to do with excessive javascript and Google search trends.

Way better than inventing ad-hoc stores that support people's biases.

Designers who “ease-in” text on-scroll should have their hearts “eased-out”. With a spoon. (“Why a spoon, cousin?”) Because it's dull, you twit: it'll hurt more.

Inflation is mostly just a cover for the handful of firms in each industry to collectively raise prices

No. It's a cover for stupidity of governments and failed governmental policies.

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