Re: Refuting supply-side economics

From: Some Guy (bc76_at_midmaine.com)
Date: 09/17/04 

Date: 17 Sep 2004 12:01:24 -0700

William F Hummel <wfhummel@comcast.net> wrote in message news:<aptlk0l2n750svcedtpeuudru1dkbku9v1@4ax.com>...
> 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.

Yep.

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