Comment on What happened to Airbnb?
jmp242@sopuli.xyz 7 months agoSellers can set prices, but for many things there are alternatives and hence more than one seller. Apple sets the iPhone prices, but you can substitute an Android pretty effectively, and there are multiple manufacturers of Android phones at lots of price points. If Apple decided to set the base price of an iPhone to 100k, people would not get mortgages, they’d buy a 500 dollar Android.
This holds true for lots of things, but housing is distorted by lots of factors. But housing doesn’t disprove supply and demand.
Excrubulent@slrpnk.net 7 months ago
I am not ignorant of the extremely simple story that you will learn in econ 101 - and sadly in more advances courses as well.
It’s just that it’s only a theory. You should perhaps pay attention to the information you gave, and how you didn’t say, “observation of market behaviour bears out the supply & demand theory”, you just waved vaguely in the direction of a mechanism, with no reference to data.
If you look at the many studies into the matter where economists accidentally - and sometimes intentionally - did science on this, they found no actual data to support supply and demand as a model of pricing. It simply doesn’t hold true, and yet it’s taught constantly, and if you try to google this, you’ll just find publication after publication talking about the “law” of supply & demand. But it’s not a law, it is simply an assumption.
When looking at market behaviour and when talking to price setters, there is no data to support the theory, and nobody in the business pays attention to supply & demand. All the models that seem to work share the feature that they are set by the supply chain.
This article gathers the relevant information and has sources linked: strangematters.coop/supply-chain-theory-of-inflat…
jmp242@sopuli.xyz 7 months ago
I don’t mean supply and demand in the extremely vague sense of that essay though. I mean individual people purchases and company sales. Something is happening when a person decides or not to buy something.
If in the aggregate people buy one product instead of another, that affects the business and they need to either appeal on other grounds or drop prices to compete.
I know there are different demand elasticity for different people for different things. That doesn’t mean that price is completely arbitrary and buyers have no leverage at all. I think most of that essay is just saying to ignore macroeconomics, which as far as I ever learned (as taking the required class and a very minor interest in terms of expertise - so not much) was a major simplification to express large groups of people’s actions. So of course it comes down to individual transactions. But I think the idea makes even more intuitive sense there.
Lets say I’m at a craft fair as a buyer. Someone wants to price their ceramic mug at 50 dollars. They can do that, but I am going to pass and look at other sellers. If the seller 30 feet down also has artsy ceramic mugs, but for 30 dollars - then that might make people there question the 50 dollar mug. Prices tend to affect demand and hence volume at least in my personal experience.
It’s not the end all of things. I would take more flights if the price was 1/2 of what it is, but I don’t know if I would take even more as it went cheaper. There’s only so much travel I want to do in a year.
All that said - I agree that business just set prices but outside of maybe hospital bills, they’re not arbitrary. If a business is constantly selling out they will raise prices I would argue that it seems pretty obvious to me that a lot of “covid” pricing was businesses just charging more and seeing if people would pay.
On the flip side, businesses regularly set lower prices on stuff that isn’t moving. This ranges from simple “manager markdowns” all the way to the liquidation of merchandise to sellers like Ollie’s. For small businesses they’ll often see if you bite on something at the arbitrary price, but if not and the item has sat there too long they might haggle with you to get something vs an unending storage cost.
Even if you argue that we don’t have an auction for many of the things we buy so the price is arbitrary and set by the seller - we still are almost always buying something that there are other potential buyers for. If I don’t want it at price X+10%, the impact of that depends on how many other potential buyers will step in to buy it. When I talk about demand, I am simplifying a paragraph to a word.
Whats more, scalpers and ebay resellers will do the whole restricted supply driving prices up for the company even if they don’t want to. We see that all the time. At that point it seems worse for the economy as the scalpers are just skimming money from buyers with no actual value provided. At least the original manufacturer could get a bonus or invest in more capacity if they grabbed that money.
Excrubulent@slrpnk.net 7 months ago
So I pointed out that the supply & demand theory is just a bunch of storytelling with no data to back it up and you responded by telling me a bunch of stories with no reference to any sort of data.
Do you see a problem here? Who taught you to think that this was an acceptable way to understand anything? It was orthodox economic theory, wasn’t it? There’s nothing special about the economy that exempts it from science, except how much incentive there is to tell stories that justify the hoarding of wealth rather than doing research to understand reality.
Also, I don’t know how you’re differentiating what you’re talking about from what the article was talking about. You’re describing how price setting and inflation happens, and so are they. It’s just they’ve actually done the work to understand it. If you dig into their references I think you’ll find that there isn’t really some other context where supply & demand does apply. They are talking about how the economy in general is shaped by these microeconomic principles.
They covered all the stuff you’re talking about, for instance how companies will set negative margins on some products for various reasons. Cost-plus-markup pricing doesn’t necessarily mean the markup part is actually positive. It can be negative and this is captured by the studies. I don’t know why you felt the need to go into that level of detail about all these ideas, except perhaps to intimidate me with your level of “knowledge” and bury me in the weeds.
Except again, you’re telling a bunch of stories and expecting me to believe not only the stories but the conclusions you say come from them. The research tells a different story. You can pay attention to that research, or you can act like most economists and ignore it in favour of the doctrines you’ve read about in textbooks.
jmp242@sopuli.xyz 7 months ago
The problem with the data referenced is that as far as I can tell it’s a bunch of surveys. And I really don’t understand how you expect to discuss microeconomics at the level of one seller like the essay references without it being talking about anecdotes.
In general, (not specifically economics) I find ignoring the consensus of experts in a field leads you to conspiracy theories. So yes, in terms of sources reliability and my rating system for who to trust, I will take the standard college classes and consensus of experts.
It feels like each thing I address just has you pulling either a non-sequitor or just lambasting standard economics.
I also don’t really see what you are arguing with me about except for a pedantic definition of supply vs demand or if those are even concepts.
The main argument in the essay is that the money printer doesn’t lead to inflation. I never claimed it does, and all but one standard theory referenced in that essay agrees with you and the essay writer that it’s not a straight “hydrolic” relationship.
The anecdotes you’re both ignoring is that unless you’re rather well off, if you get a raise or a stimulus package - almost everyone spends that money (or pays off debt, which is less direct but does free up spending power down the road). And we have seen shortages that pretty much were driven by hoarding in the pandemic. One vital part of that is having the money to spend - there were few reports of stealing actually leading to shortages.
And you completely skip the scalpers - did we imagine the PS5s being only available on ebay for 3x or more the MSRP? Did not having more money enable people to pay more to bid up the going price for the few available? What is that if not microeconomic supply and demand curves meeting at ebay sold prices?
I suppose the link you’re disputing is getting from individual sales to the economy at large, but that’s the problem this theory has, the reverse of the issue the essay claims traditional economics has.