That’s not at all how prices are set in a Market as per all the applicable theories of Economics (and in practice).
Any profit-driven sellers (i.e. all except maybe a mom-and-pop shop with soft hearted owners) will charge the most that they think buyers are willing to pay, so if for example a seller becomes a local monopoly in an essential good, they’ll pump prices up because customers have no other options (with nothing on the cost side pushing it) and will act similarly when cartels are formed.
This is very much proven again and again by observeable reality - market competition goes down prices go up, completelly independently of costs.
Cost pressures will only push prices up in a market with actual competition when it affects every seller (for example if input prices go up, certain taxes go up, or there’s an event that most sellers can use as an excuse to up prices, such as widespread news of inflation in which case they informally act as a cartel would) or if the cost pressure is so large that it will bankrupt a seller that won’t raise prices (so the seller has no option than to raise prices to try and survive, even at the risk that customers will just walk away).
This theory of yours as well as the “if companies pay less taxes they’ll raise salaries” and other such Economically-ignorant theories that ignore basic market principles and causality, seem to be immenselly popular with people with certain political-faiths who have never actually run a business or worked with Markets.
I suggest you read some books about Behavioural Economics.
But yeah, most of what you see out there from Economists is really Politics, not Science.
However those observations about price making are also from Finance, and those are immensely pragmatic people (as they put real money on the line) - you might disagree with their morals (what morals, eh?!) but they certainly are putting their money where their mouth is.
Behavioural Economics is exactly the only part of Economics that actually works like a real Science with actual experimental validation of theories (with properly conducted experiments).
Using mathematical models doesn’t make something false (or true), it’s the lack of real world validation that does. Believing otherwise is believing Physics has “no connection with the real world” so things like artillery rounds won’t fall were the Newtonian Physics formulas predict they will.
But yeah, most of the rest of Economics is self-serving bollocks, especially the closer you get to politically-significant monetary management (i.e. central banks).
It’s not by chance that the only time a Behavioural Economist won the “Nobel Prize” of Economics (which is not a real prize set up by Alfred Nobel but in fact the “Swedish Central Bank Prize for Economics in Honor of Alfred Nobel” which is very purposefully misrepresented as a genuine Nobel Prize) was for “Nudge Theory” which is about how to push the masses to favour certain financial choices (i.e. manipulation) and is minor next to the bulk of that guy’s work, which proves without a doubt the irrationality of humans in economic matters (people don’t behave at all as the Homo Economicus that is the human model that serves as foundation for the whole Free Market Theory bollocks, but he was hardly going to get even a fake-Nobel from the Swedish Central Bank for disproving Free Market theories, now was he?!)
IMHO, your take on this is too simplistic and as a consequence you’re throwing the baby with the bath water.
That’s not at all how prices are set in a Market as per all the applicable theories of Economics (and in practice).
Any profit-driven sellers (i.e. all except maybe a mom-and-pop shop with soft hearted owners) will charge the most that they think buyers are willing to pay, so if for example a seller becomes a local monopoly in an essential good, they’ll pump prices up because customers have no other options (with nothing on the cost side pushing it) and will act similarly when cartels are formed.
This is very much proven again and again by observeable reality - market competition goes down prices go up, completelly independently of costs.
Cost pressures will only push prices up in a market with actual competition when it affects every seller (for example if input prices go up, certain taxes go up, or there’s an event that most sellers can use as an excuse to up prices, such as widespread news of inflation in which case they informally act as a cartel would) or if the cost pressure is so large that it will bankrupt a seller that won’t raise prices (so the seller has no option than to raise prices to try and survive, even at the risk that customers will just walk away).
This theory of yours as well as the “if companies pay less taxes they’ll raise salaries” and other such Economically-ignorant theories that ignore basic market principles and causality, seem to be immenselly popular with people with certain political-faiths who have never actually run a business or worked with Markets.
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I suggest you read some books about Behavioural Economics.
But yeah, most of what you see out there from Economists is really Politics, not Science.
However those observations about price making are also from Finance, and those are immensely pragmatic people (as they put real money on the line) - you might disagree with their morals (what morals, eh?!) but they certainly are putting their money where their mouth is.
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Most of that is just a generalization falacy.
Behavioural Economics is exactly the only part of Economics that actually works like a real Science with actual experimental validation of theories (with properly conducted experiments).
Using mathematical models doesn’t make something false (or true), it’s the lack of real world validation that does. Believing otherwise is believing Physics has “no connection with the real world” so things like artillery rounds won’t fall were the Newtonian Physics formulas predict they will.
But yeah, most of the rest of Economics is self-serving bollocks, especially the closer you get to politically-significant monetary management (i.e. central banks).
It’s not by chance that the only time a Behavioural Economist won the “Nobel Prize” of Economics (which is not a real prize set up by Alfred Nobel but in fact the “Swedish Central Bank Prize for Economics in Honor of Alfred Nobel” which is very purposefully misrepresented as a genuine Nobel Prize) was for “Nudge Theory” which is about how to push the masses to favour certain financial choices (i.e. manipulation) and is minor next to the bulk of that guy’s work, which proves without a doubt the irrationality of humans in economic matters (people don’t behave at all as the Homo Economicus that is the human model that serves as foundation for the whole Free Market Theory bollocks, but he was hardly going to get even a fake-Nobel from the Swedish Central Bank for disproving Free Market theories, now was he?!)
IMHO, your take on this is too simplistic and as a consequence you’re throwing the baby with the bath water.
I suggest you read “Freakonomics”.
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