Monday's Wall Street Journal contained a front page headline regarding global commodity inflation. This evidently spurred CNBC to do some in-depth contrarian segments alleging that commodity inflation won't really be all that bad.
Tasked with this effort was the network's under-equipped economic's report Steve Liesman. Using a single commodity, wheat, and a single product, bread, the hapless reporter attempted to track the effects on bread prices for a given increase in wheat prices. Further, he confided that he'd checked with a Harvard economist who told him that component cost increases were more likely to be passed along in highly competitive product markets.
Funny thing was, nowhere did the economically untrained Liesman utter the words inelastic or elastic. As in demand.
Most economists would differentiate the inflationary impacts of component costs according to the demand elasticity of the good. Goods with highly inelastic demands will tend to accommodate price increases without offsetting declines in volume, while goods with elastic demands will not.
But, of course, Liesman, not having an economics background, didn't bother with the fundamental analyses taught in basic economics courses.
What occurred to me was to ask questions like:
-Which commodities are components of food products with what shares of dollar volume of US food spending?
-Which of those products tend to have inelastic demands? Elastic demands?
-What would this mix of inflating commodities' share of consumer food spending by products, and the relevant demand elasticities, suggest for the average food price inflation that US consumers may expect in the year ahead?
None of that was forthcoming from Liesman. Just a pithy little example of wheat and bread costs, without a word concerning demand elasticities. Yet another reason to only listen for news on CNBC, and skip the network's home-grown economic 'analysis.'
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment