Re: Refuting supply-side economics

From: William F Hummel (wfhummel_at_comcast.net)
Date: 09/17/04 

Date: Fri, 17 Sep 2004 14:59:31 GMT

On 17 Sep 2004 07:08:31 -0700, bc76@midmaine.com (Some Guy) wrote:

>William F Hummel <wfhummel@comcast.net> wrote in message news:<himjk0le4phhh1u86b8f899kedl7eucfvg@4ax.com>...

>> On 15 Sep 2004 20:03:58 -0700, bc76@midmaine.com (Some Guy) wrote:
>>
>> >William F Hummel <wfhummel@comcast.net> wrote in message news:<0bffk09pp7cegf5s15s17b177jsl8g5hpu@4ax.com>...
>>
>> >> Your model of inflation is far too simple. The relation between the
>> >> supply of goods and prices applies only to a true commodities in a
>> >> setting where there is plenty of competition and those in the business
>> >> know what prices the commodities have traded at. That doesn't apply
>> >> to almost everything we buy as consumers, whether goods or services.
>> >>
>> >> For example, if you visit a dentist and pay for a filling, the price
>> >> of fillings doesn't increase. None of the thousands of other dentists
>> >> in town is even aware that you had the service. If you buy a loaf of
>> >> bread at the grocery store, the price of bread doesn't change for the
>> >> same reason.
>> >>
>> >There is definately a time delay there. I agree.
>>
>> What time delay? There is no automatic price increase in a gadget
>> because someone buys it. How much have computer prices increased
>> because of the millions that have been sold?
>
>Like you said, the seller has to collect data on their level of
>business for a time, decide that the high level of business is
>permanent and then raise their prices. That's the time delay.

But that does not mean prices automatically rise after a time delay,
just because more people are buying.
>
>But one person's bread consumption isn't likely to be the *deciding
>factor* in whether a store decides it can raise bread prices, but it
>can be a *contributing factor*. If 100 people decide to buy new 1
>loaf of bread a day that they didn't buy before, then after a time
>delay, the owner(s) of store(s) they patronize might decide they can
>raise bread prices. While the individual bread consumption of each
>consumer did not have the power to raise bread prices, each
>individual's consumption contrubuted 1/100 to the increased demand
>that drove the price up.

Your concept of what causes the general price level to rise looks at
only a part of the story. It assumes that the supply of a good does
not increase when there is an increase in demand for it. Usually when
a good sells well, that usually draws other entrepreneurs into the
field. The resulting increase in competition might actually reduce
the prices set for that good.
>
>As for computers, that's a special case of where deflation due to
>technological innovation outpaces inflation wrt other goods.
>Technological innovation is deflationary because technological
>innovation makes it possible to produce more with less resources.
>High demand drives technological innovation, though what innovations
>are actually realized, also depends on what is physically possible in
>the universe given the current state of scientific knowledge.
>
Computers may be a dramatic case of technological innovation, but
bread making also gains from new technology. The productivity of
bread makers has increased enormously over the years.

Relevant Pages

  • Re: Refuting supply-side economics
    ... >>There is definately a time delay there. ... How much have computer prices increased ... factor* in whether a store decides it can raise bread prices, ... Technological innovation is deflationary because technological ...
    (sci.econ)
  • Re: Refuting supply-side economics
    ... >> supply of goods and prices applies only to a true commodities in a ... >> know what prices the commodities have traded at. ... >> to almost everything we buy as consumers, whether goods or services. ... >There is definately a time delay there. ...
    (sci.econ)
  • Re: Refuting supply-side economics
    ... decide that the high level of business is ... >>permanent and then raise their prices. ... >>raise bread prices. ... >>technological innovation outpaces inflation wrt other goods. ...
    (sci.econ)