What do we know about the economy from "greedflation"?
The term "greedflation" serves its purpose rhetorically, but misses the mark from an economist's perspective because businesses are *always* greedy.
They are *always* trying to maximize profits by setting prices optimally, and they're usually quite good at it. They hire teams and consultants whose sole job is to study data, the economy, marketing trends, their competitors, etc., to keep prices optimal for maximizing profits.
To the point where some businesses, such as airlines and hotels, and gas stations adjust prices throughout the day both to test the market and to take advantage of market tendencies.
So if saying that prices went up because businesses are greedy raises the question of why didn't they raise prices previously? They were just as greedy then, too. But somehow, their analysis then suggested a lower price was optimal. Something changed to make the higher prices more profitable.
What was that?
There are quite a few things that could in theory change to make higher prices more optimally profitable than they used to be.
But the simplest explanation, and I think likely the most relevant, is that their customer based is better to pay the higher prices. Grudgingly, no doubt, but better able than they used to be. To the point where businesses realized they would not lose enough customers to offset the increased profit margin. raising prices no longer cost them enough business to offset the gains, so raising prices became the optimal strategy.
Now I'm not for one minute saying that greedflation is a good thing, but I am suggesting that it may actually prove the point that most people are better off than they were 4 years ago.
Thanks to a solid economy with decent real (inflation-adjusted) growth, thanks to having managed a soft landing instead of a recession, thanks to inflation being a bit high but entirely consistent with average inflation over the last century, thanks to increased minimum wage in some areas, thanks to sustained full employment, thanks to a slight improvement in union and workers' bargaining power, most of us ordinary people are better off.
And these businesses see that, and whenever ordinary people find a little extra cash, businesses will *always* find a way to take a cut. That's the way the market works, and it's an argument for constantly taxing the rich to help the poor, but that's a topic for another day.
For now, my point is simply that greedflation provides some evidence that the economy is actually working for most people.
