This is somewhat tangential to your larger point. But it strikes me in reading your post that the word "shortage" is probably understood differently by laypeople and economists. My lay understanding of how economists use the term "shortage" is something like a temporary mismatch between supply and demand, where supply is below demand (for some reason or reasons). But I would imagine that the majority of the lay public would interpret the term not as something that can work itself out through price changes (or other macro levers?), but rather as something like an underlying physical fact that is not necessarily temporary. It is viewed as an input, rather than an output, such that the question, "if we had more, why wouldn't we just produce/hire/buy more?" is rhetorical. I.e., "There IS no more oil, there ARE no more workers, three IS no more toilet paper--if those things existed, they would be here right now." As opposed to an economist, who would interpret the question "why wouldn't we just produce/hire/buy more" with supply-demand-price explanations. Does that make sense? I guess my point is, to the average person, I think "shortage" means "alarm bells" much more so than it does to an economist. And I guess that is warranted, because the average person is just worried about whether there is toilet paper on the shelves RIGHT NOW, because right now they are in the empty toilet paper aisle and they're out of scrap paper.....
My thought is that employees are reluctant to leave their jobs. Employers could exploit this by reducing wages or not giving out raises in some circumstances to increase their profits, but they don't lower wages because people don't like that. Huge amounts of inflation means a fall in real wages. Employers don't want to increase wages for everyone, so they accept temporary shortages. I'm not sure. It's a guess.
I saw an interesting news piece that was basically a rant from an entitled woman claiming that the worker shortage was bullshit because she had applied to a bunch of jobs with no response. All I could think was that all those places were fortunate they could smell the entitlement wafting off her resume.
The thing with price adjustments is that they happen differently on the wholesale side than on the retail side as there is still more competition on the retail end. Shrinkflation is a good example on how the end user has to be tricked into accepting higher prices to reduce loss of brand loyalty.
Customers are funny on how they view price increases. I had a builder who didn't say a hint of a grumble as his door prices more than doubled in 2021 but threw a fit when I increased install price per door by $50.00.
I will use this in my microeconomics class. I have been trying to emphasise this exact point that the equilibrium point is not what is important, it is the direction of adjustment that matters. I would actually be a bit more forceful in your fourth footnote, in any large market there are always changes going on that require adjustments (some people die, some are born, some input becomes more expensive, some law changes) such that it is very hard to imagine an equilibrium ever existing for any significant amount of time.
This is somewhat tangential to your larger point. But it strikes me in reading your post that the word "shortage" is probably understood differently by laypeople and economists. My lay understanding of how economists use the term "shortage" is something like a temporary mismatch between supply and demand, where supply is below demand (for some reason or reasons). But I would imagine that the majority of the lay public would interpret the term not as something that can work itself out through price changes (or other macro levers?), but rather as something like an underlying physical fact that is not necessarily temporary. It is viewed as an input, rather than an output, such that the question, "if we had more, why wouldn't we just produce/hire/buy more?" is rhetorical. I.e., "There IS no more oil, there ARE no more workers, three IS no more toilet paper--if those things existed, they would be here right now." As opposed to an economist, who would interpret the question "why wouldn't we just produce/hire/buy more" with supply-demand-price explanations. Does that make sense? I guess my point is, to the average person, I think "shortage" means "alarm bells" much more so than it does to an economist. And I guess that is warranted, because the average person is just worried about whether there is toilet paper on the shelves RIGHT NOW, because right now they are in the empty toilet paper aisle and they're out of scrap paper.....
Hi, Doc. :)
My thought is that employees are reluctant to leave their jobs. Employers could exploit this by reducing wages or not giving out raises in some circumstances to increase their profits, but they don't lower wages because people don't like that. Huge amounts of inflation means a fall in real wages. Employers don't want to increase wages for everyone, so they accept temporary shortages. I'm not sure. It's a guess.
I saw an interesting news piece that was basically a rant from an entitled woman claiming that the worker shortage was bullshit because she had applied to a bunch of jobs with no response. All I could think was that all those places were fortunate they could smell the entitlement wafting off her resume.
The thing with price adjustments is that they happen differently on the wholesale side than on the retail side as there is still more competition on the retail end. Shrinkflation is a good example on how the end user has to be tricked into accepting higher prices to reduce loss of brand loyalty.
Customers are funny on how they view price increases. I had a builder who didn't say a hint of a grumble as his door prices more than doubled in 2021 but threw a fit when I increased install price per door by $50.00.
I will use this in my microeconomics class. I have been trying to emphasise this exact point that the equilibrium point is not what is important, it is the direction of adjustment that matters. I would actually be a bit more forceful in your fourth footnote, in any large market there are always changes going on that require adjustments (some people die, some are born, some input becomes more expensive, some law changes) such that it is very hard to imagine an equilibrium ever existing for any significant amount of time.