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PaperclipPerfector  3mo ago (text post)   30138 thread views

Culture War Roundup for the week of August 12, 2024

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Whereupon I unsubscribe from Matt Stoller

I had long considered Stoller to have solid analysis and a respect for markets, even when I didn't agree with his political slant, editorial direction, or choice of topics. But he has lost me here, and probably forever, in his simpering defense of the Harris economic plan, which includes price controls on groceries and vague yet sinister crackdowns on so-called price gouging.

It’s all predictable, both the economist revolt, and reporters who interview economists as if they know anything. I suspect what’s going on is that economists, as moral reformers who ordain truth, believe price-setting is beyond the realm of elected leaders or normal people. Harris has interfered with that belief, leading to an angry reaction of religiously scorned zealots. Another possibility is that those who think the most about how to set prices are monopolists and economists. And like anyone who sees someone new coming into one’s realm of expertise, they are angry at Harris. Regardless, I can’t see much of a downside to being attacked by economists and experts, after all these are the elites who got us into this mess.

Someone hasn't read The Road To Serfdom. I'm actually kind of flabbergasted to see this, though I shouldn't be surprised.

It is strange to see what is a dressed up Ad Hominem attack.

"These people said x. What is your response to x?"

"Those people suck"

It also isn’t anything new! It is ignoring history—not just someone upset that someone is encroaching on their turf.

I’m not at certain what her price controls are. I know the food production end of things (not the stores) is highly consolidated into a couple of big companies that therefore own most of the food market. Breaking up those monopolies seems like a good way to get grocery priced down a bit. If that’s what she’s actually proposing, I would support it. But she hasn’t been very clear on what her plan actually is.

Those companies have small margins—very small margins.

I know the food production end of things (not the stores) is highly consolidated into a couple of big companies that therefore own most of the food market. Breaking up those monopolies seems like a good way to get grocery priced down a bit.

I strongly don't believe breaking up these "monopolies" will do anything other than raise prices.

In order to be an entity with monopoly powers you need to be the only game in town. An oligopoly can imitate monopoly power if they are all coordinating (and punishing defectors).

The problem with calling single producers of a product a monopoly is that substitution is a thing that exists. There could be a single company that produces strawberries and all strawberry related products and they would not have a single bit of monopoly power. Hell, they could probably expand to all fruit products and still not have much monopoly power. Because people can eat different kinds of food. Even if someone cornered the entire grocery market they would still not have monopoly power. Because restaurants and fast food exists and some of the larger chains are their own suppliers.

It is basically impossible to gain any level of monopoly power in the modern day food market. If anyone says there are food monopolies they are either lying, or using a non-economic definition of monopolies. Its fine if they use a non-economic definition of monopolies, economists don't own the word. But these people often say "this company is a [non-economic] monopoly, so we need to do what economists say to do about [economic] monopolies".

I can't say I'm an expert on monopolies, but I'm beginning to think that with today's informational velocity and the past ~100 years of legal precedent, it's nearly impossible to actually function as a monopoly.

The term monopoly conjures up images of John D. Rockefeller and other robber barons. I know just enough history to be aware that the practices of Standard Oil in the early 20th century are now patently illegal at a variety of levels, not just at the level of anti-monopoly. I mean, for one, it's pretty evident that Standard Oil was routinely offering kickbacks aka bribes all up and down their operation. One thing America has actually become pretty damn good at is making bribery a really bad business strategy.

But the 8th grade textbook of monopoly still owns an unreasonable amount of mindshare in the minds of activist politicians and bureaucrats. Lina Khan loves to get up in the morning and begin the next chapter of her "I'm the main character heroine fighting evil money dragons" autobiography.

Inflation, inefficiency, and capital appreciation malaise are what has and will continue to kill the middle and working classes. Government do-gooders operate under the flawed assumption that they can (a) understand the complexities of the dynamic system that is the economy and (b) craft laser precise legislation or regulation that will target only "the bad thing" and have zero unanticipated or secondary effects. It really is an alarming level of intellectual hubris.

Its always been quite easy to become a monopoly. The trick is to get government to make it happen for you. The post office still jealously guards its first class mail monopoly.

The history of Standard Oil is very frustrating to learn. They were an efficient modern business way before its time. If there were kickbacks along the rail line it was because everyone had to do some version of that. They were something like 90% market share when the government brought a case against them for monopoly. By the time the case resolved against them they were about 60% market share. There was also a war about to happen and the government wanted access to the resource for cheap so they nationalized part of standard oil. Standard Oil created most of the Oil byproducts that we have today. All of their competitors were dumping toxic waste chemicals into rivers. They thought 'how can we use this "waste" instead of throwing it out?'

But the 8th grade textbook of monopoly still owns an unreasonable amount of mindshare in the minds of activist politicians and bureaucrats. Lina Khan loves to get up in the morning and begin the next chapter of her "I'm the main character heroine fighting evil money dragons" autobiography.

I was on capital hill briefly about a decade ago. And yes they are constantly looking for badies to fight. Back then they kept complaining how google has a "search" monopoly. Which showed a hilarious lack of understanding of google's actual business model (advertising), and an insulting level of paternalism assuming that people were somehow "stuck" with google search.

Inflation, inefficiency, and capital appreciation malaise are what has and will continue to kill the middle and working classes. Government do-gooders operate under the flawed assumption that they can (a) understand the complexities of the dynamic system that is the economy and (b) craft laser precise legislation or regulation that will target only "the bad thing" and have zero unanticipated or secondary effects. It really is an alarming level of intellectual hubris.

I went more in depth on the history back in my college days. And the only thing that has really changed is the ability of government propaganda to cover things up. They've gotten worse at that. Even when the economy was much simpler they routinely failed to bring in good regulations.

I was on capital hill briefly about a decade ago.

From what I have heard from friends with direct experience, it is a "children with dynamite" situation. You've got mid-20s to mid-30s people without any real world experience who think they can understand and entire industry / social problem / international conflict after a few briefings. Then, they have access to the actual fucking Federal legislative process. The formula for disaster is obvious.

It's a good thing bills move so slowly through Congress. I think more Americans would agree with this if they understood who the primary authors are.

There has never been an incidence of 'cornering the market' as per the bogeyman definition of monopolistic price gouging. Technical abuses of mechanical inefficiencies arising from information arbitrage are not repeatable actions, and there is a different conversation to be had about the effect of frictionless cross national capital transfers.

The only successful way to perform market cornering to capture the producer surplus is by regulatory capture, not 'lose money until competitors all exit, then hike prices'. If your product was only bought because it was cheap, raising its price won't magically force the demand equilibrium to shift in line with your price manipulation. Open competition can certainly lead to value-destructive capability duplication and tragedy of the commons (public infrastructure is the most common example of this) but the stable equilibrium will never allow for a permanent marginal producer surplus. The only way that can happen is if the needle is jammed in place by a government exercising monopoly on force. In places where the government does not have a monopoly on force, parallel governments spring up to get their hands on the mechanisms of regulatory capture, even if we just call those governments 'citizen committees' or 'corporate towns'.

The only successful way to perform market cornering to capture the producer surplus is by regulatory capture, not 'lose money until competitors all exit, then hike prices'.

I feel like pointing out that this("lose money until...") is the actual exact method used by Dollar stores to choke out competition. They open a bunch of stores in an area, sell at a loss until they can kill the competition, then consolidate their stores into one and raise the prices once they kill off their competition. Predatory pricing is actually a real thing that happens, and the effectiveness of it is great enough that people want the government to do something about it. Sure they don't have a true monopoly, but an effective local one is a decent substitute.

Dollar generals are an interesting case, and they do indeed perform predatory pricing once local competition is snuffed out, but I don't think they are laughing their way to the bank once they kill the competition. Their price rises are only to whatever the local equilibria is for their provided service, and any presumed producer surplus the monopoly is expected to accrue is obviated by theft ("its only shrink" will be claimed by insistent progressives), low barrier alternatives (DG isn't the only dollar store after all, and delivery exists) or other intrinsic factors. DG does not have a cheat code that forcefields their stores against poverty induced crime paired with ineffective law enforcement.

The negative effect of DG isn't the subsequent price hiking as DG tries to stabilize its price needle after factoring in theft while outcompeting alternatives, it is the utility calculation of the goods on offer and the utility destruction stemming from misallocated capital. The legacy mom and pop stores are only in dead small towns or shit neighborhoods because they are the ones with a 'monopolistic' hold as the locale simply cannot justify additional investment for higher grade inventory, much less fitouts. The fresh produce on offer (I presume; I've never seen fresh produce at a black-heavy bodega, but spanish harlem always had peppers and onions) has a presumed higher utility per dollar for health outcomes, but for personal utility calculations that same dollar spent on ricearoni and DMD goes much further. These 'food deserts' exist because the local population simply was not having its personal utility preference exercised by expensive and effort heavy 'healthy' foods. The cheap consumer surplus phase of DG expansion is DG rolling the dice on where the stable marginal surplus needle lies, and DG bets on its competitive advantages to be the one that captures a greater marginal surplus. The consumer surplus returns to its stable point after the ZIRP-funded gambling ends. At no point is DG laughing its way to the bank.

Indeed. Ask the Hunt brothers (also note CIA / Watergate ties) about cornering the silver market. One went broke trying to defend it, having overleveraged in the process. Some lawfare was waged against him, for sure, but no one agent can outweigh the market, in a fair and free market^TM. Even when collusion and cartels are attempted between multiple agents, the incentive to defect generally busts the last empty bagholder.

Defect is both active intent and incapability. There are a number of Indonesian and Malaysian financial scandals that all shit themselves because the parties involved were too stupid to execute the bare minimums of their plans. Failure was inevitable for things like the maminco tin scandal, but the fail point occurring earlier in the chain than expected happens because incompetent retards fuck up their end of the conspiracy without knowing they fucked up.

This could be inverse survivorship bias too. There likely are a number of successful corners and exploits conducted under the radar without common knowledge. What little I know of shadow banking is that avoiding the taxmans eye is the most successful way of 'exploiting' a market opportunity, and these small scale illicit money movements are simpler to aggregate into pools steered by bankers and accountants to magically clean cayman island accounts.

It's funny because though he's right to say economists know very little compared to how much they usually claim to, the negative effects of price controls is one of the very few things that is both consensual among economists and backed by solid historical evidence. If you had to name the one thing the entire discipline actually agrees on for the most part, it's that.

Now if we want to be maximally charitable, maybe they overstate it, sometimes you may be willing to eat the deadweight loss for political reasons. But handwaving the concern away as experts clutching at pearls is a bit zany.

Yeah, pretty much the only policy as universally unpopular among economists as price controls is protectionist tariffs.

https://www.astralcodexten.com/p/book-review-how-asia-works

Protectionism is essential for building up an economy. See the section on Korea in the link ..

That is a very expansive take away from that book.

I'd say its thesis was that protectionism worked for East Asian countries during a brief time period.

There has always been a theoretical case that tariffs can work as protectionist trade policy. Economists stopped telling people this about a century ago, because what consistently happened is that countries would just start applying tariffs to everything and tank their economy. (or spark trade wars that tanked everyone's economy)

Its as if some people heard that radiation therapy can be good for you if you need to remove a cancerous tumor, so they all went and sat inside of nuclear power plants.

I wish there were a book called 'Things That 90% of Economists Agree On'. I imagine it would be a pretty thin book, the only thing I know of that would definitely be in it is rent control. But it would at least give a baseline of policies that are so clearly bad that no serious administration should consider it.

Part of the problem is that the profession has lost a lot of credibility. The public has - belatedly - realised that you can always find some economist or other to wheel out in favour of/against almost any policy under the Sun. When that rare issue comes along that unifies the profession it isn't always legible to the public, who have gotten used to ignoring them.

Part of the problem is that the profession has lost a lot of credibility.

A frequent joke heard in my circles is "What do you call an economist who opens his mouth?" "Wrong." Their reputation is so terrible among the public that a lot of people would go stick their head out of the window and look up if they heard one say the sky was blue.

Basically the Law of Supply and the Law of Demand are agreed on, and the other things agreed on follow directly from them. All that is micro. It's macro that's the big mess.

I wish there were a book called "Things That 90% of Economists Agree On".

Consensus Among Economists 2020

Flexible and floating exchange rates offer an effective international monetary arrangement. (90 percent)

Tariffs and import quotas usually reduce general economic welfare. (95 percent)

If the federal budget is to be balanced, it should be done over the course of the business cycle rather than yearly. (93 percent)

Fiscal policy (e .g., tax cut and/or expenditure increase) has a significant stimulative impact on a less than fully employed economy. (94 percent)

Appropriately designed fiscal policy can increase the long-run rate of capital formation and economic growth. (90 percent)

The Earned Income Tax Credit program should be expanded. (90 percent)

Immigration generally has a net positive economic effect for the US economy. (97 percent)

Antitrust laws should be enforced vigorously. (93 percent)

Addressing biases in individuals and institutions can improve both equity and efficiency. (90 percent)

See also the surveys conducted by the University of Chicago's Clark Center for Global Markets. (The website seems to be a bit broken at the moment, possibly due to a recent domain-name change. Older surveys can be found using the Internet Archive.)

Capping annual rent increases by corporate landlords at 5 percent, as proposed by President Biden, would not make middle-income Americans substantially better off over the next ten years. (85 percent)

Capping annual rent increases at 5 percent, as proposed by President Biden, would substantially reduce the amount of available apartments for rent over the next ten years. (72 percent)

Capping annual rent increases at 5%, as proposed by President Biden, would not substantially reduce US income inequality over the next ten years. (79 percent)

Very nice, thank you sir!

If I remember correctly, “The Myth of the Rational Voter” is primarily concerned with the topic you speak of; policies that are politically popular but have almost universal condemnation from Economists.

Just because it's never worked before, that doesn't mean it won't work this time.

That isn't a joke. It's probably true that grocery chains are overcharging a little bit right now. If the price controls are done very delicately, they might be able to reduce prices a little bit without damaging the economy.

The USA is more advanced than Venezuela. There are lots of things the USA can do that Venezuela can't. Successful price controls could be one of them.

If there are people making huge profits, they're not running grocery stores, which as a rule operate on unbelievably thin margins and run losses on some products. Remember - store brands are cheaper than name brands, not the other way around.

It's probably true that grocery chains are overcharging a little bit right now.

Why is that "probably" true? Walmart is operating at a 2.7% margin. The grocery store market remains competitive - there's at least five chain stores plus independent grocers in my area.

Because consumers hate it when prices increase. When inflation hits, grocery stores prefer to raise their prices in one big jump rather than many small jumps - or so I've been told. The idea is that if you increase prices by X 5 times the consumers will register 5 separate increases, but if you raise it by 5X then they'll only register one increase. Because of that, grocery stores (and stores in general) will increase their prices ahead of expected inflation to avoid having to continue to make small price increases over time.

The logic is essentially that stores are currently priced according to next year's inflation. When inflation is low that's no big deal, but when it's high it can be a pretty penny. Continuing that logic, they could be forced to match current inflation rather than preemptively raising prices for future inflation. This would shave a small but meaningful amount off prices.

What's the optimal way to determine price of any good, in your opinion?

Optimal for what purpose? In order to optimize you must first have a goal.

This is not consonant with the behavior of grocery prices. They are, in fact, extremely volatile. And the consumer price index for food at home certainly does not lead the producer price index for supermarkets by a year.

Because of that, grocery stores (and stores in general) will increase their prices ahead of expected inflation to avoid having to continue to make small price increases over time.

So why are their margins so shit?

they could be forced to match current inflation rather than preemptively raising prices for future inflation.

How?

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