5 Comments

What about only looking at companies with physical products and comparing direct COGS Q to Q?

Expand full comment
author

You could try something like that, but you run into problems with services.

Expand full comment

The term, "gouging," greed, puts the topic into a political (civic) framework. Also fitting with that is "try to," though it also makes it concrete rather than purely theoretical--in fact, firms haven't simply tried, they have/had raised prices--an economic framework for "gouging," by private firms acting within their, profit-maximizing, civic mandates might create a simplified model which would say that prices simply rose (and now to generalize beyond this more political than economic crisis to other similar, but more generally theoretically useful patterns of the past) because of market advantage accrued over time via past years/decades profit margins.

So much for framing what everyone must be thinking in seeing the title of this Substack; my question is, these falling aggregate profits in the short-term create lower or higher prices--deflation or inflation? I note you used the term, "aggregate," which might include per-firm, at least in the very short term, higher prices--inflation. Followed by a deflationary crash?

Expand full comment
author

The wording was not optimal, but the “try” was supposed to refer to “try to raise profits.”

“ my question is, these falling aggregate profits in the short-term create lower or higher prices” - not sure I follow. Profits arguably rose after the pandemic. My concern is that aggregate profits can go up or down regardless of pricing decisions. I.e., profits are not tightly linked to prices.

Expand full comment

I was focused on "TRY to raise price," which I thought odd, considering they actually did. Soy comment went off-point. I was reading Piketty a few years ago so I had this image of "aggregate" for the whole economy, whereas you mean selling in bulk versus selling a bit less at a higher price PER FIRM, so, it's off-point so no need to answer me on that, nor therefore about what price--infla. vs. defl.--a falling cross economy falling profit might produce.

I will re-read this in the light of your "concern." But what of monopoly pricing, and the various levels of competitive advantage, varying elasticity, by which the price level is set in a market-based negotiation. At any rate, I will re-read this, short, piece or wait for a later more in depth talk on the same, if it comes out on Substack.

Expand full comment