Note: this is an unedited draft from my inflation primer manuscript. It is relatively lightweight, partly because I want to avoid getting too deep into controversial theories in that book. I might add material closer to publication. One area of controversy that showed up after 2020 was about the role of “price gouging” in the overall rise in inflation. (This idea was satirically referred to as “greedflation.”) This has been an area of theoretical dispute between post-Keynesians and mainstream economists (as post-Keynesians argued in favour of a conflict theory of inflation), although it was not that a well-known dispute until after the pandemic. The obvious reason is that most people are not going to loudly argue about the sources of inflation when it was stuck near 2%.
Interesting to see however so many economists still out here trying to dismiss the work of weber. To me, it's disingenuous and ridiculous. Traditional Macroeconomists like Jason Furman and even Larry summers haven't been any better in getting inflation right and in fact, they've been wrong for a long time now. Webers sellers inflation is worth the read and it's in a sense fascinating.
It's always struck me as obvious. Prices are controlled by excess capacity to supply between competing entities. And people will mark up their items for sales as high as they can get away with.
Once you run out of excess capacity to supply, then the kurtosis shape of the income curve changes.
To keep prices under control the income curve has to be highly leptokurtic. Changing price or reducing volume has to seriously affect income.
If the price hikes are being rammed through by “upstream” industries with pricing power, this results in downward pressure on the profits the “downstream” industries.
Interesting to see however so many economists still out here trying to dismiss the work of weber. To me, it's disingenuous and ridiculous. Traditional Macroeconomists like Jason Furman and even Larry summers haven't been any better in getting inflation right and in fact, they've been wrong for a long time now. Webers sellers inflation is worth the read and it's in a sense fascinating.
It's always struck me as obvious. Prices are controlled by excess capacity to supply between competing entities. And people will mark up their items for sales as high as they can get away with.
Once you run out of excess capacity to supply, then the kurtosis shape of the income curve changes.
To keep prices under control the income curve has to be highly leptokurtic. Changing price or reducing volume has to seriously affect income.
Typo
If the price hikes are being rammed through by “upstream” industries with pricing power, this results in downward pressure on the profits the “downstream” industries.
...on the profits the "downstream...
... profits OF the "downstream...