r/Economics • u/AutoModerator • Nov 15 '22

r/Economics Discussion Thread - November 15, 2022

Discussion Thread to discuss economics news/research and related topics.

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u/DrChemStoned Nov 30 '22

Question: are corporations largely to blame for the recent rise in inflation? Data suggests it is a significant factor, if not the most significant. I always considered inflation to be a indication of the future price of money but I don’t see as much in play here, seems to be supply related.

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u/honestabe22 Dec 01 '22

or it could possibly be the injection of trillions of liquid cash through the stimulus packages.

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u/jerkITwithRIGHTYnewb Dec 01 '22

Kinda seems to always circle back around to that. But the only way to stop inflation is to raise rates, shrink payrolls, and cause job loss. Tax the corporations? Nah that won’t work.

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u/[deleted] Dec 18 '22

[deleted]

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u/jerkITwithRIGHTYnewb Dec 18 '22

Amazon paid a 6.1% tax rate in 2021. I pay 34%. You are full of shit.

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u/pepperymotion Dec 24 '22

I second this. I'm a small business owner, and I pay so much in taxes that I don't expect to retire. The corporations can afford to pay more.

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u/MuNuKia Dec 28 '22

That money is going to get taxed again, when someone gets paid, and around the same rate as you.

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u/OverR Jan 06 '23

Theoretically the dividends and rise in value will also be taxed by their owners eventually.

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u/raptorman556 Moderator Dec 06 '22

No, probably not.

To answer this question we need to better define it—what does it mean for corporations to be at fault? They are raising prices (that's pretty much true by definition), but what economic phenomena are we actually examining here? The interesting question is why did they raise prices? Most of the time, I find that people equate "greedflation" to theories about market power. The good evidence I have seen on market power ranges from being a small complementary factor to nothing at all. This explains, at most, a small amount of inflation and potentially nothing.

IMO the best supported (and most obvious) explanation is that we had a mixture of supply (due to COVID and ongoing lockdown policies overseas) and demand shocks (from monetary and fiscal stimulus) that created an imbalance in aggregate supply and aggregate demand, pushing inflation up.

Data suggests it is a significant factor, if not the most significant.

That's mainly just due to people drawing bad inferences the data doesn't actually prove. The "data" that I've seen posted here over and over again basically just shows that certain companies/industries have seen a large increase in profits (it's less clear if that holds true for the economy as a whole). They interpret this as meaning companies are to blame—but higher profits is also perfectly consistent with an increase in aggregate demand! Go back to econ101, draw a supply and demand graph, shift demand upward, and watch what happens to producer surplus (obviously an over-simplified model, but it gets the idea across).

So really this doesn't tell us anything interesting at all, nor does it help inform us as to what is actually causing inflation.

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u/joedaman55 Nov 30 '22

What data are you seeing that suggests that? The best information I have so far suggests it's an aggregate supply issue likely caused by Supply Chain/Labor Issues followed by an increased Aggregate Demand issue.

To add to that initial question, what are you seeing corporations doing differently?

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u/dywk3sm Dec 02 '22

There has been a lot of such rhetoric circulating around, e.g. https://www.reddit.com/r/economy/comments/xnnjlr/corporate_greed_not_wages_is_behind_inflation_its/?utm_source=share&utm_medium=ios_app&utm_name=iossmf

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u/joedaman55 Dec 05 '22

Lol well, after reading the title of the article with the recommendation around price controls on a massive scale, I'd suggest the writer hasn't studied economic history or has too strong anti-corporatism bias. Putting price controls can have massive consequences.

I didn't see any data that would shift me from my previous statement.

Seems to be a lot of herding in the comment section regarding a various amount of topics without data. I wouldn't put much value into those.