Comments by "Guinness" (@GuinessOriginal) on "Sasha Yanshin"
channel.
-
@Adam-mn3tt nonsense, of course the government can increase supply. Introduce price caps so the only way to increase profits is to increase supply to meet demand. It’s really very simple. Exactly the same thing would happen if it was a competitive market and perfect competition existed instead of the monopoly and oligopoly we are saddled with instead. The true market price is where the marginal cost = the marginal revenue. Instead we have oligopoly and monopoly that restrict supply, raise precise and make supernormal profits at our, and the market’s, expense. This is an example of a market not functioning correctly and a case for invention and regulation to ensure it does.
In a perfectly competitive market, each individual firm is a price taker, meaning they have no control over the market price and must accept the prevailing market price for their output. As a result, the marginal revenue for each additional unit sold is equal to the market price, since selling one more unit does not change the overall market price.
Therefore, in perfectly competitive markets, the profit-maximizing condition can be further simplified as marginal cost = market price. All the government has to do to ensure firms are price takers of the market price rather than price setters is put a price cap at the level of the marginal cost.
9
-
8
-
8
-
7
-
5
-
4
-
4
-
4
-
3
-
3
-
3
-
3
-
2
-
2
-
2
-
2
-
2
-
2
-
2
-
2
-
2
-
2
-
2
-
1
-
1
-
1
-
1
-
1
-
1
-
1
-
1
-
1
-
1
-
1
-
1
-
1
-
1
-
1
-
1
-
1
-
1
-
@Adam-mn3tt Once again, you’ve demonstrated your lack of understanding of basic economic principles, and are providing answers based on your emotional and political interpretation of a flawed and apocryphal analysis. Allow me to assist you in gaining a better and more accurate understanding of inflation according to fundamental economic principles.
The argument you presented contains some logical errors and misconceptions. I’ll break down the points you attempted to make and explain why you’re wrong.
1. “Inflation is calculated based on many different products:”
Inflation is not calculated based on individual products but on a basket of goods and services that represent the average consumer's spending pattern. This includes a wide range of products and services, from food to housing, transportation, healthcare, and more. By looking at the overall price changes of this basket over time, economists calculate inflation rates.
2. “Decreased demand for other items lowers inflation:”
While it's true that increased spending on one category, such as food, might lead to less money available for other items, this alone will not lower overall inflation, and will certainly not lower food inflation. Inflation is influenced by the general trend of rising prices across the economy, not just in a single sector. If prices are rising in multiple areas, the overall inflation rate will still be affected, even if the demand for certain goods decreases. Your claim that high food prices with a high profit mark-up will lower overall inflation is flawed. While individual price changes in specific sectors might temporarily impact inflation, they are not sufficient to bring sustained and meaningful changes to the overall inflation rate. Inflation is influenced by a combination of factors, including monetary policies, demand-pull, and cost-push forces, and cannot be solely attributed to food prices in an oligopolistic market.
3. “Food price fluctuations and supply adjustments stabilize inflation:”
Your argument suggests that when food prices are high, companies would decrease the supply of low-demand items and increase the supply of high-demand, high-profit items. However, this view assumes a perfect market response, which is certainly not the case in the food market in the U.K. today. Companies might not be able to quickly adjust their production and supply chains in response to food price fluctuations, and may not wish to do so even if they are able, especially in non competitive markets like the oligopoly that is the food market, where firms are price setters.
Moreover, inflation is influenced by factors beyond supply adjustments, such as monetary policies, fiscal measures, and global economic conditions. Your argument suggests that companies in an oligopoly will adjust supply in response to food price fluctuations, stabilising or lowering inflation. However, the effectiveness of such supply adjustments in oligopolistic markets are limited. Companies in an oligopoly have significant market power and are less responsive to short-term price changes, as they collude or tacitly coordinate to maintain their market positions.
4. “High profit mark-up on food lowers inflation:”
Your idea that a high profit mark-up on food items would stabilise or lower inflation is not supported by any evidence. Inflation in competitive markets is mainly influenced by factors such as money supply, demand-pull, and cost-push forces. As I’ve already said, although individual price changes in specific sectors might temporarily impact inflation, they will not be sufficient to bring sustained and meaningful changes to the overall inflation rate.
Oligopolistic markets, by their very nature, lead to reduced competition and higher prices. In these markets, a small number of firms dominate, allowing them to exert significant control over pricing and supply decisions. According to a recent study by Statista which you can find on their website, the the big 7 supermarkets account for 78% of the U.K. food retail market as of April 2023. This concentration of market power leads to less responsiveness to consumer demand and price changes, making it difficult for supply adjustments to efficiently stabilize inflation.
5. Missing from your argument was any mention of inflation management and monetary policy. Central banks and government policymakers typically, at least theoretically, play a crucial role in managing inflation through monetary policy measures such as setting interest rates and managing the money supply. Their focus extends beyond specific product price changes and considers broader economic indicators and trends. Inflation management involves addressing demand-side and supply-side factors, as well as overall economic conditions, which are beyond the scope of individual product price adjustments in oligopolistic markets.
To sum up, inflation is a complex economic phenomenon influenced by numerous factors, and it cannot be easily controlled or stabilized by focusing on the price movements of specific products alone. Economists and policymakers look at a broader set of indicators and implement various measures to manage inflation effectively. Your argument oversimplifies the complex nature of inflation and its determinants in oligopolistic markets. It neglects to consider the broader economic factors, the calculation of inflation, and the impact of oligopoly market structures on competition and pricing decisions. To gain a comprehensive understanding of inflation, it is essential to consider a more holistic approach that includes various economic indicators and factors beyond specific product price changes in oligopolistic markets.
Now, I understand that inflation can be a confusing topic, but it's essential to have a clear understanding of it to make informed decisions about personal finances and economic policies. By considering the broader context and engaging with experts in the field, you can gain a deeper appreciation of the intricacies of inflation and its implications for our economy and everyday lives.
1
-
@JackdiyGarden in fact, you’re understanding is far more accurate than Adam’s. I’m not sue why he’s purporting to be an expert here but it’s clear he’s never studied the subject. I’ve provided a more in-depth answer to his argument above if you’re interested. I’m not expecting him to reply, certainly not with any level of accurate economic analysis, but if he does I’ll be pleasantly surprised.
As Mark Twain said, “it’s easier to fool people than convince them they’ve been fooled, and as George Orwell noted, “The further a society drifts from the truth, the more it will hate those who speak it.”
He also said the following, which I think is relevant in the current climate: "The foundations of totalitarianism lie in the misuse of language to manipulate the truth and humanity's tendency to be subject to such manipulation."
I’ll leave you with the thoughts of Thomas Jefferson in inflation: "If the people ever allow banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless."
1
-
1
-
1
-
1
-
1
-
1
-
@lawrencebywater2112 FYI I did a degree in economics. The consolidation of the food retail industry in the UK is anything but transitional, it’s certainly not a time of innovation and adaptation, and it’s been a long time since it was truly competitive. While both Aldi and Lidl have made significant inroads into the market, by and large it hasn’t been at the expense of the big 4, who have largely retained their market share and seem an increase in their profits (Sainsbury’s yearly profits have increased by 400m over the last 5 years and their Chief Executive recently saw a 1.4m rise in his yearly salary to a cool 5m, for example), but at discount supermarkets like kwiksave and Netto and smaller high street grocers. Whilst initially offering lower prices on basic goods, prices at both have shot up in line with prices in the big 4, and competition is based less on price and more on brand and convenience. They may have increased competition in certain parts of the food market, but they have not had the same impact across all sections of the grocery retail market or other sectors of the economy, and their impact on overall inflation is limited.
Supernormal profits are a result of market inefficiencies and monopolistic behavior, leading to higher prices for consumers and reduced choices. This situation is detrimental to the overall welfare of society, as it concentrates wealth in the hands of a few companies rather than fostering healthy competition and innovation. The idea that people are still spending covid savings on more food than they would otherwise buy, and that as a result prices have risen is tenuous and far fetched, when you consider that in May £3.8 billion was withdrawn from savings, the largest savings drawdown in history, to pay bills. Any uptick in food or any other demand as a result of covid dissipated a long time ago. Monopolies and oligopolies use various pricing strategies based on their market structure, and rarely set prices at P=MC, preferring to exploit their market power to set prices above marginal cost (P>MC), leading to allocative inefficiency and contributing to inflation. This has been especially prevalent since covid and Ukraine, where businesses have used each crisis as an excuse to raise prices fast in excess of any increases in costs they may have incurred.
Any shift in both demand and supply curves, leading to an increase in prices and a decrease in quantity supplied, may explain short-term price fluctuations, but doesn't negate the impact of persistent long term high inflation. Structural and long-term inflationary pressures arise from factors such as excessive supernormal profits from monopolies and oligopolies in the markets, money supply growth, sustained budget deficits, and central bank policies. Your argument limits its focus on short-term factors and individual market dynamics without fully addressing the broader implications of inflation.
1
-
1
-
1
-
1
-
@lawrencebywater2112 ONS data shows that in 2022, incomes for the poorest 14 million people in the U.K. fell by 7.5%, while incomes for the richest fifth saw a 7.8% increase. Wealth in the U.K. is even more unequally divided than income. In 2020, the ONS calculated that the richest 10% of households held 43% of all wealth. The poorest 50%, by contrast, own just 9%. This has been massively exacerbated since then. The wealth gap in the UK widened by £1 trillion during the pandemic since 2020 with the richest 10% gaining £50,000 on average, an increase of £335 billion for the top 10% alone, according to research by the Resolution Foundation. The U.K. GDP was £2.23 trillion in 2022. The benefits of increased wealth during lockdown have been skewed to the richest 10% by a ratio of more than 500 to 1. Worldwide, the top 0.01% owned 11% of the global wealth by 2021, part of the trend towards a massive increase in wealth for billionaires. According to the ONS Chancel and Piketty World Inequality Report 2022, the wealth transfer has been so great that by 2023, the richest 50 families in the UK held more wealth than half of the UK population, comprising 33.5 million people.
I trust you’ll be happy to self reflect on how what you’re saying might be wrong.
1
-
@lawrencebywater2112 you shouldn’t need reminding that extreme income inequality can have adverse consequences for social cohesion and economic growth. The protests and riots in France and across Europe are a symptom of this, and are only going to get worse. In the Ukraine they brought down the government in a coup, and there is a distinct possibility of this happening elsewhere. Ukraine hasn’t exactly had booming economy in recent years. In the US you saw a protest that had the potential to be an insurrection on January 6th. There are going to riots in Britain soon if something is not done, it is only a matter of time before something ignites the tinder box.
While the role of the state in addressing inequality is a subject for debate, with various economic theories offering different perspectives on the appropriate level of intervention, it is nevertheless a fact that ensuring economic opportunities are accessible to a broad segment of the population is a critical aspect of a well-functioning and sustainable economy. You mention that companies' objectives are profit maximization, and this leads to the efficient allocation of scarce resources. While this is a fundamental principle of markets in perfect competition in economics, you should consider the negative externalities associated with unrestrained profit maximisation by unchecked monopolies and oligopolies, that harms consumers and stifles competition, leading to adverse economic outcomes. Intervention and regulation by the state, such as price caps, windfall taxes and the monopolies and mergers commission, ought to play a crucial role in ensuring fair competition, protecting consumers, and maintaining a balanced economy.
1
-
@lawrencebywater2112 Unilever, which includes brands such as Marmite, Persil, Dove, Lynx, Domestos and Hellmann's in its stable, reported a 20% rise in net profits to €3.9bn (£3.4bn) over the first half of its financial year.
Underlying price growth for the second quarter was 9.4%, despite underlying sales volumes falling by 0.2%, the company said. Another case of Oligopolies using market power to make supernormal profits through excessive price rises. The regulator, the Competition and Markets Authority (CMA), are going to investigate them for anti competitive practices and making excessive profits, although there’s no doubt under this government they will be cleared, just as the supermarkets were. Lobbying and political donations are important, as are the future corporate careers of those in charge of there CMA.
1
-
1
-
1
-
1
-
1
-
1
-
1
-
1
-
1
-
1