a thread in which ilx interprets economics and finance, sometimes linen by linen*, and disagrees a lot (probably)

"But surely if one seller keeps their prices the same while other sellers raise theirs then people will just go to the place that's still relatively cheap?"

Also seems a good argument (though I suppose doesn't apply to the fictional world where only one merchant for a substance exists, eg: Dr Casino).

On the non-scarcity side, if there’s more money circulating in the economy why should the milk-producer simply cover their costs and maintain their existing prices? They’ll want to see what pricing the market will bear - and people will be able to pay more.

also: the companies who supply me with milk bottles, cow maintenance equipment, etc., have all been inching up their prices --- because they can also get away with that, because everybody has more money. so if i don't raise my prices, i will actually be making less money on my milk sales, in real terms.

More money circulating = higher prices because it increases the chance that one of those with more money but no milk will buy at an above market rate on the secondary milk market in the example above, which will tend to push up the primary market price.

Milk tends to be very highly regulated. You might not be able to set up a secondary market as easily as this is suggesting.

But not to the other scenario that was posited, which was: a substance is recommended, or consumers have more money, so the price goes up.

― the pinefox, Friday, November 18, 2022 4:32 AM (five hours ago)

right, so the example i gave was a shock to the supply side. now, imagine this: doctor casino has reached a pact with the aliens such that they are no longer mutilating his cattle, and he's got 100 cows, there are 100 people wanting 100 pints of milk at £1 a pint. everybody's happy.

one day, the milk and taylor swift appreciators of hereford roll into town, 25 of them. taylor swift has sampled doctor casino's milk and has declared it to be the best milk ever - it's from grass-fed, free-range cows that are happy because aliens are no longer mutilating them and also doctor casino gives a great cow massage, and only 100 pints are produced a day! so, the milk and taylor swift appreciators of hereford are here for a week and they are demanding to appreciate doctor casino's milk! but, there's a problem - there are now 125 buyers of doctor casino's milk (100 + 25 taylor swift appreciators), but doctor casino can still only coax his cows to produce 100 pints a day. so what happens? well, luna schlosser, head of the milk and taylor swift appreciators of hereford, spying that PBKR was able to buy the last pint of the day, corners him in a dark alley, and says i've give you £2 here for that bottle of milk (i have some extra pounds because i was scalping taylor swift tickets off ticketmaster), and this story is starting to sound familiar...

this is what happens when you increase the demand side of the supply/demand equation.

to really hammer this home: what the back-alley scalper examples highlight is that if demand is going up, and there are enough people willing to pay more, the price will eventually go up - UNLESS i, Farmer Casino, am oblivious to the scalpers, or profoundly committed to making sure that original customer base will always have affordable milk. that kind of philanthropic attitude is rare!

note that no actual scalpers need truly materialize - i could also simply guess that with the Tay-hive coming, i can surely get away with the price hike. (i know in the back of my head that unless i raise my prices to whatever the customers will bear, the scalpers could materialize and take the money that could be mine!) i might also notice that another ILXor's farm has raised their prices and gotten away with it, so again I'm leaving money on the table.

Good story.

But in reality, can shopkeepers see that people have more money?

What is the signal for WH Smith to put up the price of ballpoint pens? I understand "it's getting harder and more expensive to secure ballpoint pens - sadly, the price we charge for them must go up". But I don't understand "some our customers are looking more smartly dressed these days - perhaps they have more money for some reason. Let's raise the price of ballpoint pens."

OK --- so to the extent that you're asking about inflation: under inflationary conditions, the price of everything is going up. The price that W.H. Smith is paying for the pens is going up. The wages their workers expect to be paid is going up. The rent and the electricity bill are going up. Etc. So they raise the price of the pens. Good luck identifying the "first mover." But it's what happens.

But certainly, if a shop is located in an increasingly posh neighborhood, the suits people are wearing might well inform the owner's pricing decisions! It might also inform the decision of the landlord to raise rents on the pen shop, which is also going to affect the shop-owner's next moves. This isn't the same thing as inflation, though, where the buying power of a given unit of currency is going down across the economy.

Manufacturers and retailers put a lot of resource into pricing and also keep up with what their competitors are doing, state of the market, current financial conditions etc.

I guess in the old days when prices were routinely haggled over between buyers and sellers, part of the skill set of a seller was determining the highest price that the buyer was willing to pay, perhaps by watching their facial expressions and body language, bluffing, etc. In the modern era of posting prices for all items, these personal and interactive ways of sussing out how much buyers are willing to pay have been most likely replaced with modern analytical practices, but the goal remains the same.

You can still experience it in street markets the world over tho. Or when you try to cancel your internet service. Literal offer I got last week when I did that (because of course they force you to call some guy in an answering center who then reads a script designed to keep you): "What if we cut your bill by 17 percent and boost your speed from 100 mb to 500 mb?"

I should try that with my bank, as noted before.

>>> "under inflationary conditions, the price of everything is going up. The price that W.H. Smith is paying for the pens is going up. The wages their workers expect to be paid is going up."

That sounds different from our actual conditions, where the price of things is going up, but nobody's wages are going up - in fact many of us are looking at getting paid less.

"The rent and the electricity bill are going up." - I understand as a reason for price rises. But as I mentioned earlier, the fact that wages never seem to go up may be a reason I can't picture this world where people have more money and then prices rise.

That sounds different from our actual conditions, where the price of things is going up, but nobody's wages are going up - in fact many of us are looking at getting paid less.

nominal wage growth in the uk is over 5%, highest it's been in 15 years. so wages are going up for most people, on average. but they aren't going up as fast as inflation, so real wage growth is negative (around -2%)

similar story in the US too https://www.forbes.com/sites/qai/2022/10/01/us-wage-growth-fails-to-keep-up-with-rising-prices-for-17-consecutive-months/?sh=154d34b1b007

It's not that anyone claims inflation figures are anything but gross and often arbitrary estimates but it seems like there ought to be a more granular breakdown that would be more relevant to most people. Like "I have to work X more hours to feed myself now vs 10 years ago, but now I can get a big screen TV with 3 dead pixels for free on the curb that would have been a week's worth of wages 10 years ago."

Or "the rent was too damn high 10 years ago vs now where the rent is too GOTT DAMN high"

Who in the UK is experiencing 5% wage increases?

Maybe billionaires and multimillionaires, skewing the statistic somehow.

I don't think any normal person has seen any wage increase in many years.

tesco workers had their pay increase by ~5% earlier this year

https://www.nationalworld.com/lifestyle/money/tesco-staff-pay-rise-2022-how-much-will-wages-increase-and-how-do-they-compare-to-other-supermarkets-3647234

How much will Tesco staff get paid?
Tesco staff will see their hourly wage increase by 55p an hour.

Workers are currently paid £9.55 an hour, but this will increase to £10.10 in the summer.

Tesco store workers in London will get a similar increase to bring their hourly pay up to £10.78 per hour.

The pay increase has been agreed following talks with union Usdaw.

The move will see workers paid at least 60p above the National Living Wage.

The National Living Wage, which applies to workers over the age of 23, increased in April from £8.91 per hour to £9.50 per hour from this month. For those aged 21 to 22, this amount has gone up to £9.18.

but yeah, wage stagnation since the 1970s is a big driver of the wealth gap and which has made the US/UK into kleptocracies pretty much

nominal wage growth in the uk is over 5%, highest it's been in 15 years. so wages are going up for most people, on average. but they aren't going up as fast as inflation, so real wage growth is negative (around -2%)

― flopson, Saturday, 19 November 2022 15:55 (yesterday) bookmarkflaglink

if wage growth is behind inflation, which it has been as long as I've been in full-time work, then it still doesn't make sense that wage growth is driving inflation.

> seems like there ought to be a more granular breakdown that would be more relevant to most people.

the last cpi was lower than realistic because of the relative cheapness of second hand cars and fuel, neither of which I've ever bought

"The increase to the annual inflation rate in October 2022 reflected, principally, the changes to the cost of domestic energy supplies. There were also increases from rising food and non-alcoholic beverage prices, and from items for recreation and culture. There were large, partially offsetting, downward effects from the transport section, more specifically from the price of motor fuels and second-hand cars."

https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/latest#notable-movements-in-prices

(A CPI that included anonymous demographics or consumer behavior would be interesting.)

Most people I know are taking wage cuts or being fired.

Meanwhile I hear that taxes are going up and services will be cut.

Apparently this is because of the last bad 'mini-budget'. This seems criminal. Whoever is responsible should be in jail for life. Instead they will presumably be sent to the House of Lords and given millions of pounds for the rest of their life.

Wage increases sounds a nice idea but does not appear in my reality.

if wage growth is behind inflation, which it has been as long as I've been in full-time work, then it still doesn't make sense that wage growth is driving inflation.

― plax (ico), Saturday, November 19, 2022 8:02 PM (yesterday)

i'm not an economist/statistician nor am i a britisher but doing a little googling and the uk gov apparently keeps some pretty official looking numbers on a site. again not a statistician but if you click on the top level hits for economy -> inflation and employment/labor market -> people in work you get:

https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/l55o/mm23

https://i.ibb.co/7J401Gh/image.png

and

https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/timeseries/kac3/lms

https://i.ibb.co/XtNJDvb/image.png

now i have no idea how they calculate either and you can imagine the wage growth one being skewed by high earners etc. but from the uk government's perspective wage growth has outpaced inflation until covid.

my intuition is that policy makers have a target for inflation that matches or is slightly under wage growth, but would be curious as to what insights flopson has on the subject.

oh whoops, the same image embedded twice. here:

inflation:

https://i.ibb.co/7J401Gh/image.png

wage growth:

https://i.ibb.co/v19hN07/image.png

my intuition is that policy makers have a target for inflation that matches or is slightly under wage growth, but would be curious as to what insights flopson has on the subject.

― 龜, Sunday, November 20, 2022 7:29 AM (eleven hours ago) bookmarkflaglink

the inflation target doesn't have anything to do with wage growth; it's just set at 2% (usually with some caveats like "flexible" and "average" thrown in) and that's it. some central banks (like the US, new zealand and australia) have a dual mandate that includes "full employment"

if wage growth is behind inflation, which it has been as long as I've been in full-time work, then it still doesn't make sense that wage growth is driving inflation.

― plax (ico), Saturday, November 19, 2022 8:02 PM (yesterday) bookmarkflaglink

yeah i think most people agree the nominal wage growth that's happening now is "following" inflation rather than driving it. i'm not sure how strong the evidence for the wage-price spiral ever was. from a new report by the IMF:

How often have wage-price spirals occurred, and what has happened in their aftermath? We investigate this by creating a database of past wage-price spirals among a wide set of advanced economies going back to the 1960s. We define a wage-price spiral as an episode where at least three out of four consecutive quarters saw accelerating consumer prices and rising nominal wages. Perhaps surprisingly, only a small minority of such episodes were followed by sustained acceleration in wages and prices. Instead, inflation and nominal wage growth tended to stabilize, leaving real wage growth broadly unchanged. A decomposition of wage dynamics using a wage Phillips curve suggests that nominal wage growth normally stabilizes at levels that are consistent with observed inflation and labor market tightness. When focusing on episodes that mimic the recent pattern of falling real wages and tightening labor markets, declining inflation and nominal wage growth increases tended to follow – thus allowing real wages to catch up. We conclude that an acceleration of nominal wages should not necessarily be seen as a sign that a wage-price spiral is taking hold.

Who in the UK is experiencing 5% wage increases?

Maybe billionaires and multimillionaires, skewing the statistic somehow.

I don't think any normal person has seen any wage increase in many years.

― the pinefox, Saturday, November 19, 2022 5:46 PM (yesterday) bookmarkflaglink

the 5% wage increase comes from a survey that asks a random sample of about 10,000 households every month how much they earned at work that month. 5% growth means the average number this year was higher than the same number last year

if you want to remove the influence of millionaires and billionaires skewing the numbers, you can look at growth in median wages. from the office for national statistics (look at section 3). median pay growth was about 6.9% for september. industries in which wage growth was highest

people getting laid off doesn't count as a zero wage, so that wouldn't affect these numbers. that's one of the limitations of looking at wages. the unemployment rate is 3.6% which is historically low (link from ONS)

since this is an average, it's consistent with you and all the people you know having zero wage growth. it's not clear whether nominal wages going up means people getting raises or new workers being hired at higher wages. i'll see if i can find anything with details on that. data that can go into that level of detail usually takes a while to come out

Presumably if they're counting raw salary, millionaires and billionaires aren't being paid millions and billions?

I had an encounter of sorts with a 'secondary market' today when I tried to find tickets to a pop music concert online.

I was on a site called, I think, viagogo?, that was selling tickets at high prices and I think I later realised that these were people selling on tickets they had already bought.

Oddly, tickets were still available from slightly more direct sources. 'Slightly' because these are still online firms that make things difficult in all kinds of way and overcharge for anything and everything.

After I'd spent a large amount of money, I realised that I had to 'download the venue app', which I managed to do, but not to enter. So after all that I still don't have a ticket.

All this made me reflect on how extremely bad certain particular uses of digital technology have been for our society and economy, and how these have advanced inexorably at the expense of ordinary people with no consultation or obstacle in their way. Everyone has simply had to agree and go along with these things though they are very bad.

I note that when I say that 'certain particular uses of digital technology' are utterly appalling, I am not saying that digital technology or technology, in general, is bad. That would, presumably, be foolish.

This piece supports pinefox in that while their are benefits, it excludes those who are poor, not tech savvy or want to get involved in the digital economy. https://www.theguardian.com/money/2022/nov/26/britons-digital-banking-shopping-parking

Technological/practical "backward steps" we all just accept now

I agree with poster Worsley, and agree that lots of tech involves backward steps that has made our lives worse.

Ticket touting was an annoying and bad practice before it met digital technology.

Yes, FWIW my own complaint is not about ticket touting as in 'unscrupulous individuals' in the street or online. That was just the initial observation above (re 'secondary market'). My own complaint is about big corporations and their complex digital mechanisms.

Perhaps these corporations can also be called touts? Maybe, but they're official in a way that touts, I think, are not.

back in the day I remember I had friends that were paid to stand in line to buy tickets in person where they would only sell a certain number of tickets to any given individual. Thus, ticket "touts" would pay people like my friends to stand in line. These tech ticket systems have eliminated this valuable job

The jobs that I think are most beneficial, that have been lost, are basically "human being on the end of a telephone line" or even "across a counter".

Tech developments may be thought to have made these redundant, but this is not the case because tech has a tendency either to go wrong or to be opaque, and to need explanation or navigation by a human being.

It is increasingly rare to be able to find such a being, and thus one is confronted with a wall of technology with no way in and no recourse when anything goes wrong.

This seems basically to be a case of cost-cutting which is malign and bad for people's lives. Like other such tech developments, it has never been voted on. No-one ever went and cast a vote for "less human support, more impersonal interfaces that may or may not work". But the world went this way anyway.

I admit this is now not on topic of "finance" but that's how I started it - re: economic transactions being technologised.

> No-one ever went and cast a vote for "less human support, more impersonal interfaces that may or may not work".

elsewhere on ilx there are people writing in favour of the self-checkouts when they were introduced

I didn't know that. But even at self-checkouts in supermarkets, if that's what you mean, human support is needed. Almost literally every time I use one, something goes wrong and I have to wait for a human being to come over. Without them I would simply never be able to buy any food. The checkout example is actually a great demonstration of this principle.

At scale, I suppose, ie in big supermarkets, self-checkouts must have efficiency gains (like being able to employ less meat puppets), but in the Tesco metros and sainsburys locals that I mostly shop in they seem a waste of time for all concerned, as you need staff on hand for when things fuck up, 'assistance is coming' lol

thats still just and example of how you can easily get away with like 90% less human interaction and be ok

I'm all about reducing my human interaction but I still hate self-checkouts

I wasn't personally saying that self-checkouts are bad.

My view is that what is bad is financial / technological transactions where human assistance is not available for when things go wrong (as they usually do) or there is uncertainty (as there usually is).

I agree that in principle, self-checkouts could be OK, if human assistance is always available (it usually is), though probably we should have more of that (two people not one).

OTOH the fact that self-checkouts do so often go wrong is an argument against them. They add to life's frustration.

Clearly 'cutting jobs' is good for employers if it saves them money, but it's not good for others (the people who needed the jobs, and the services, shops etc in which those people's wages would have been spent).

cutting jobs and menial work is fine. the problem now is that the surplus value is being distributed to the rich and not to the workers

The jobs that I think are most beneficial, that have been lost, are basically "human being on the end of a telephone line" or even "across a counter".

As someone who has had one of those jobs, (and I know there are other ilxors who have had them as well) these jobs are generally shitty for the person doing them. The pay is shit. The customers treat you like shit. You have limited agency in ways to help, which tends to make customers increasingly treat you like shit. ... There is more dignity in standing in line and buying tickets for a scalper/tout than there is many of these customer service jobs.

fwiw - I very rarely have any problems with self checkout machines.

> No-one ever went and cast a vote for "less human support, more impersonal interfaces that may or may not work".

People have arguably voted with their feet and their wallets: with the rise of budget airlines, online banks etc.

i submit that not one person, given the choice between an automated push-button phone menu system, and a human who actually works at the business you're calling, would ever pick the former! the people who voted with their wallets were the corporate actors who realized this kind of technology could save them a fortune in clerical labor, not the public who have to actually call in and deal with the system. because, of course, the automated systems also demand a whole lot more of the caller's patience and energy, with no way to really know if they got what they were calling for, or if by the end of it they'd found themselves in a blind rage from desperately trying to get the machine to do something it refused to do. it's funny, basically every place has signed themselves up to have the public affection level of AT&T in the Lily Tomlin "Ernestine" era. cutesy tweets are probably a desperate attempt to claw back some of the lost affinity people might have once had for their products and services.

sarahell also makes great points though. i wonder how much those are specific to call-center type situations (whether outsourced, or internal to large organizations), versus other forms of clerical labor, or retail employees who can answer the phone at the counter. the call center situation definitely seems extraordinarily soul-sucking and emotionally taxing, putting the workers constantly in contact with people frustrated by the limited script/agency. really they're attempts to turn phone calls into a mass-production, factory-floor kind of thing, which is really in conflict with what a human conversation actually is. the push-button systems are a further attempt to fully automate/mechanize those kinds of interactions.

again, i recommend this thread as very relevant to the current conversation: Technological/practical "backward steps" we all just accept now

ATMs on the other hand, a true innovation!

i submit that not one person, given the choice between an automated push-button phone menu system, and a human who actually works at the business you're calling, would ever pick the former!

In a word: price. People choose to use businesses all the time that have notoriously bad customer service. It’s a trade off for price.

Sorry - I might be a bit too insistent in arguing this.

In an economy dominated by mega-corporations it often happens that people are forced to choose among a limited number of providers, all of whom have notoriously bad customer service. This is not a choice based on price vs. service, because there is no "excellent customer service" option available.