I know this is probably going to give a heart attack to some of the libertarian tech-bros here, but there is an easy and tested solution for that: price controls. Inflation has a very clear source, it happens when someone decides to raise the prices. Why not stop the problem at the source?
The rises are due to a power dynamic: the companies raising the prices can basically get away with it ("whatever the market will bear").
Why can they do this? One reason is monopoly power- monopolies must be broken up.
But what else can be done (besides central bank driven demand destruction)? So instead of price controls, a more palatable solution is collective buying. This gives buyers more clout, allows them to bargain for lower prices.
So we need more large non-profit buyers clubs, things like that. In the US, allow medicare to bargain with drug companies- it's insane that they can not.
An example where this works: my parents live in a gated community. They pay very little for the cable + internet + cell phone because the entire community has a deal with the provider.
Large retailers have this exact role: they certainly demand and get lower prices from their suppliers. We need a non-profit version of this, why should Walmart owners only benefit from their buying power?
Grocers are typically a commodity business, one feature of which is that the companies do not have pricing power. So unless the grocers have increased their net profit margins, I don't think evil-powerful-corpos is a tenable answer. It's a nice simple, market-based answer that gives people someone to blame, but it's just wrong for grocers.
Target has a NET 2.6% profit margin, Walmart has 1.9%, which are on the low side of what you'd expect for a sustainable commodity business. Tesco appears to have a GROSS (not net: this is after cost of goods but before salaries, etc.) margin of 6.5% and Sainsbury's has 7.6%. [1] Obviously their net profit margin is going to be less. This is hardly a company with a huge pricing power dynamic. If you want to see that, look at Apple (24.5% NET margin), Coca-Cola (22.2% NET margin), Visa (50.3% NET margin). (Note however that Coca-Cola's customers are its bottlers and Visa's customers are merchants so their pricing power might be invisible to end consumers)
>Large retailers have this exact role: they certainly demand and get lower prices from their suppliers. We need a non-profit version of this
This was tried a lot in the 20th century (starting in the 19th century), usually emerging from the labour movement. I think in food retail and energy it has mostly failed or simply stopped making a difference. The profit margins of food retailers are small to begin with and easily lost by being a bit less efficient.
But Europe and the UK in particular has been using a similar model pretty successfully to keep drug prices low. Some argue that costs were merely shifted over to the U.S. I think this is only partially true.
Price controls are equivalent to welfare payments, except instead of being handled by an at least theoretically accountable government, the responsibility is imposed on random third parties with no oversight. Unsurprisingly, most of those third parties decide they'd rather keep their wealth instead of selling at a loss.
Gives anybody with elementary knowledge of econ a heart attack. How far up the supply chain do you want to go with these price controls to try and avoid the inevitable shortages and black markets? Labor price controls? Would that be effective?
> "It happens when someone decides to raise the prices"
What would drive someone to raise the price of something with the confidence it will still sell at that price?
Rising demand and limited supply. Someone with a monopoly on all the widget production can arbitrarily decide to limit supply (e.g. your "limited edition" MTG card), which is a farce.
More often and importantly, in an environment where there are many producers of a commodity like toilet paper, they suffer input shortages or other increases to the cost of production/delivery. On and on this analysis goes until you get to your question, "why not stop the problem at the source". Where is the source in the price increase in toilet paper? Paper production costs are up? Ink costs are up? Shipping costs are up? Regulatory costs are up? Energy prices are up? Labor costs are up? Freeze all of these by government mandate?
As the guy cutting down trees for toilet paper with a shortage of gas for your chainsaw (meaning it costs more to run), do you want the cost of your product arbitrarily frozen with no regard to your input costs? What if the cost of your logging lease from the government increased? Can you raise the price of the toilet paper logs you're selling? No? How is that fair? What if landslides decreased your tree availability by half, but the number butts that needed wiping hasn't changed, or worse, has increased? Are you to sell your now scarce trees at the same price you always did? Or shall you sell to the highest bidder? What if the government says you can't auction the trees but must sell them for the same price? Maybe you look for off-the-books compensation - free tickets to the game, whatever. Someone still bears that increased cost.
If rising demand relative to limited supply is the actual source of the problem (too many people want toilet paper) why not stop the problem there by simply rationing toilet paper? Turns out this is what happens more frequently - rationing eggs, toilet paper, trying to prevent hoarding, scalping, etc.
Arbitrarily limiting the supply costs of a product or the demand for a product is a temporary solution at best.
Price controls and rationing go hand in hand. Ultimately the goal is to ensure that everybody is able to acquire the goods that they need to survive. We are not talking about luxury yachts here, we are talking about food. If the source of the price increases is an insufficient supply of the raw materials, would you rather allow the market to increase prices until the point that some people are starving while others are buying ten times the food that you need to survive to feed their pets?
> Gives anybody with elementary knowledge of econ a heart attack
Plainly, this isn't true. This opinion is not uncommon amongst so-called "Marxist economists" such as Richard Wolff. You can disagree that price controls and rationing would be the best way to solve the problem, but it is outright ignorant and needlessly insulting to make this claim.
That went really well in my country 30-40 years ago.
My father once went to buy me diapers and returned with living room furniture set(ugly one also), because this was only one available since month or so, and he had to take it on the spot, because entire shipment will be gone in next few hours.
Then he had to go back to the diaper line and wait a few hours, because I wasn't impressed with the furniture enough to stop eating.
I'm not sure you really get how markets work. Price controls can have a few different effects depending on the good in question, but one of those is shortages, which can be really bad when the good is food.
People don’t decide to raise prices out of the blue… it isn’t quite this simple, but for the purpose of understanding the basic concept, you can think of it as the price goes up when you can easily sell your inventory at the current price… if your product sells out quickly, and you still have people eager to buy your product, you raise prices, and you keep raising them until you can just barely sell all your product (of course it is more complicated, because you are trying to maximize profit and not minimize inventory, but the basic idea is the same)
If you fix prices, it just means the product keeps selling out quickly and most people can’t get the product.
This is why prices go up when there is a supply shock (like with eggs and the bird flu). There are fewer eggs available, and raising prices reduces demand until it matches the supply (as people who only kinda like eggs switch to cheaper alternatives). While it sucks that eggs are more expensive, at least you can still buy them if you really like eggs. With price controls, it becomes a crapshoot on whether you can get them or not.
With eggs its kind of a different story. The price of eggs has increased for the supermarket to buy, by maybe a cent or two coming down to up to 16 cents.
Packaging takes 4 cents per egg.
Meanwhile the eggs in the supermarket cost 56 cents each.
