Episode 210: Seller's Inflation and the Super Serious Economists Mocking Greedflation Conspiracies AI transcript and summary - episode of podcast Citations Needed

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Episode: Episode 210: Seller's Inflation and the Super Serious Economists Mocking "Greedflation" "Conspiracies"

Author: Nima Shirazi and Adam Johnson
Duration: 01:18:13

Episode Shownotes

"An inflation conspiracy theory is infecting the Democratic Party," The Washington Post frets. "'Greedflation' is a nonsense idea," The Economist insists. "Harris' plan to stop price gouging could create more problems than it solves," CNN warns. Over the last few years, as the prices of groceries, cars, and other necessities

have risen, often dramatically, leading news outlets and influential pundits have claimed that these rising prices are simply a matter of supply and demand. Corporations aren't taking advantage of inflation, we’re told; they're simply responding to it. If materials are in short supply, or if there’s a surge in demand, retailers have no choice but to raise prices to control production flows and costs. Likewise, if prices of goods are significantly higher, then the people who want those goods enough to pay higher prices can still have them. But these pat arguments don't hold up to scrutiny. Since the most recent round of inflation began, multiple studies have shown that corporations are indeed taking advantage of inflation, using tactics like price gouging to boost profits while creating barriers to quality food, medication, and other essentials. So what explains this discrepancy? On this episode, we examine the tendency of media to defend corporate price-gouging and other inflationary maneuvers, how high status pundits and Serious Economists critique the White House from the right on this issue and condescend to anyone who might be even slightly suspicious that corporations are animated by something other than just the Invisible Hand, painting them as wacko conspiracy theorist who simply need to take the vaulted "Econ 101." Our guest is the Revolving Door Project's Dylan Gyauch-Lewis.

Summary

In Episode 210 of 'Citations Needed', hosts Nima Shirazi and Adam Johnson tackle the inflation narrative, critiquing how corporate price gouging is often overlooked in favor of blaming external factors like labor and government spending. They argue that mainstream economists dismiss 'greedflation' as a conspiracy theory, despite evidence that corporations have significantly raised prices to enhance profits during times of economic turmoil. The episode emphasizes the role of concentrated markets in driving up prices and critiques the portrayal of those questioning these practices as conspiracy theorists.

Go to PodExtra AI's episode page (Episode 210: Seller's Inflation and the Super Serious Economists Mocking "Greedflation" "Conspiracies") to play and view complete AI-processed content: summary, mindmap, topics, takeaways, transcript, keywords and highlights.

Full Transcript

00:00:03 Speaker_00
This is Citations Needed with Nima Shirazi and Adam Johnson. Welcome to Citations Needed, a podcast on the media, power, PR, and the history of bullshit. I'm Nima Shirazi. I'm Adam Johnson.

00:00:17 Speaker_00
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00:00:28 Speaker_00
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00:00:38 Speaker_00
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00:00:44 Speaker_01
Yes, if you listen to the show and you like it and you haven't yet, please support us on Patreon. It helps keeps the episodes themselves free and the show sustainable. We're grateful for any support there.

00:00:56 Speaker_00
An inflation conspiracy theory is infecting the Democratic Party, frets The Washington Post. Greedflation is a nonsense idea, insists The Economist. Harris's plan to stop price gouging could create more problems than it solves. warns CNN.

00:01:18 Speaker_01
Over the last few years, as prices of groceries, cars, and other necessities have risen, often dramatically, leading news outlets and influential pundits have claimed that these rising prices are simply a matter of supply and demand.

00:01:30 Speaker_01
Corporations aren't taking advantage of inflation, we're told. They're simply responding to it. If materials are in short supply, or if there's a surge in demand, retailers have no choice but to raise prices to control production flows and costs.

00:01:43 Speaker_01
Likewise, if prices of goods are significantly higher, then the people who want those goods enough to pay higher prices can still have them.

00:01:50 Speaker_00
But these pat arguments don't hold up to scrutiny.

00:01:53 Speaker_00
Since the most recent round of inflation began, multiple studies have shown that corporations are indeed taking advantage of inflation, using tactics like price gouging to boost profits while creating barriers to quality food, medication, and other essentials.

00:02:09 Speaker_00
So what explains the discrepancy?

00:02:13 Speaker_01
On today's episode, we'll examine the tendency of media to defend corporate price gouging and other inflationary maneuvers, discuss how high-status pundits and serious economists critique the White House from the right on this issue, and condescend to anyone who might even be slightly suspicious that corporations are animated by something other than just the invisible hand, oftentimes painting those who are skeptical of this narrative as wacko conspiracy theorists who simply need to take the vaulted Econ 101.

00:02:39 Speaker_00
Later on the show, we'll be speaking with Dylan Gauch-Lewis, senior researcher at the Revolving Door Project, where she leads their Economic Media Project.

00:02:48 Speaker_02
When you have concentrated markets where firms are able to be price setters rather than just price takers, then when there is uncertainty around pricing because of high inflation, i.e.

00:03:04 Speaker_02
consumers can't tell when you raise the price of milk by an extra dollar, whether that's reflective of an actual increase in costs or whether that's to line your wallet, then you have every incentive to increase the price of milk by the extra dollar.

00:03:23 Speaker_01
So this is a spiritual successor to a live interview we did in July of 2022 entitled, How Simplistic Inflation Discourse Fuels the War on Workers with Josh Mason, who is an associate professor of economics at John Jay College.

00:03:35 Speaker_00
So check that out if you haven't. Yes, we discussed inflation and inflation narratives in the media a bit with Josh. And this, we're going to dig into it deeper, especially because of what we have seen in the ensuing two years.

00:03:49 Speaker_00
To start, let's go back 50 to 60 years and talk about the historic inflation of the mid to late 1960s through the 1970s, which occurred amid multiple oil crises and the general neoliberalization of the global economy.

00:04:06 Speaker_00
Now, there were many differences, of course, between the inflation of that time and the inflation that we see now, but the groundwork was being laid in the 1970s to obscure the inflationary role of private industry, while placing outsized blame on government spending and, of course, labor power.

00:04:25 Speaker_00
Now, a November 1970 edition of Reader's Digest included an article written by then-President Nixon's Undersecretary of the Treasury, Charles E. Walker. The article opened with this, quote, Ready for a short multiple-choice quiz on the economy?

00:04:43 Speaker_00
Here goes. Question number one. The basic cause of the rising cost of living has been, A, price gouging by business, B, excessive wage increases demanded by labor unions, or C, federal spending, end quote.

00:05:03 Speaker_00
After that opening, Walker continued with this, quote, if your answer is C, go to the head of the class. If it's any of the other choices, back to your textbook in economics, end quote. So C, of course, being federal spending.

00:05:22 Speaker_00
That was the only appropriate answer that Walker was going to accept for why there has been inflation and thus a rise in the cost of living.

00:05:32 Speaker_01
There are, of course, multiple contributing factors to inflation. And of course, how we emphasize those factors is deeply political and deeply ideological and very much about public perception.

00:05:41 Speaker_01
But at the time, the Nixon administration had been blaming organized labor for rising prices by demanding higher wages, prompting union leaders to draw attention to the inflationary effects of corporate price gouging. In 1971, I.W.

00:05:53 Speaker_01
Abel, the president of United Steelworkers, made the following statement, saying, quote, the single most important factor in the current inflation has been price gouging by the profit greedy.

00:06:02 Speaker_01
Between 1960 and 1968, after-tax business profits skyrocketed 91%, while dividend payments to shareholders increased by 84%.

00:06:11 Speaker_01
During this period, average after-tax take-home pay of American workers increased by only 31%, with inflation further reducing the workers' gains to 11%, unquote. Still, the erasure of corporate culpability continued.

00:06:23 Speaker_01
Some years later, in May of 1978, the Associated Press published an article with the headline, What Causes Inflation? In this article, the AP stated the following quote, while there is no single cause of inflation, these factors play a part.

00:06:37 Speaker_01
Labor negotiations, as prices rise, workers ask for more money and that extra cost is passed on in still higher prices. Government policy.

00:06:45 Speaker_01
Inflation is not the only consideration and some decisions are made in spite of, not because of their effect on inflation. Deficit spending. Higher government spending puts more money into circulation, which increases demand and prices.

00:06:57 Speaker_01
Devaluation, as the value of US currency drops in comparison with foreign money, imports cost more, whether they are finished goods or raw materials for domestic products." And the list ended there.

00:07:09 Speaker_01
Note the conspicuous absence of private industry decisions at all on raising prices. It's only labor unions, government social spending, and broader devaluation of currency. There's no sense that corporate price gouging is responsible at all.

00:07:22 Speaker_01
That's right.

00:07:23 Speaker_00
Never would the private industry be responsible for inflation. It is only labor and the federal government. Now, let's skip ahead to the present day and what we've been seeing lately. Since the start of the decade,

00:07:37 Speaker_00
The dismissal of the corporate cause of or contributions to inflation has been kicked into high gear.

00:07:44 Speaker_00
By late 2021, following a number of global disruptions, including the onset of the COVID-19 pandemic and the related so-called supply chain crisis, inflation was on track to reach its highest levels since 1982, which it did in early 2022.

00:08:02 Speaker_00
The Biden White House had issued an executive order in July of 2021 calling for some mild regulations targeting consolidation and profiteering across industries including healthcare, agriculture, internet service providers, technology, and transportation ostensibly designed in part to reduce prices, to keep inflation in check.

00:08:24 Speaker_00
Months later, in November of 2021, Biden, according to the Washington Post, quote, urged the Federal Trade Commission to escalate its investigation of anti-competitive behavior in the oil and gas industry, which the president alleged was leading to higher prices for drivers at the pump, end quote.

00:08:43 Speaker_00
So despite the fact that this was reported fairly straight by the Washington Post, they do say alleged, but still, the Washington Post's own editorial board in January of 2022 published a piece condemning Biden's move to cite business consolidation as a major cause of rising prices as what they deemed to be quote unquote

00:09:07 Speaker_00
foolishness, adding that, quote, pinning the current inflation problems on corporate greed is a flimsy argument, end quote.

00:09:17 Speaker_00
Instead, the Washington Post editorial board argued, demand soared, but supply just couldn't keep up due to, quote, supply chain hiccups and labor shortages. so prices went up."

00:09:32 Speaker_00
The implication here, of course, was that corporations, according to the Washington Post editorial board, had either very little control or no control whatsoever over the economic dynamics of the time, that the cause of inflation really was pandemic-era supply chain hiccups, and of course, as we've discussed before on Citations Needed, the dreaded labor shortage.

00:09:58 Speaker_01
Now, this would become a reoccurring theme made especially clear by Washington Post columnist Catherine Rampel, who in May of 2022 wrote an opinion piece dismissing concerns about corporate contributions to inflation as, quote, a conspiracy theory, unquote, that had been, quote, infecting the Democratic Party, unquote.

00:10:14 Speaker_01
Rampel called the theory greedflation, a term used in earnest in the 1970s to refer to the same phenomenon. Rampel, of course, was using it pejoratively as she dutifully echoed the editorial board's reasoning.

00:10:24 Speaker_01
And another piece a few days later, Rampel cited stimulus checks. i.e. government social spending, as the chief cause of inflation and called the democratic strategy to blame corporate greed as a form of quote, demagogic rhetoric, unquote.

00:10:36 Speaker_01
And the argument took off with centrist neoliberals and capital S, capital E, serious economists and capital S, capital P, serious pundits.

00:10:45 Speaker_01
Namely, Matt Iglesias, for example, on his blog Slow Boring in May of 2022, wrote a post called, quote, Greed Inflation is Fake, unquote. It was published in response to Elizabeth Warren introducing a bill

00:10:56 Speaker_01
call the price gouging prevention act of twenty twenty two places road quote only a very stupid person would think company suddenly became greedy in twenty twenty one after years of being non greedy unquote.

00:11:08 Speaker_01
Here are similar pieces in the same genre madagascar piece in may of twenty twenty three. entitled, Greedflation is Still Fake, The Telegraph, in June of 2023, quote, blaming inflation on corporate greed is dangerous left-wing nonsense, unquote.

00:11:23 Speaker_01
And The Economist, in July of 2023, wrote, quote, greedflation is a nonsense idea, unquote. But these pieces were ignoring key points of evidence.

00:11:33 Speaker_01
Even before Katherine Rampel's condescending screeds were published in May of 2022, studies had confirmed that corporate price hikes were indeed instrumental to the spike in inflation.

00:11:43 Speaker_00
The Economic Policy Institute, or EPI for example, released a report in April of 2022 noting an enormous rise in profit-driven price increases. Between the second quarter of 2020 and the fourth quarter of 2021, over half of the increase in prices

00:12:01 Speaker_00
53.9% could be attributed to larger profit margins, and less than 8% could be attributed to labor costs.

00:12:05 Speaker_00
By contrast, in the 40 years between 1979 and 2019, profits contributed about 11% to price growth, and labor costs contributed over 60% to price growth.

00:12:23 Speaker_00
Now, let's be clear about what so-called greedflation means and how it relates to an actual economic theory called seller's inflation.

00:12:31 Speaker_00
As our guest Dylan Gauch-Lewis has written, quote, seller's inflation is the idea that in significantly concentrated sectors of the economy, coordinated price hikes can be a significant driver of inflation.

00:12:44 Speaker_00
While the concept's opponents generally prefer to call it greedflation, largely as a way of making it seem less intellectually serious, the experts actually advancing the theory never use that term, for a very simple reason.

00:12:58 Speaker_00
It doesn't really have anything to do with variance in how greedy corporations are."

00:13:05 Speaker_00
So let's return to the aforementioned claims of Matty Glazius that people recognizing the existence of seller's inflation think that corporations, quote, suddenly became greedy in 2021, end quote. Now, as Josh Bivens.

00:13:20 Speaker_00
The author of the EPI study wrote, quote, It is unlikely that either the extent of corporate greed or even the power of corporations generally has increased during the past two years.

00:13:32 Speaker_00
Instead, the already excessive power of corporations has been channeled into raising prices rather than the more traditional form it has taken in recent decades, suppressing wages, end quote.

00:13:48 Speaker_00
Bivens added, quote, "...the historically high profit margins in the economic recovery from the pandemic sit very uneasily with explanations of recent inflation based purely on macroeconomic overheating.

00:14:02 Speaker_00
Evidence from the past 40 years suggests strongly that profit margins should shrink and the share of corporate sector income going to labor compensation, or the labor share of income, should rise as unemployment falls and the economy heats up.

00:14:19 Speaker_00
The fact that the exact opposite pattern has happened so far in the recovery should cast much doubt on inflation expectations rooted simply in claims of macroeconomic overheating."

00:14:32 Speaker_00
Similarly, economist Isabella Weber of the University of Massachusetts at Amherst also found that corporations had maintained the higher prices they'd set, even as the shocks of the pandemic and the supply chain issues subsided, and as the rate of wage growth slowed.

00:14:49 Speaker_00
In 2023, Weber and economist Evan Wozner concluded that, quote, the US COVID-19 inflation is predominantly a seller's inflation that derives from microeconomic origins, namely the ability of firms with market power to hike prices, end quote.

00:15:05 Speaker_00
And earlier this year, in January of 2024, the think tank Groundwork Collaborative found very similar results to those of EPI, namely that corporate profits were responsible for more than half of inflation.

00:15:19 Speaker_00
during the second and third quarters of 2023. Despite the slowdown in inflation, additional costs were still being passed on by corporations to consumers.

00:15:32 Speaker_00
Groundwork's research found that, quote, while prices for consumers have risen by 3.4% over the past year, input costs for producers have risen by just 1%. For many commodities and services, producers' prices have actually decreased.

00:15:51 Speaker_00
Corporations have failed to pass that savings to consumers." Groundwork also found that, quote, corporate profits as a share of national income have skyrocketed by 29% since the start of the pandemic.

00:16:07 Speaker_00
While our economy has returned to or surpassed its pre-pandemic levels on many indicators, workers' share of corporate income has still not recovered," end quote.

00:16:18 Speaker_00
And as Groundwork's executive director, Lindsay Owens, explains, quote, even as supply chain snarls have receded and the U.S.

00:16:26 Speaker_00
economy has stabilized, our research finds that businesses continue to pad their bottom lines at the expense of American families, end quote.

00:16:35 Speaker_01
Indeed as far back as mid twenty twenty one groundwork researchers began listening in on and reading transcripts of corporate earnings calls across industries experiencing record setting price increases from oil and gas to housing and healthcare to groceries and retail to transportation industries like railroads and airlines.

00:16:53 Speaker_01
They found that quote ceos were openly bragging to their shareholders about their ability to raise prices beyond their rising cost to increase profits to justify this move ceos hid behind the cover of supply chain issues and the economic turmoil caused by the pandemic unquote.

00:17:09 Speaker_01
Yeah which makes sense right there's a psychological aspect to this this is why psychologists when nobel prizes for economics all the time there's a huge psychological huge mass psychological you sociological dynamic to many of these questions and of course this feeds into.

00:17:24 Speaker_01
Issues of how media covers in the public perceives it and the political consequences of that perception that these dynamics don't exist in a frictionless vacuum we don't exist on an econ 101 textbook page.

00:17:36 Speaker_01
There are many contributing dynamics to this and if someone feels like they have the cover of supply chain issues in terms of the psychology of the consumer and the psychology of public regulators right.

00:17:47 Speaker_01
Then yeah they're gonna try to push it from five to six to seven percent to eight percent. Why would you not why would you not just keep pushing it like the velociraptors and drastic park can see.

00:17:59 Speaker_01
How much you can get away with until you get shocked right you test the fences both psychologically and from a public regulatory. Dynamic that makes sense to me right that makes common sense but they're also not doing it.

00:18:11 Speaker_00
Stealthily which is i think what's really interesting here based on the research of based on these publicly available transcripts of corporate earnings calls which are. public because they are publicly traded companies.

00:18:23 Speaker_00
And so therefore, CEOs and those financial officers speaking on these corporate earnings calls are actually bound to at least nominally tell the truth about how they are increasing the profits and the payouts to shareholders.

00:18:38 Speaker_00
And in these calls, they literally praise themselves for keeping prices high, even though Pandemic supply chains have recovered even though inflation is down but they're like look the consumer.

00:18:53 Speaker_00
Got used to paying higher prices so rather than drop them to kind of react to how the economy is moving how unemployment is moving how inflation is moving. We're just going to keep the prices high because it's more profit for all of us.

00:19:08 Speaker_00
And they literally say these things and you can read it. And still so much of political speech, so much of media assessment and analysis is based on shitting on this idea of greedflation. Right, Adam?

00:19:23 Speaker_00
This idea that if you believe that, you know, all of a sudden, all of a sudden corporations got greedy.

00:19:29 Speaker_01
Monocle-wearing capitalists decided to get greedy. They weren't greedy before, you fucking idiot. Econ 101.

00:19:35 Speaker_00
Which is not what greenflation means. It's just a way to explain that prices are going up and staying up well above the increase in costs, right? Increase in costs are going to... This is econ 101.

00:19:50 Speaker_00
That makes the overall cost of a good or service more expensive, right? This is profit well above covering costs, well above that. And they are bragging about it publicly.

00:20:03 Speaker_00
And still you get Matt Iglesias being like, yeah, I don't really think it's that. There was really no change in the corporate side of things. So greedflation must just be some conspiracy theory by the Democrats.

00:20:16 Speaker_00
And of course, it's no coincidence that all of this kind of narrative work has occurred after a period of mass industry consolidation. Since the late 1990s, more than 75% of American industries have become more concentrated.

00:20:32 Speaker_00
In May 2023, The Lever published a piece examining and debunking this media erasure of the role of corporate price gouging.

00:20:41 Speaker_00
The authors of the article actually asked Matty Glazius and Catherine Rampell and others for comment to clarify this discrepancy between their claims and the documentation of corporate price gouging.

00:20:55 Speaker_00
Those who replied to him, which included Matt Iglesias, simply doubled down on their arguments. When asked about his piece, Greedflation is Fake, Iglesias responded to the lover by saying, quote, In terms of my piece, I believe my thesis

00:21:11 Speaker_00
as you yourself quoted it back to me, was that inflation could not possibly be attributed to an increase in the level of corporate greed. I stand by that 100%.

00:21:23 Speaker_00
And he added, quote, 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.

00:21:38 Speaker_00
That's broadly speaking what I think is going on here and what I assume the economists whose work you're summarizing are explaining, end quote.

00:21:47 Speaker_00
In June of 2024, Iglesias took to Twitter to ask in a snide poll that actually had no choices, this, quote, is seller's inflation just normal demand push inflation given a new name to be confusing?

00:22:05 Speaker_00
And what he was referencing is that study by Isabella Weber.

00:22:10 Speaker_00
In response to this snide poll, Isabella Weber, the economist we had referenced earlier who did the study confirming that corporate greed is driving inflation, wrote back to him saying, quote, loving it when people with big platforms run such well-designed surveys on my work.

00:22:27 Speaker_00
Congrats. P.S., if you had read our paper, you would know that seller's inflation has nothing to do with demand poll and is not a new name but dates to the 1950s. to which Iglesias was forced to respond with this, quote, OK, I've read the paper now.

00:22:46 Speaker_00
And you're right. It is much clearer on this point than most of your popularizers. Basic idea is we should understand the macroeconomic outcome in terms of microeconomic rather than macro causes, end quote. So basically, he was like,

00:23:03 Speaker_00
shitting on this idea of seller's inflation to be smug and snide without ever having read the paper itself. And when called out on it was basically like, yeah, I guess you're right. Never mind.

00:23:15 Speaker_01
Well, I'm glad he got around to reading the paper. He was great. But we'll discuss that more with our esteemed guest and noted Metaglacius hater. So let's talk about the media panic around price controls that Kamala Harris proposed.

00:23:29 Speaker_01
So there is a pattern of media apologia that transcends from inflation over to this idea of price controls as a scary quasi-Marxist solution to high prices. When Kamala Harris took over the now memory holds Biden campaign, you remember that? Who? Who?

00:23:47 Speaker_01
Right. They were so cooked from the beginning.

00:23:50 Speaker_01
In August 2024, she quickly proposed a federal ban on price gouging on food and groceries, realizing that obviously this would be a huge vulnerability for Democrats and also just, I don't know, probably a good idea.

00:24:03 Speaker_01
CNN's economic reporter, Elizabeth Buchwald, wrote an article quote harris's plan to stop price gauging could create more problems than it solves unquote which is. Weirdly editorial for an ostensibly straight report but the piece.

00:24:17 Speaker_01
Cherry pick conservative economists and studies highlighting those opposed to limits on price gauging and relegating one proponent the aforementioned lindsey owens of the groundwork collaborative,

00:24:27 Speaker_01
to the very bottom of the article its main extremely tortured argument was that limit some price gouging would prevent smaller companies from moving in to offer lower prices it didn't seem to take into account that keeping corporate power at this astronomical level what also by traditional capitalist logic also prevent smaller companies from moving and but that was not really.

00:24:47 Speaker_01
That important to her and guess who else had something to say other than cnn's elizabeth buckwell the washington post is on kathryn rample in august of twenty twenty four wrote a column headlined.

00:24:58 Speaker_01
When your opponent calls you a communist maybe don't propose price controls her usual she's a fucking snarky isn't she.

00:25:04 Speaker_01
Because clearly Republicans are going to stop calling you a communist when you don't propose price controls because they never called Obama, Hillary Clinton, Bernie Sanders, or Joe Biden a communist.

00:25:14 Speaker_01
So clearly there's evidence that if they don't propose modest... Then the Republicans will just get on board.

00:25:20 Speaker_01
Stop calling him communist she warned that quote at best unquote restrictions on price judging would lead to shortages black markets and hoarding and would somehow raise prices that was not really clear how ramp also claim that price gouging laws quote would require public companies to publish detailed internal data about cost margins.

00:25:38 Speaker_01
Contracts in their future pricing strategies posting cost and pricing plans publicly is a fantastic way for companies to collude to keep prices higher all facilitated by the government unquote.

00:25:49 Speaker_01
Rampal didn't bother to note that companies mostly already do this and certainly did this in the wake of the pandemic.

00:25:54 Speaker_01
The non-profit Good Jobs First analyzed government agency announcements and court records and reported in 2023 that since January 2000, US corporations have paid $96 billion in fines and settlements to resolve more than 2,000 cases involving allegations of price fixing and similar anti-competitive practices.

00:26:12 Speaker_01
These cases include household items and necessities documented cases encompassing goods from shoes to package ice to pharmaceuticals.

00:26:20 Speaker_01
It's also central to note that harris's proposal was extremely light on details this still very much business friendly and this is important doesn't resemble anything close to price controls yeah but she's still a comedy.

00:26:31 Speaker_01
Yeah according to the new york times report it would likely only target sellers with huge markups during times of emergencies like natural disasters.

00:26:40 Speaker_01
The plan is also concerned with rewarding smaller businesses ostensibly a form of quote industry competition unquote far more than any numerical controls.

00:26:49 Speaker_01
I'm prices but this didn't stop the panic around this because again you're not supposed to imply that there's any kind of corporate price fixing either in formal or formalized even though again as good jobs first noted there's been over two thousand examples of price fixing in various industries especially when there's less and less competition which increasingly there is which i guess we'll talk about and i think this really kind of cuts to the core of this media narrative.

00:27:14 Speaker_01
Madagascar does this a lot obviously picked on him a lot because he's been the forefront of this is also read everyday by former biden chief of staff ron clinton so he's very influential but he does this a lot obviously kathleen rample did it which is another serious capitalist capital a serious economist they do this idea of conspiracy theory they can love to throw this pejorative.

00:27:33 Speaker_01
Now there's an old you know sort of adage that when workers get together and to better plan their mutual interest and work together it's called a union when people in corporations get together and plan in their better interest it's called a conspiracy theory.

00:27:47 Speaker_01
Now of course there are trade groups there are ways in which corporations again both informally and informally decide not to really compete with each other because it's in their best interest to do that is a very nature of price fixing it's a very nature of trust and the idea that that in concert with just broader corporate consolidation again is our guest notes and her excellent work.

00:28:06 Speaker_01
At the rolling door project there are many mechanisms with which corporations are not exactly on the up and up when they determine prices that there isn't a strict vacuum frictionless vacuum econ one on one model.

00:28:18 Speaker_00
Supply and demand that determines prices you mean prices don't just go up and down like the waxing and waning of the moon adam it's not just a force of nature unaffected by human decision making.

00:28:30 Speaker_01
Especially when inflation is such a powerful political tool and this is something that i think these progressive economist to push back on this and talk about sellers inflation i think they avoided this issue cuz it's outside of their domain.

00:28:43 Speaker_01
But having the power of inflation to punish and discipline democrats especially during a crisis moment like in twenty twenty one twenty twenty two with respect to covid and social spending.

00:28:55 Speaker_01
Which radically change the labor market radically change labor power almost overnight in terms of both the stimulus and the unemployment and has an appointment with talk a lot about capital was freaking out.

00:29:06 Speaker_01
And there needed to be a corrective to what they viewed as being a change in the social system change that a lot of.

00:29:12 Speaker_01
Do i progressive thought would maybe translate into a broader social station at once people saw how much poverty reduced when once people saw how much childhood poverty reduced.

00:29:22 Speaker_01
And once people saw how much labor power workers could have when you had a higher floor to protect workers from exploitation and from abuse. That, of course, didn't happen.

00:29:34 Speaker_01
But I think in this context, there was not just corporations sitting around twiddling their thumbs, simply responding to upstream costs. The market. The mysterious market.

00:29:47 Speaker_01
And so all this kind of worked together, again, along with the tremendous political power of raising prices in terms of sending a message to Democrats, sending a message to the sort of prevailing political mood at the time, which at that point was to sort of spin, spin, spin.

00:30:01 Speaker_01
And again these things were openly lobbied for by business lobbyists quite explicitly so i'm excited to talk to our guest about this dynamic is i think that this is where this really does become a media story where it intersects with what we do, which is it's about public perception it's about the political perceptions of who owns inflation because everyone can see their grocery bill skyrocket everyone can see mcdonald's doubling its prices in a matter of four five years and so.

00:30:30 Speaker_01
Who owns that who's responsible for that who gets blamed for that is a tremendous importance and there's been a huge effort by.

00:30:36 Speaker_01
The business lobby by pro business groups by republicans by more conservative democrats to make sure that the day when you see your grocery bill you see that your bill is twenty thirty percent higher that you don't blame kroger albertsons and other corporate forces but instead blame.

00:30:54 Speaker_01
those greedy workers who ask for too much or those late lay about scoville about who decided to collect their government cheese instead of working.

00:31:02 Speaker_00
Right, because we see so often headlines about skyrocketing inflation, and far fewer headlines, albeit some, but still far fewer headlines that report things like S&P 500 hits record high amid upbeat third quarter earnings, or Tyson Foods shares set record as high meat prices fatten profits, or US billionaire wealth skyrockets during pandemic, which it did, right?

00:31:29 Speaker_00
The wealth of the world's 10 richest men doubled during the pandemic, according to Oxfam.

00:31:36 Speaker_00
And so making sure that those kinds of reports fail to make the same waves as reports about inflation and rising prices and rising labor power, rising federal spending, that is the purpose of these very powerful media and political narratives about inflation and how corporations, when they're even driving up prices,

00:32:01 Speaker_00
are saying, hey, it has nothing to do with us. It's all because there was so much federal spending or because of maybe a nominal increase in worker salary and certainly large federal spending. That gets all the blame.

00:32:16 Speaker_00
To discuss this more, we're now going to speak with Dylan Gauch-Lewis, a senior researcher at the Revolving Door Project, where she leads their Economic Media Project. Dylan will join us in just a moment. Stay with us.

00:32:40 Speaker_00
We are joined now by Dylan Gauch-Lewis. Dylan, thank you so much for joining us today on Citations Needed.

00:32:46 Speaker_02
Yeah, thank you so much for having me. I'm looking forward to it.

00:32:49 Speaker_01
So as you note, and as your organization notes, that the issue of inflation, prices, price gouging, price controls is very much a media story at its core in the sense that it has tremendous political consequences.

00:33:03 Speaker_01
The prevailing media narrative around inflation

00:33:05 Speaker_01
It's been around a little bit, but I still think it's fair to say it's kind of the prevailing or conventional wisdom around inflation, especially from late 2021 into basically early this year was that covid era, a social spending and disruptions in the supply chain, along with increasingly powerful labor markets.

00:33:23 Speaker_01
had radically increased prices across the board. And this led to a kind of inflationary spiral where things kind of got out of hand.

00:33:30 Speaker_01
And the solution, therefore, the obvious solution to both of those is to decrease labor power and to decrease social spending, which obviously we have ideological problems with on our show, seeing as how we are economically illiterate leftists, as we have been called.

00:33:44 Speaker_00
Or you could say pro-labor. I mean, but whatever.

00:33:46 Speaker_01
Well, I meant for the sort of fedora hat wearing crowd. We didn't do it at 101. We don't understand supply and demand. Now, obviously, we view this popular theory as extremely convenient for the wealthy, right?

00:33:56 Speaker_01
Discipline labor and cut social spending, right? What are the odds?

00:33:59 Speaker_01
Talk to us about this kind of dominant media narrative that really took off, I think it's fair to say, in earnest, in late 2021 with a lot of the panic around uppity Wendy's employees was driving up the cost of your burger.

00:34:11 Speaker_01
How do you respond to that narrative? And what do you think it's leaving out of the conversation?

00:34:15 Speaker_02
So to start on the economics of it all, really, if we look at the inflation from the past several years, it's come from a number of different sources, including the ones you mentioned, like labor power and government spending.

00:34:32 Speaker_02
Although what's being left out of that list I think is even more important, which is supply shocks, which happened for a number of reasons. One was there's been

00:34:45 Speaker_02
over the course of the past several decades, much less regulation of transportation industries, alongside growing pushes from Wall Street financiers for transportation companies to cut their overhead, which basically means to cut their capital expenditures, trucking companies have fewer trucks,

00:35:13 Speaker_02
train companies have fewer cars, fewer active trains, they upgrade them less frequently, which means that they can save money on those expenses, reduce their overhead, and pass on the savings to shareholders. Obviously, this creates problems,

00:35:30 Speaker_02
when there's a once-in-a-lifetime, or hopefully once-in-a-lifetime, pandemic that forces everyone to go home and shift their spending away from services and towards goods, it would have been really useful if those transportation companies had excess capacity in the way that they would have had 40 years ago.

00:35:52 Speaker_02
Another thing is the invasion of Ukraine by Russia. had serious supply shocks in especially oil and grain that rippled through other markets because oil and grain are inputs for a ton of different stuff.

00:36:11 Speaker_02
And then after you combine all of this supply side stuff and demand side stuff, we also saw corporations using inflation as a smokescreen to prop up additional hikes above what they would need to offset their costs in order to pad their profits.

00:36:31 Speaker_02
But Groundwork Collaborative especially has done a lot of work documenting executives bragging about doing this on their earnings calls. And basically the mainstream economic discourse response to this has been one of two things.

00:36:47 Speaker_02
It's either been, no, they're not doing that. Or it's been, well, that's just normal, they're passing on costs to consumers.

00:36:55 Speaker_02
On the nah-ah thing, I have yet to hear a good response to the fact that you are legally obligated to accurately describe your pricing and earning strategies on an earning call. So for those people who think they're defending corporate executives,

00:37:13 Speaker_02
by casting doubt on that, they're also kind of implicitly accusing them of federal crimes.

00:37:20 Speaker_00
Right.

00:37:21 Speaker_00
By like being honest about what their plans actually are on those earning calls to shareholders, they're actually just, the accusation is that they are not only lying to their shareholders, but also by virtue of lying on those calls, they're breaking the law, even though obviously like there's no incentive to do so, especially when they're admitting to like price gouging, right?

00:37:41 Speaker_00
Like increasing costs

00:37:43 Speaker_00
over and above covering the, you know, increased costs of say, an import or whatever, that they are actually like, increasing those costs, passing those on to the consumer, so that they can just make more profit and admitting to that on these calls.

00:37:56 Speaker_00
And so yeah, no, that's a really good point to make, like, they actually can't lie on those calls. I mean, you can say like, well, anyone can lie anywhere, right?

00:38:03 Speaker_00
Like you say that you're not lying, and then you can lie, but that would actually be a federal crime.

00:38:07 Speaker_01
Yeah, it would be securities fraud. I want to ask a quick question.

00:38:10 Speaker_01
I want to follow up on this dynamic, because I think this is really the key dynamic, or it's one of the main key dynamics, which is this idea that there is a psychology and a kind of human psychology to this.

00:38:20 Speaker_01
Let's make a parallel example to this, right? Before COVID broke out in, obviously, March of 2020, it would be unheard of to ask people to make tips in certain contexts, right?

00:38:30 Speaker_01
Like most contexts, you were not really prompted to give a tip at, say, like a bowling alley or in many kind of consumer transactions.

00:38:37 Speaker_01
And then as labor costs skyrocketed, the psychology dynamic changed, where obviously labor costs went up because of tight labor markets.

00:38:44 Speaker_01
But also, again, either through coordination or just a confluence of incentives, various businesses decided to start trying to pass off their labor costs onto you by gilting you into tipping, which again, from the worker's perspective, makes sense.

00:38:58 Speaker_01
But it broke a more, it broke a kind of informal arrangement. And these kind of informal arrangements around pricing and the psychology of pricing exist everywhere.

00:39:06 Speaker_01
And what i think you're arguing what a lot of people can i put food is that there is obviously a form of mass psychology involved in how much you can charge for things and that what a lot of corporations all and again you can talk about the underlying dynamics that permit them to do this in terms of the power of price in terms of concentration of the limited number of.

00:39:25 Speaker_01
corporations in most domains of economic activity, they see the psychological dynamic and they just get fucking greedy. I mean, in the truest sense of the word of like, let's just see how far we can go, right? Let's test the Raptors in Jurassic Park.

00:39:37 Speaker_01
Let's test the fence until we can't go any further. Which makes sense, because again, that's what I would do, right? If you see an opportunity, if you see something that kind of shocks the system, right? It's Naomi Klein Shock Doctrine 101.

00:39:49 Speaker_01
You sort of see what you can get away with under the cover of this crisis, whether it be supply chain disruption, whether it be sort of the broader sort of psychology of COVID and the lockdowns.

00:39:58 Speaker_01
So talk a bit about the psychological dynamic and why this was kind of poo-pooed so much as one of the things informing the high cost and the inflation.

00:40:06 Speaker_02
Yeah. I think you kind of hit the nail on the head there. I do want to gently disagree with you on one point.

00:40:14 Speaker_01
You're not allowed to do that. That's banned by the show. Sorry. Go ahead. Sorry.

00:40:17 Speaker_02
Well, you can kick me off after I say this. You're out. Well, let me, since I'm going to be out anyway, I'll go ahead and say it. Go out with a blaze of glory. Yeah. I think the characterization that companies got greedy is wrong.

00:40:32 Speaker_02
When you look at outspoken critics of this theory, which is called seller's inflation but derided as greedflation, a big part of what they sneer about is they say that the mechanism

00:40:47 Speaker_02
being proposed is, oh, well, why would companies have suddenly gotten greedier? That's not what I don't think anyone who has seriously been arguing for seller's inflation has ever said, and the actual narrative is firms are profit maximizing.

00:41:09 Speaker_02
If you are like a Catherine Rampell who wants to put everything in a macro 101 context, then that is a basic assumption of every model that you're going to use. So that's presumably something we can agree on.

00:41:26 Speaker_02
So then if your profit maximizing and a new opportunity to wield pricing power presents itself, Why wouldn't you use it? Because no one is saying every corporation is doing this.

00:41:40 Speaker_02
What people have said is, and what I argue is, when you have concentrated markets where firms are able to be price setters rather than just price takers, then when there is uncertainty around pricing because of high inflation, i.e.

00:42:01 Speaker_02
consumers can't tell when you raise the price of milk by an extra dollar, whether that's reflective of an actual increase in costs or whether that's to line your wallet, then you have every incentive to increase the price of milk by the extra dollar.

00:42:19 Speaker_02
You don't go to a dollar all at once necessarily, but on especially inelastic staple goods like milk, like bread, you have an incentive to slowly push the price up past what you would need it to be in order to compensate you for additional costs.

00:42:39 Speaker_02
And these are also goods whose prices move a lot week to week and month to month anyway, milk, eggs, bread, especially milk and eggs because they have really concentrated oligarchic suppliers for those goods. But

00:42:58 Speaker_02
I think a big part of the psychology is we're a corporation.

00:43:03 Speaker_02
We, one, want to make money because we like money and we like to pay ourselves and our executives well, but two, you actually have legal obligations to shareholders to try and maximize your company's viability and your company's basically returns.

00:43:23 Speaker_02
So I think that that's really the mindset going on. And in a stable environment, like what we saw throughout the 2000s, throughout the 2010s, where inflation is

00:43:36 Speaker_02
consistently low and not very variable, consumers can tell when they are getting ripped off. Like, this is people who are complaining about shrinkflation for a long time, which is where you reduce the size instead of increasing the price.

00:43:56 Speaker_02
And they can tell that because they know roughly how costs are moving because they're in a stable inflationary environment.

00:44:05 Speaker_02
When you suddenly have a bunch of spiking inflation, it's so much harder for consumers to be able to intuit when they're getting ripped off. And there's such an information asymmetry where businesses know what their changing costs are.

00:44:24 Speaker_02
They likely know what their competition's changing costs are as well, which means that they can make decisions with information that the public can no longer intuit because you are no longer in a situation where costs are rising at a relatively constant and predictable rate.

00:44:45 Speaker_00
Right.

00:44:45 Speaker_00
And, you know, I want to kind of dig into this a bit more, Dylan, you've written that the like pejorative dismissal of the term, greedflation, namely, in the past couple years, when that term was really being used by those who wanted to, I think, make this idea of price gouging, and maximizing profit always right, the kind of fundamental state of greed, right, that that's not something that increases or decreases at the top levels of

00:45:13 Speaker_00
corporate leadership, but that's kind of the driving motivation.

00:45:16 Speaker_00
So like in 2022, 2023, when that term was being used to really explain inflation, not just as, hey, that's just the market, that's law of nature here, that these are choices being made by executives at companies and giving that media friendly term, greedflation, but then that was dismissed

00:45:35 Speaker_00
by people who didn't want to push that line, right? Those who maybe were opposed to people calling out corporate pricing power and price gouging.

00:45:46 Speaker_00
And those calling this out, those kind of dismissing the term greedflation, saying it wasn't accurate, were accusing those who were using it of basically like trafficking in conspiracy theories.

00:45:58 Speaker_00
Like creating something that wasn't there and you mentioned washington post opinion columnist kathryn rampel Who has done this a tedious blogger madaglasius has often made this argument. Can you just explain like what that line?

00:46:13 Speaker_00
of discourse Really means this idea of you know painting those who are who are trying to point out So-called greedflation right but the very real price gouging motivations of companies that they themselves

00:46:29 Speaker_00
are not just like doing econ 101, that they are tinfoil hat types, that they are the conspiracy theorists for calling out corporate greed.

00:46:37 Speaker_02
Yeah, I think there's a certain portion of the economics profession that views neoclassical economic models as when there were historians saying, I think it was Fukuyama, saying we're at the end of history.

00:46:55 Speaker_02
I think a lot of people sort of feel like neoclassical economics is the end of economics, that like it gets it right and these models are so good that you can apply them anywhere and everywhere and they should work all the time.

00:47:12 Speaker_02
And they just like to apply these basic models that they think explain everything.

00:47:18 Speaker_02
And if there's other things outside of the models that cast doubt on them or that need further engagement from different angles, then you're just not being scientific anymore about it.

00:47:32 Speaker_02
One of the arguments that I've made for years now is that you can really trace the intellectual legacy of seller's inflation back all the way to David Ricardo, who was a contemporary of Adam Smith, one of the first real economists in the modern sense of the word who had a theory of rent-seeking.

00:47:56 Speaker_02
Basically, when you have the ability to price higher than you need to in order to make a profit, you have every incentive to increase your profit by adding additional rents.

00:48:13 Speaker_02
He talked largely about landowners because there was a situation in the UK that he observed where, you know, farmers were working the land

00:48:25 Speaker_02
would be paying exorbitantly higher rent than you would think would be justified, mostly because if you're a farmer, it's really hard to pick up your farm and move to a different plot of land.

00:48:39 Speaker_02
So the aristocracy that owns the land would charge more than what you would expect from a pure supply and demand focus, even though they didn't quite have that conception established back then.

00:48:52 Speaker_00
But they knew that there was this kind of captured market.

00:48:55 Speaker_02
Right, exactly. And this is something that is really present in economic thought for quite a long time.

00:49:03 Speaker_02
And it's really pretty new that economists, especially a certain degree, a certain cast of neoliberal, neoclassical economists, think that they have sort of figured out human behavior and markets are infallible.

00:49:24 Speaker_02
This really kind of got jump-started with the Chicago bunch, the idea that markets are just infallible, so if you just get out of the way and let them do their stuff, they're going to wind up at the most efficient outcome most of the time.

00:49:40 Speaker_02
which obviously doesn't work when you have non-competitive markets, because the fundamental assumption of why a market will settle at an efficient outcome is because you'll have entry and exit of firms in response to changing demand for the goods that they are selling in a particular industry.

00:50:04 Speaker_02
That doesn't happen in things like grocery stores, because there is a very high burden of entry. It's hard to compete with Kroger. Like, I can open a grocery store anytime I want, but

00:50:19 Speaker_02
Am I going to be able to get a whole lot of customers when I have to charge twice the price for a loaf of bread that Kroger does just because of economies of scale? Probably not.

00:50:31 Speaker_02
And that opens up a lot of latitude for Kroger to raise their own prices. because they know that I'm not going to come in and undercut their prices. Even if I do, they can lower them back down.

00:50:47 Speaker_02
There's all kinds of ways that they can block entry into the supermarket space.

00:50:52 Speaker_01
I'm going to ask about that because I think the grocery store really is, I think, where the rubber hits the road in terms of media narratives and the consequences for, frankly, elections. Recently, the FTC, various state attorneys general,

00:51:04 Speaker_01
in various states, Elizabeth Warren's been on this for a while, is investigating the existence of price fixing. And I want to touch on this idea of conspiracy theory, right?

00:51:12 Speaker_01
Matt Iglesias and Catherine Rampel, I think even called Elizabeth Warren a conspiracy theorist, Rampel did. This idea that like corporations either have formal or informal price fixing, especially when there's like two of them.

00:51:24 Speaker_01
Like in my neighborhood, it's either Albertsons or Kroger. There's no other option. You have whole paycheck, but that's kind of its own thing, right?

00:51:30 Speaker_01
And the idea that there would be, and then, you know, the person, the average person goes to the store and says, God damn, my $140 grocery bill is now $230. Like, something seems a little bit off here. Right?

00:51:42 Speaker_01
And I know that grocery prices have exceeded inflation by quite a bit. And then there's this question of is there price fixing?

00:51:47 Speaker_01
Clearly, it's there's enough evidence that both the FTC and various attorneys general and other members of the US Senate think it's at least worth looking into. But I think a constant way to kind of shut down the conversations around corporate

00:51:58 Speaker_01
And of course they have trade groups right there not even really conspiracies i remember during twenty twenty one and twenty twenty two and every single.

00:52:04 Speaker_01
Business group is handing out memo saying complain about labor costs complain about labor costs so they can cut covid social programming and people will get back to work and republicans are like we're gonna cut social programming so people get back to work and then you be like wow this is a little coordinated conspiracy theory much like no i get the thing they're doing i got in the open.

00:52:21 Speaker_01
So there are like trade groups right that are captured by these organizations talk if you could about this kind of conversation stopping conspiracy smear cuz i'm sure you get that a lot i know other economists in your space have gotten a lot this idea that like any gesture towards coordination at all among like.

00:52:37 Speaker_01
People in power is somehow basically like lizard people stuff.

00:52:41 Speaker_02
Yeah, so a somewhat tertiary point that I want to lead with is the people that you're talking about, Katherine Rampell, Mattie Glacius, they do not read the things that they are critiquing.

00:52:54 Speaker_02
Mattie Glacius admitted openly on Twitter that he hadn't read Isabella Weber's seminal paper on seller's inflation while poo-pooing seller's inflation for two years. So that's like the most blatant example I can come up with.

00:53:13 Speaker_02
And then Catherine Rampell in one of her columns said that Warren and Bob Casey's legislation, I think they introduced two separate bills, would give the FTC the ability to set prices for various goods. It doesn't.

00:53:36 Speaker_02
Neither bill has any language that does that. So either she has poor reading comprehension, didn't read it, or has such an agenda that she... CB.

00:53:48 Speaker_00
Possibly has some ideological priors that are informing what she's writing.

00:53:52 Speaker_02
Who's to say? BF. Right. So it's some combination of those factors. And I think that that's important for understanding this, is ideally the narrative that happened

00:54:04 Speaker_02
wouldn't have been, these people are gating econ, look there's this theory that they won't talk about and now we need to be iconoclastic about it. I think that most people would have preferred to go through normal academic channels.

00:54:23 Speaker_02
You write some op-eds, you share some ideas, you write a research paper, you do some data analysis, it gets peer-reviewed, it gets published.

00:54:33 Speaker_02
We can have an open discourse about it, which at the beginning was the excuse that a lot of people gave for why we couldn't accept seller's inflation. It hadn't gone through that process.

00:54:45 Speaker_02
But then when it was going through that process, it was continually

00:54:50 Speaker_02
dismissed out of hand by Larry Summers, by Matt Iglesias, even at first by people who I think are quite mainstream and slightly left of center, like Paul Krugman, really attacked Isabella Weber about it.

00:55:07 Speaker_02
And I think part of the reason why is that it is really contrary to how, if you really like markets, how you have to conceptualize markets, which is they compete. That's the entire point.

00:55:25 Speaker_02
But I think there's a couple of nuances that are also worth talking about here, that by glossing over, these neoliberal pundits are able to make their case look a little bit better than it is. One is that they don't make the distinction between

00:55:46 Speaker_02
everything and specific goods that are coming from concentrated markets, especially staple goods, your milk, your eggs, your meat, where there are cartels that control the supply of all of those things, which is a big part of why the prices of those things got so crazy.

00:56:10 Speaker_02
And then part of why the prices were able to fall as soon as you started hearing rhetoric from Biden and Harris and DOJ antitrust in the FTC saying, hey, this is unacceptable. We're about to smack you over this.

00:56:25 Speaker_01
Quite mysterious, quite mysterious. I think it was unrelated. I think it was a coincidence.

00:56:28 Speaker_02
Yeah, it must be, must have just been a lag in adjusting their costs. But the other thing that I think a lot of the discourse allied is the difference between variable costs and fixed costs.

00:56:41 Speaker_02
So like Matt Iglesias a couple of different times has said, I'm not changing my newsletter pricing despite the fact that I absolutely could increase the price. The problem with that comparison is a newsletter is mostly fixed costs.

00:57:01 Speaker_02
You have to pay an editor, if you have an intern you have to pay the intern, you have to pay various expenses, editing software maybe, what have you. But there aren't a whole lot of variable costs.

00:57:14 Speaker_02
A supermarket or something like that has the opposite, where their costs depend a lot on the inputs that they're getting, i.e. the stuff that they're putting on shelves.

00:57:25 Speaker_02
So if a milk producer jacks up those costs, they absolutely should be adjusting their milk price accordingly. The problem, though, is that in this

00:57:38 Speaker_02
lawsuit about Kroger's and Albertson's, what Kroger executives admit to doing is moving their prices up to adjust for those things, but not correspondingly moving their prices down. So when you have

00:57:55 Speaker_02
Like, Iglesias' logic is, well, I shouldn't just lower the price of my newsletter even though I could afford to make less profit. And like, no, you don't need to. But when your pricing is based on the variable cost on an item-by-item basis,

00:58:13 Speaker_02
and your business model is to adjust cost frequently, like you do with milk or eggs, then if you're only moving in one direction, that is exploiting consumers' lack of knowledge about the supply chain and the costs that you're incurring.

00:58:29 Speaker_02
So I think that those are a couple of nuances that are really important. And I think to sort of tie this all back to the question, a big part of

00:58:38 Speaker_02
why this gets called a conspiracy theory is just because it really challenges economic orthodoxy, and there is within the media at large, but especially among this group of people that you brought up.

00:58:56 Speaker_02
The economists or economists or most economists or prestigious economists doesn't mean what you would think it would mean. It means a group that I would like call the Beltway bunch. It's Robert Rubin, Larry Summers, Jason Furman, the people from the

00:59:15 Speaker_02
Bill Clinton Treasury Department, basically, who, among their many insights, repealed Glass-Steagall and helped to create 2008, and all profited off of it quite handily too. Larry Summers,

00:59:30 Speaker_02
And Robert Rubin both went to big investment banks after they were in Treasury, made a ton of money, then left to go join the Obama administration and supposedly fix the problem that they had in large part created.

00:59:46 Speaker_00
Right. And they're deemed to be like the kind of unassailable gods of economics.

00:59:52 Speaker_01
Yeah, there's a certain level of kind of priesthood mysticism and taking a long time and making everything seem super obscure and difficult.

00:59:59 Speaker_01
It's kind of the point because meanwhile, the average person's milk prices are skyrocketing and they can't afford diapers and they're suffering.

01:00:05 Speaker_01
So the political response is meant to be slowed down until Democrats realize they absolutely had to do something because they were getting their asses into them politically, especially in the 2024 election coming up.

01:00:16 Speaker_01
When you put lawyers and economists in charge of policy decisions, no offense, they're supposed to be the guys crunching the numbers after the political decisions have been made.

01:00:23 Speaker_01
They're not supposed to necessarily lead the sort of popular response to these crises. And I think the sort of delay and the like, well, we need to send it to two years of academic rigor and study first.

01:00:33 Speaker_01
But meanwhile, the status quo, of course, does not and the inertia of status quo doesn't suffer from similar.

01:00:39 Speaker_01
who needs to jump the red it's just taking for granted and i think that was one of the things i was frustrated about this is that like people.

01:00:45 Speaker_01
We're suffering in the economic discourse around it was mostly kind of either the popular discourse was heavily obscure or just really blamed covid social programs i mean that was kind of the go to line for the longest time that that and along with the ira.

01:01:00 Speaker_01
and government spending in general was the culprit. And that was kind of taken for granted. And that conventional wisdom didn't need to go through seven different peer review studies over two years. It was just a thing people asserted.

01:01:09 Speaker_01
That and, of course, labor being too mouthy.

01:01:12 Speaker_00
Well, and like, you know, yeah, right, exactly. That like, you know, increase in union membership or better bargaining deals, higher salaries for workers, all that, the conventional wisdom is, well, the price for that gets passed on to the consumer.

01:01:27 Speaker_00
And so therefore, If people are getting paid more, you're having to pay more. So the bad thing is people getting paid more, not the price gouging from corporations.

01:01:37 Speaker_01
It's similar when John Chait was like, well, we can't have Medicare for all because it's too complicated. No one's worked out the math. And then meanwhile, you go back and read his column supporting the Iraq war.

01:01:44 Speaker_01
And he's like, I will just figure it out. There's always this double standard of process criticism. And I think you saw that a lot with what you were saying, this kind of effort to say, guys, no, this is about regulation to a large extent.

01:01:56 Speaker_01
I think the concession was, yeah, a third of it is these factors, obviously. But a large part of it is a political issue. It is a moral issue. It is not some obscure technical problem.

01:02:08 Speaker_01
And I think that's what's frustrating watching the sort of narrative around greenflation was that the paralysis was the point. The point was we were kind of supposed to sit around and hand wring for two years.

01:02:16 Speaker_01
Meanwhile, people couldn't afford to keep up with groceries. I mean, it really hit people really hard in the lower income. Because like you said, I mean, you know, inflation is to a large extent a reduction in wages for poor people.

01:02:26 Speaker_02
Yeah. So a few different things on this. One, you said, yeah, but the fiscal expenditures account for like a third of inflation.

01:02:36 Speaker_02
That's something that I want to kind of harp on is when we actually did the two years of analysis about the orthodox claims that inflation was being driven by fiscal stimulus, It actually came back most of the time saying, not really.

01:02:55 Speaker_02
A third seems to be where a lot of analyses have kind of landed. I've seen a number that are lower. I've seen some that are higher. But a third seems to be like, people are like, that's a good enough guess. But that means two thirds isn't coming

01:03:15 Speaker_02
from fiscal stimulus.

01:03:17 Speaker_02
And this kind of gets back to one of your questions from really early on, which was like, isn't it convenient that rich people don't have to sacrifice anything because the Fed is going to raise rates due to man destruction, immiserate workers by loosening the labor market, trying to force wage growth, and potentially even wages down, all while there's no effect on capital.

01:03:44 Speaker_02
And the orthodox model is tighter labor markets lead to higher overall inflation. That's shown in a graph called the Phillips curve, which has been broken in the United States for years now. It no longer looks really like a curve.

01:04:07 Speaker_02
Another thing you see is that wages were a lagging factor. in inflation. So if you look at when wage increases happened, it seems like for the most part they happened in a response to inflation that was already there, which then extended how long

01:04:31 Speaker_02
inflation was being reported as elevated, but it didn't create that inflation in the first place. It just made it so that workers were benefiting or at least not being hurt by that rising inflation that was already there.

01:04:50 Speaker_02
And I think there's kind of a parallel that shows that a part of this really is about immiserating workers. And that's the Silicon Valley bank collapse, where everyone rushed to bail out Silicon Valley Bank.

01:05:09 Speaker_02
And if you were really super worried about inflation, like Larry Summers, for instance, was, you know, he was on a beach saying we needed 10% unemployment in order to ever get back down to lower inflation rates. Then, you know, a bank run

01:05:27 Speaker_02
have been bad. It would have hurt a lot of people, but it would have been quite deflationary.

01:05:33 Speaker_02
So the idea that we have to immiserate workers because it's necessary to do whatever it takes to decrease inflation, but then as soon as it's time for capital holders to suffer because of increased rates, there's a massive response that

01:05:54 Speaker_02
stretches existing legal precedent fairly thin, to be honest, that keeps capital holders from actually suffering the consequences. I think that that's just a big dichotomy that you see.

01:06:09 Speaker_02
And I'm not saying that Silicon Valley Bank or Signature shouldn't have been bailed out necessarily. Like, bank runs are bad, but if you are talking constantly about how

01:06:22 Speaker_02
you know, we have to suffer for inflation to go down, then it's kind of counterintuitive, but this particular suffering doesn't help.

01:06:34 Speaker_00
When you're looking at how corporate media talks about, quote unquote, the economy, and this is something we've talked about on the show before, this idea of the economy, why is maybe, how is the economy doing?

01:06:49 Speaker_00
Or is the economy better now than it was four years ago? Why might those be the wrong questions to ask?

01:06:56 Speaker_02
So I think among progressive groups and thinkers, there has been this line that has sort of taken hold, which is, we are the economy. And that, I think, is really reflective of the issues of When we talk about the economy, we look at GDP.

01:07:16 Speaker_02
Some people look at the stock market, even though that's not really a great indicator of how anything is actually going on the ground. You look at unemployment rates and all kinds of stuff. You look at business start rates.

01:07:30 Speaker_02
But largely, when we talk about the economy, what people talk about is growth. And especially among this cast of the punditocracy with your Mataglaciuses, your, to lesser extent, Ezra Clines, what you see is really they're all about growth. And

01:07:55 Speaker_02
The thing about growth is that it aligns where that extra income is actually going. So would GDP growing by a trillion dollars, but 90% of it going to the top 10%, actually be preferable to the GDP growing by

01:08:22 Speaker_02
300 billion dollars and 90% of it going to the bottom 90%. On the one hand, a trillion dollars in GDP growth sounds like it's better.

01:08:34 Speaker_02
But if it's going to people who already have plenty of money, whether that's actually a net improvement for society compared to less GDP growth, but shared more evenly, I think matters.

01:08:47 Speaker_02
And these distributional questions get lost when we talk about the economy as sort of a natural state that we are separated from.

01:08:59 Speaker_02
where really you need to evaluate policies based not just on how the overall growth rate is affected, but you also need to make sure that people maybe aren't getting gouged for a cheeseburger at Wendy's when they are on their lunch break because they have limited options, they have limited knowledge, they have limited ability to actually shift their demand around to respond to changing real-time prices.

01:09:29 Speaker_02
So there are all of these considerations about, should policy purely increase growth? And I would say, no. It should look at a whole suite of factors, even ones that aren't classically captured in metrics.

01:09:45 Speaker_02
For instance, domestic work is the famous example that is just not really included in GDP, domestic work done by people for their own households. You know, there's a lot that can't be captured in these metrics.

01:10:02 Speaker_02
So I think the economy is an abstraction that should be brought back down to reality and back down to people's lives. And what really matters is how people's lives get better. And sometimes that will be facilitated through maximizing GDP growth.

01:10:21 Speaker_02
A lot of times it won't I think I'll leave the substantive question there unless I've opened a new can of worms.

01:10:27 Speaker_00
No, no, I think that's great.

01:10:29 Speaker_00
I think the idea that the economy is used as this blanket term when it means so many different things, depending on the proclivity of the speaker or writer, depending on what, you know, narrative is being promoted, what possible agenda, for better or worse, may be pushed.

01:10:47 Speaker_00
And I just think that that term is so weasley. You know, we often talk about like, certain terms being a skeleton key for whatever ideology you want to push.

01:10:54 Speaker_00
And I think, you know, when you hear about the economy, you know, when you when you hear it at a presidential debate, like, you know, how is the economy doing? Is it better now? It's there are a million ways to answer that.

01:11:04 Speaker_00
So it sounds like a smart question, but actually, it's just teeing up kind of however you want to approach that. And usually, usually the economy is deemed to be, you know, what most benefits capital rather than what most benefits everyone else.

01:11:18 Speaker_00
So Noah, thank you for answering that, and we'd love to hear about the work you're doing at the Economic Media Project where people can find that work.

01:11:26 Speaker_02
Yeah, absolutely. On what you just said, one unexpected source of wisdom that I've run across was Colin Coward, of all people, the football commentator. Trump was talking about how the economy got worse than Biden, And he was just like, I don't see it.

01:11:46 Speaker_02
I see people coming to football games. I see them with money in their pocket. I see them buying concessions. I see them relatively happy. And I think we can point to inflation, we can point to GDP, but we should also be looking at those things.

01:12:03 Speaker_02
Are people happy? Are they able to afford luxuries, are they able to go and do things that they want to do?

01:12:10 Speaker_02
And I think that from a football commentator of all places, that's actually an important insight into what can often be missed in economic discourse. But as far as how to follow what we're working on, You can go to therevolvingdoorproject.org.

01:12:28 Speaker_02
We have a blog there. There's also our economic media project-specific website, which is hackwatch.us. We run a weekly substack newsletter called Hackwatch.

01:12:42 Speaker_02
where we write about neoliberal pundits, including a specific list of people we have biographies for on Hackwatch, as well as other folks who are generally involved in arguing for pro-corporate policies using flawed economic analysis, like, you know, we've talked about Madaglacius a lot.

01:13:05 Speaker_02
That's another website to check out. Subscribe to our substack if you're interested. You can find us on Twitter at RevolvingDoorDC. We're also on Blue Sky. I think that mostly covers all the different places we're at.

01:13:18 Speaker_00
Every single platform. You can find all that. I love the research that you're doing. I have that kind of like rogues gallery where people can really look up the

01:13:26 Speaker_00
thinkers and writers that oftentimes dominate the discourse and see where they're coming from, see the research behind that from you all. So Dylan, this has been so great.

01:13:34 Speaker_00
We've been speaking with Dylan Gauch-Lewis, Senior Researcher at the Revolving Door Project, where she leads their Economic Media Project. Dylan, thank you so much again for joining us today on Citations Needed.

01:13:44 Speaker_02
Dylan Gauch-Lewis Absolutely. Thank you for having me.

01:13:53 Speaker_01
Yeah, I think economics is obviously very intimidating to most people. It's very complicated. You've got lots of graphs, lots of big bars, very confusing. You've got your gazintas, you've got your four goes into five, seven goes into eight.

01:14:04 Speaker_01
And I think that it intimidates people, right? It sort of seems like, again, like it is a kind of Latin mass that's very sort of unapproachable.

01:14:11 Speaker_00
Yeah. It's an inaccessible part of how we understand the world and yet it affects every part of our lives.

01:14:18 Speaker_01
And by design as many economists will tell you you know is the critique industry and so when you see like the washington post editorial board kind of stagely tell you haha that's just that's just demagogic poppycock, people kind of accepted and i do think that this is why it's important you have economist who are more interested in these nuances and dynamics of human psychology and political pressure,

01:14:40 Speaker_01
And it's important to sort of counterbalance that. I think in some ways they've done a pretty good job, actually. I think that the media narrative has shifted around this.

01:14:46 Speaker_01
Certainly there's political reason to do so because the Democrats are getting hammered on it.

01:14:50 Speaker_01
But again, the idea that the economy is some kind of law of nature, that it's an earthquake or a volcano for which we can't really do anything about is exactly what I think it's a fundamental premise of neoliberal ideology, that it's this thing that exists and there's not really much we can do about it.

01:15:06 Speaker_01
We can kind of just harness the elephant and ride it. But beyond that, it's out of our control. And I think that it's important to understand that there's other dynamics here.

01:15:14 Speaker_01
And there's obviously tremendous political reason to blame labor and blame poor people for why your grocery bill is so high.

01:15:21 Speaker_00
Right. And to blame, of course, let's not forget federal spending, right? The historic influx of stimulus money, right? Blamed for fatter wallets all around, and therefore more purchasing power in the hands of consumers.

01:15:36 Speaker_00
And therefore, the economy, capital T, capital E, just had to respond. Corporations had no choice but to respond. Of course, this is also the time when corporate media was

01:15:45 Speaker_00
blaming, you know, things like labor shortages and higher transportation costs and supply chain disruptions for higher prices, blaming everything, talking around the always mysteriously missing central piece of what creates prices, which are the corporations themselves.

01:16:06 Speaker_00
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01:16:15 Speaker_00
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01:17:58 Speaker_00
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