May 25, 2023


This isn’t “wage push” inflation – it’s pushed by profiteering. The Wall Street Journal reports:

Inflation has proved more stubborn than central banks bargained for when prices started surging two years ago. Now some economists think they know why: Businesses are using a rare opportunity to boost their profit margins….

Usually, economists would expect any business that raised its prices to lose customers to competitors that don’t, or not by as much. But these aren’t normal times. In rare situations—such as an economy’s reopening after a pandemic—widespread knowledge that costs are rising allows businesses to raise their prices knowing that their competitors will act in the same way, according to a paper by Isabella Weber, assistant professor of economics at the University of Massachusetts, Amherst, and her colleague, Evan Wasner.

Read more here (if you can get past the WSJ paywall). The paper by Weber and Wasner is here.