Tuesday, June 20, 2023

Lines Go Straight Up

It's largely an online thing, but all the Big Boy economists are throwing a big hissy fit about this, doing their usual thing of fighting a multifront battle against a pile of straw. When "they" get in a mood like this it's like arguing with MAGAs. The misrepresentations and goalpost shiftings are endless.

The crazy idea here is, basically, that there are moments when limited price controls might make sense, such as when you have hit a capacity constraint at a transportation node like a port (this is the 'extreme' case), so all price increases are just pure profit.

Certainly they make much more sense than trying to clear those bottlenecks by plunging the economy into a recession.

They love to spit venom about "heterodox" economics, which is quite often pretty standard stuff (such as the above) which just doesn't fit the political line of the day. The most famous implementation of genuinely "heterodox" economics (as in, not in the Econ 101 textbook!) I can think of is when all the Big Boys decided that "growth through austerity" was a thing, something they pulled out of their asses, justifying it with one hastily thrown together empirical study which was stupid even if correct but also obtained its key result due to an Excel sheet error.

Sure it was wrong, but it felt true, so who is to say?

I mean, if someone had made that kind of error showing "increasing the minimum wage by 5 cents is good, actually," they'd now be earning minimum wage.

There are good economists, but the public face of the profession is made up of the worst dissemblers, along with an army of media chucklefucks who think they are smart because they can convincingly "speak econ." Like this:
He added, “What I remember from my economics textbooks is that if you have a surge in demand that runs up against relatively inelastic supply, what happens is that prices go up (inflation) and so do profits — that’s broadly speaking what I think is going on here and what I assume the economists whose work you’re summarizing are explaining.”
When you have a vertical supply curve, positive demand shifts (like, after you turn off the world economy and then turn it on again) will lead to price increases without any additional quantity supplied. Meaning, they raise prices and increase profits, and capping those price increases would have no negative effects! Otherwise, shipping prices increase but there is no more shipping capacity!

His supposed refutation is the point!

The choice here is between lowering output and employment to cut inflation, or cutting profits of mostly big firms a bit to cut inflation! No surprise which one they choose!