...No? The expected value is 0 in either case.
.6 * 400 + .4 * (-600) = 0
.9 * 100 + .1 * (-900) = 0
The ability to slice a given risk-return profile into different pieces, or different amounts of leverage, is called "finance". But Mr. Behemoth in this case has the same expected return as everyone else, so the example has nothing to do with "control of supply and demand."
> For example, it might be assumed that if supply shrinks, that prices will increase, which will reduce demand because fewer people can afford it, which will lead to a rebound in supply - which means prices will drop again. This seems intuitively correct.
About here would do it.
Economics terminology is important because it gives us a shared foundation for science and discussion.
So when people discuss economics but act like they have explored a novel concept that is economics 101, it tends to get mentioned.
> There’s another possibility, however. Imagine that there is a demand for a specific luxury good - say, ivory from elephant tusks.
to be followed with something like "but as it happens, in some cases like luxury goods, demand can actually increase as prices increase! This is called a Veblen Good, isn't that interesting!"
The author instead makes a different point: the 'supply' of elephant ivory can increase despite the underlying rarity of the natural resource, because rising prices create more willingness to poach, and market prices are about how much you have to pay the poacher, not the elephant. This isn't necessarily self-balancing because eventually you do run out of elephants entirely.
This doesn't really strike me as a comment about price elasticity per se.
Inelastic items are:
- things that are dirt cheap, so nobody cares how much they exactly cost, like 5 cents versus 10 cents for a candy.
- things that people desperately need, and for which there is no alternative, so they fork up the money when the price is jacked up.
Poachers cannot do anything that will keep the demand the same while prices go up due to low supply due to ivory not being an inelastic good.
The desire to extrapolate economic interpretations from toy examples is unending. See also the two-people-with-cows-on-an-island example that gets paraded around and has never existed except in the heads of the terminally marginal-pilled crowd.
He lost his seat a few weeks ago in a provncial election where the party was reduced from three seats to one.
This doesn't rationally follow at all.
The rareness (low supply) of a good is the net sum of how hard it is to obtain, due to all the possible reasons for that.
More poachers may enter the market, but with fewer elephants left alive, they cannot find elephants so easily, which means it takes more time and effort: the MTBE (mean time between elephant) goes up, making the hunt more costly. They may have to engage in increasingly hostile and violent turf wars with other poachers.
More poachers entering the market will not prevent a reduction in demand; it isn't something "instead of reducing demand".
If the market maintains the same level of interest in the good, the demand curve stays the same, and the only thing that changes demand is the current price point, which determines where on the demand curve the market is.
The author of the article doesn't seem to understand the difference between a reduced demand due to a movement of price along the same demand curve and actually reduced demand, whereby the market is less interested in the good, and buys less of it at every price point.
Can we get some examples of this? (not implying otherwise)
Edit: Another example was the collusion between Canada's bread makers[3].
[1] https://arstechnica.com/tech-policy/2021/05/amazon-sued-over...
[2] https://9to5mac.com/2022/11/09/apple-amazon-lawsuit-price-fi...
[3] https://financialpost.com/news/retail-marketing/why-the-hell...
From the bread pricing scandal, the amount of coordination that was going on between supposed competitors is crazy. The fact that it took "a decade and a half" to prosecute the case means that much more subtle collusion is probably very common.
> “Retail customers would call threatening to reject a price increase if another retailer was offside in terms of pricing alignment.”
> The coordination was particularly tough between discounters including Walmart, Giant Tiger, Loblaw’s No Frills, Sobeys’ FreshCo and Metro’s Food Basics, the document says.
> “None of them wanted to be the first to implement the price increase …There was always a negotiation process going back and forth between the four retailers where the supplier was trying to coordinate it, because somebody had to be the first to move.”
> According to redacted witnesses cited in the documents, the individual retailers involved were all in favour of taking price increases, and full-price grocers such as Loblaw tended to hike prices first, followed by discounters such as Walmart.
https://arstechnica.com/tech-policy/2023/11/14-big-landlords...
However, the mental gymnastics the author performs to reach these conclusions is impressive on its own right. "You are not buying an apple, but the property rights to an apple" is just the sort of non-parody content I have come to expect from Substack writers at this point.
If you are actually interested in how supply and demand work in non-monetary markets (like the POW camp example), I cannot recommend enough "Who Gets What and Why" by Alvin Roth, the father of Kidney exchange programs.
All of this stems from the idea that independent actors will create an "efficient" market to reach a price equilibrium in the most Econ 101 way possible with an awful lot of hand waving. This ignores the desire and ability for actors to put their thumbs on the scales.
Markets exist to extract wealth from participants to support the current economic order. This is done through lobbying, rent-seeking, putting up barriers (or enclosures if you prefer), restricting competition, using market power to crush competitors and reaching a monopoly or oligopoly to maximize wealth extraction.
It is part of the Supply & Demand model. Governments and other factors add friction which impact the elasticity of supply and demand curve.
Modern Capitalist societies are not pure, governments can drive friction through regulations, fees, taxes, codes, and a million other factors.
