Episode 210: Seller's Inflation and the Super Serious Economists Mocking "Greedflation" "Conspiracies"
Oct 16, 2024
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In this discussion, Dylan Gouch-Lewis, a senior researcher at the Revolving Door Project, delves into the controversial notion of 'greedflation.' He critiques media narratives that absolve corporations of blame for rising prices, arguing that price gouging and market concentration significantly impact inflation. The conversation highlights how corporate strategies manipulate pricing and the ineffectiveness of simplistic supply-and-demand explanations. Gouch-Lewis also emphasizes the need for a deeper understanding of economic dynamics and the responsibility of corporate entities in shaping inflationary trends.
The podcast challenges the mainstream portrayal of inflation, arguing that corporate greed, rather than just supply-demand dynamics, significantly drives rising prices.
Historical trends reveal a consistent media and political tendency to blame external factors, such as government spending and labor demands, while ignoring corporate responsibility for inflation.
The discussion highlights the psychological manipulation employed by corporations in pricing, exploiting consumer perceptions to justify unjustified price increases, particularly in concentrated markets.
Deep dives
The Rise of Greedflation Narrative
Recent discussions have emerged around the concept of greedflation, where corporations allegedly exploit inflation to increase their profits through price gouging. Despite being dismissed by major outlets like The Economist, various studies indicate that price hikes during inflationary periods are often significantly driven by corporate greed rather than just supply-demand dynamics. For instance, the Economic Policy Institute found that between 2020 and 2021, over half of the price increases could be traced back to profit margins. This contradicts narratives that solely blame external factors like labor costs or government spending for rising prices.
Historical Context of Inflation Narratives
The conversation on inflation is not new; it resonates with historical trends from the 1970s when rising prices were often attributed to excessive wage demands and government spending, sidelining corporate responsibility. For example, a Reader's Digest article from 1970 attributed inflation primarily to government spending over corporate price gouging, a stance echoed in media critiques over decades. The Nixon administration, during high inflation periods, notably blamed organized labor for financial strains, ignoring corporate price-setting behaviors. This historical pattern suggests a longstanding tendency within media and political rhetoric to absolve private industry of its role in inflation.
The Impact of Media on Corporate Accountability
Media narratives often downplay or outright dismiss corporate responsibility for inflation, creating a perception that inflation is a natural economic phenomenon rather than a consequence of corporate decision-making. Influential economics commentators have labeled concerns about corporate greed as conspiracy theories, which minimizes public discourse surrounding corporate accountability. Reports from credible institutions reveal a failure to recognize the impact of corporate pricing power in concentrated markets, where companies can increase prices significantly without justification. The Washington Post, for example, has faced backlash for framing corporate profit-driving actions as normal economic behavior, perpetuating a harmful narrative.
Psychological Dynamics in Pricing Strategies
The psychological aspects of pricing reveal that corporations often take advantage of consumer perception when determining prices, especially in concentrated markets where alternatives are limited. Companies can test how much consumers are willing to pay, incrementally raising prices under the guise of increased costs or supply chain disruptions. This practice leads to sustained price increases that far exceed actual cost hikes, as seen in essential goods like milk and eggs, whose prices are frequently adjusted. The dynamics suggest that corporations are willing to exploit consumer behavior and shift blame away from themselves while maintaining high profit margins.
The Complicated Economics of Inflation
The prevailing media discussions around inflation often simplify complex economic factors, failing to account for both supply-side and demand-side contributions. While COVID-related disruptions and federal spending have been cited as causes for inflation, many scholars argue that a significant portion is due to corporate-driven price increases. Moreover, traditional economic models like the Phillips Curve have shown to be ineffective in explaining recent inflation trends, as they do not account for the unique market dynamics at play. This highlights a need for a re-evaluation of economic metrics and a more nuanced understanding of what drives inflation beyond surface-level analysis.
"An inflation conspiracy theory is infecting the Democratic Party," The Washington Post frets. "'Greedflation' is a nonsense idea," The Economist insists. "Harris' plan to stop price gouging could create more problems than it solves," CNN warns.
Over the last few years, as the prices of groceries, cars, and other necessities have risen, often dramatically, leading news outlets and influential pundits have claimed that these rising prices are simply a matter of supply and demand. Corporations aren't taking advantage of inflation, we’re told; they're simply responding to it. If materials are in short supply, or if there’s a surge in demand, retailers have no choice but to raise prices to control production flows and costs. Likewise, if prices of goods are significantly higher, then the people who want those goods enough to pay higher prices can still have them.
But these pat arguments don't hold up to scrutiny. Since the most recent round of inflation began, multiple studies have shown that corporations are indeed taking advantage of inflation, using tactics like price gouging to boost profits while creating barriers to quality food, medication, and other essentials. So what explains this discrepancy?
On this episode, we examine the tendency of media to defend corporate price-gouging and other inflationary maneuvers, how high status pundits and Serious Economists critique the White House from the right on this issue and condescend to anyone who might be even slightly suspicious that corporations are animated by something other than just the Invisible Hand, painting them as wacko conspiracy theorist who simply need to take the vaulted "Econ 101."
Our guest is the Revolving Door Project's Dylan Gyauch-Lewis.
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