If you use your economics, then no matter how complex the supply-chain problems might appear, they can be solved using the price system. The price system may or may not be able to call forth more supply, but it certainly can ration demand, and it can do so more efficiently than is being done at present. Everywhere the supply chain is “broken,” higher prices can ensure that scarce goods are allocated to the highest-priority uses.
“If you use your economics, then no matter how complex the supply-chain problems might appear, they can be solved using the price system.”
I can see why political scientists don’t quickly see this, but economists?
To paraphrase William Gibson, “Inflation is here, it’s just not evenly distributed.”
To understand why new cars are allocated to dealerships by formula rather than dealer bids you have to read through thousands of pages of regulations. (Which I did, once-upon-a-time, thinking that there was an opportunity for an internet-based business.) So, lower-than-market-clearing price inflation so far.
OTOH, restaurant prices are galloping ever upwards now. Restaurant workers cannot be had for any wage, at least in my neighborhood, so restaurants prices are up and availability is down (staff shortages mean that restaurants are open only 4 or 5 days per week.)
But, how about internet subscription movie/entertainment services; hulu, youtube, netflix, disney, amazon prime etc. This business model has $0 marginal labor cost per marginal revenue $. So, would you expect rising prices?
My guess is that there is no cost pressure (my favorite 70s catchphrase “Wage Price Spiral”). And, there is enough competition to hold down prices. Maybe consumers will subscribe to yet another one of these services, but, how many hours per day can you watch movies?
Then again, IATSE is going on strike. So, keeping up with the current level of new releases will cost more eventually.
The problems might be mitigated, but they are not solved by the price system. Rationing demand of surgical supplies so that life saving tumor removal takes place while quality of life surgery like knee and hip replacement or cataract surgery still means a large quality of life reduction. This is generally considered a problem.
You know what is striking?
For the bottom third of the US workforce (in terms of wages) these must be the best times in 60 years.
That is a huge slug of people, about 50-60 million.
I do not see the heartening anecdote stories, about Gertrude getting $17 an hour instead of $14, and taking her nieces to the movies as a result.
The 50-60 million people whose work lives are getting better…are just invisible.
Like the 100 million or so, maybe more, getting gouged on rents due to property zoning and suffocated supply.
Some topics just do not rate coverage.
The trouble with the blame-avoidance thesis is that plenty of stores seem perfectly willing to let the price system ration by just raising prices, the items remain in stock at those higher prices, and while people gripe about it, no one really blames the store. Yes, you can try to wave these things away with special psychological explanations – perhaps people have been accustomed or well-trained to price rises or volatility for certain things – but a “blame-avoidance, but only for some things, some of the time” thesis is hard to falsify.
Gas stations are the obvious example. Gas prices are up a lot, and no one blames the gas stations or even “Big Oil”, sometimes OPEC or Democrats.
But as I go into the grocery store, I see that most beef products are way up from a year ago and two years ago, and yet, if you want to pay a lot for it, there is plenty of beef to buy. Plenty of things online are up a lot too, but they are in stock, and I haven’t noticed people blaming Amazon, etc. for gouging or whatever.
For goods, prices move around for a lot of things, and people seem to take it in stride.
For services and labor, on the other hand, employers in particular seem *really* reluctant to fill gaps with offers of higher pay, perhaps because of sticky-wage issues and figuring that the situation with covid and government benefits will go away soon. Hard to pay newbies more without paying everybody more, and very hard to go back if/when things get back to normal, so lots of employers just holding off and trying to wait it out.
This seems a lot like “reservation wages” for unemployed job seekers reluctant to accept lower wage work, but in reverse, on the demand side.
“Everywhere the supply chain is “broken,” higher prices can ensure that scarce goods are allocated to the highest-priority uses.” Rather than “highest-priority uses,” isn’t it more accurate to say “the highest bidder?” Example: two small businesses in need of a delivery van. One has more cash and less debt on hand and thus can pay more for the van than the other. How is that “higher priority?”