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Economics

Stop Pretending Price Inflation Is a Result of “Too Much” Profit

Some commentators attribute the latest sharp increase in the Consumer Price Index to businesses pushing prices of goods higher in order to secure higher profits. (See the New York Times article “Democrats Blast Corporate Profits as Inflation Surges,” Janu

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Some commentators attribute the latest sharp increase in the Consumer Price Index to businesses pushing prices of goods higher in order to secure higher profits. (See the New York Times article “Democrats Blast Corporate Profits as Inflation Surges,” January 3, 2022). Note that the yearly growth rate of the Consumer Price Index jumped to 6.8 percent in November 2021 from 1.2 percent the year before. However, is it true that businesses are determining the prices of goods and services?

How Prices Are Established

As a rule, a supplier sets the price. After all it is the supplier who offers the goods to the buyers. So it is the supplier who must set the price of a good before he presents the good to the buyers.

In order to secure the price that will improve his lot, the price that the supplier sets must cover his direct and indirect costs and provide a margin for profit. By setting the price, the supplier must make as good an estimate as possible regarding whether he will be able to sell his entire supply at the price set.

The process of making the estimate involves the assessment of the possible responses of the buyers and the possible responses of his competitors—other suppliers. If his estimates are accurate, then he makes a profit. By making a profit, the supplier expands his pool of resources, which in turn enables him to attain more ends. His standard of living improves.

Observe that while the cost of production in some cases would appear to be the main factor in price determination, this is not so. Ultimately, it is the evaluation of the buyer that dictates whether the price set by the supplier is going to be realized. Every buyer decides in his own context whether the price paid for a good betters his life and well-being.

If the cost of production were the driving factor behind setting market prices, then how can we explain the prices of goods that have no cost because they are not produced—goods that are simply there, like undeveloped land?

Likewise, the cost-of-production theory cannot explain the reason for the high prices of famous paintings.

According to Rothbard, "Similarly, immaterial consumer services such as the prices of entertainment, concerts, physicians, domestic servants, etc., can scarcely be accounted for by costs embodied in a product."1

It follows then that businesses striving to make profits cannot cause increases in the prices of goods and services without the consent of consumers.

Defining Price

The price of a thing is the amount of money paid for the thing; for example, the number of dollars per loaf of bread or the number of dollars per shirt. The key driving factors here are the amount of dollars and the quantity of goods.

Now, with all other things being equal, an increase in the amount of money paid for goods and services implies that the price of these goods and services is going to be higher. More money is now paid for these goods and services.

In the absence of an increase in the amount of money there cannot be a general increase in prices. If a business raises the price of its goods and consumers have agreed to this increase then consumers are going to have less money to spend on other goods, all other things being equal. Hence, we will have here a specific price increase but not a general increase in prices.

Inflation Is All about Increases in Money Supply

By popular thinking, it is the role of the central bank to guide the economy onto the path of economic and price stability.

If central bank officials anticipate that the economy will fall below the path of economic and price stability, then officials are expected to prevent this decline through monetary pumping. Conversely, if officials are of the view that the economy is likely to shoot above the stable path, then they are likely to prevent this by reducing the monetary pumping.

In response to covid-19 and in particular the lockdowns and other restrictions, central bank officials expected severe damage to the economy. The economy was expected to fall strongly below the path of stability. In this case, strong monetary pumping was considered as a welcome move. The strong monetary pumping is believed to have brought the economy onto the stable path.

But monetary pumping cannot generate economic stability. The pumping sets in motion an exchange of nothing for something, or the diversion of wealth from wealth generators to the early recipients of the newly pumped money. This undermines the process of wealth generation and weakens the prospects for economic growth.

As a rule, because of the monetary pumping, individuals are going to have more money in their pockets, which they are likely to dispose of by buying goods and services. This means a greater amount of money is going to be spent on various goods and services. This means that the prices of goods and services are going to increase, all other things being equal.

Given the massive increase in the monetary pumping, the yearly growth rate of the US money supply jumped to 79 percent in February 2021 from 6.5 percent in February 2020, according to the True Money Supply metric—an average increase of 43 percent. Allowing for the time lag between changes in money supply and changes in prices, it is not surprising that the momentum of the Consumer Price Index displays massive increase.

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Hence, the culprit here is the alleged defender of the economy—the central bank itself. Curiously, very few commentators are mentioning the role of the central bank in fueling general increases in the prices of goods and services. Note that the massive increase in the growth rate of money supply, coupled with lockdowns and various other restrictions, has intensified the upward pressure on the prices of goods and services. The combination of not enough savings allocated toward the expansion and the enhancement of the production structure and a strong demand for various goods and services due to the massive increase in money supply has resulted in shortages. After a time lag, prices are therefore likely to increase further to eliminate the shortages that have emerged.

Could Price Controls Resolve the Issue of General Price Increases?

Some commentators are of the view that the government should introduce price controls in order to prevent further increases in the prices of some key consumer goods. A policy of restricting price adjustments due to the monetary pumping is going to weaken various marginal producers. Consequently, these producers are likely to move to activities which are not subject to government price controls.

As a result, the supply of some key consumer goods will come further under pressure. So rather than benefiting consumers, such a government policy would hurt consumers’ well-being. Hence, a policy of price controls is likely to increase shortages and stifle the production of goods and services. In fact, this could ultimately lead to the imposition of the price controls on a large variety of economic activities, which in turn is likely to result in the economic system that resembles the former Soviet Union.2

  • 1. Murray N. Rothbard, "The Celebrated Adam Smith," in Economic Thought before Adam Smith, vol. 1 of An Austrian Perspective on the History of Economic Thought (Auburn, AL: Ludwig von Mises Institute, 2006), pp. 433–74, esp. p. 452.
  • 2. Ludwig von Mises, "How Price Controls Lead to Socialism," Mises Wire, Jan. 14, 2016.

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Economics

New Research Shows Declining Confidence in the Education Profession, With Educators Calling for Connection, Community and Customization

New Research Shows Declining Confidence in the Education Profession, With Educators Calling for Connection, Community and Customization
PR Newswire
BOSTON, Aug. 18, 2022

Critical insights reveal how edtech is transforming the classroom; 81% of educ…

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New Research Shows Declining Confidence in the Education Profession, With Educators Calling for Connection, Community and Customization

PR Newswire

Critical insights reveal how edtech is transforming the classroom; 81% of educators say we are now closer to fully realizing the potential of technology in teaching

BOSTON, Aug. 18, 2022 /PRNewswire/ -- According to the 2022 Educator Confidence Report, released today from learning technology company HMH, confidence in the education profession has dropped for the second year in a row. An annual barometer for how educators across the country are feeling about the state of teaching and learning, today's report found more than 3 in 4 (76%) educators feel negatively about the state of the teaching profession in the U.S. The Educator Confidence Index, a measure of overall confidence (out of 100), continues to drop and now sits at 40.0—its lowest in the report's history—down from 42.7 in 2021 and 49.0 in 2020.

According to HMH's research, which surveyed more than 1,000 K-12 classroom teachers and 125+ administrators, educator retention hinges on immediate needs more than long-term developments, including improved salary and benefits, support for educator well-being and adequate funding for the classroom. Conducted between May and June in partnership with MarketCast, the report revealed three major themes for achieving success in the future:  Connection, Community and Customization.

Connection: A Digital-First Era

When it comes to technology, educators see strong connections between the teacher, student, classroom and home as the top priority. Seventy-three percent of educators report feeling technology is significantly more integrated into the classroom now than pre-pandemic, with tools to communicate between teachers and parents (63%) and tools that deliver interactive learning opportunities to students (57%) most favored among teachers. Even more, 68% of educators said edtech has become essential to the classroom.

Importantly, survey results showed that educators realize the potential in classroom technology and can visualize how it fits into their workflow. 81% report the experiences of the last two years have moved education closer to fully realizing the potential of technology in teaching. Educators are most excited about easy-to-use technology that can be used in-classroom and remotely (63%).

"We believe that the future of learning will be powered to a meaningful degree by technology yet centered on human connection, and this year's survey data gives us clear insight into how to realize that vision," said Jack Lynch, CEO of Houghton Mifflin Harcourt. "Educators are telling us that today's status quo isn't cutting it, but they also see a path to the future. Importantly, that path relies on addressing basic needs like wellbeing and mental health concerns, both for teachers and students, supported by connected technology that allows educators and focus on what matters most, human relationships."

Community: A Need for Broad Support

Educators report needing more consideration for their overall wellbeing now, with 78% of educators stating that their top concern is the mental health of their peers. The majority also need more aid in the classroom, with 64% saying they need adequate funding for classroom supplies and resources.  According to today's educators, improved salary and benefits (90%) and more support for educator well-being (67%) would make the profession more appealing to new educators.

"On top of concerns around student wellness and performance, educators are increasingly worried about their peers," said Francie Alexander, Chief Research Officer at Houghton Mifflin Harcourt. "To nurture their needs, we must invest in tools to help our educators make the connections with their networks in ways that best serve them. Parents, administrators, policymakers and community members are all needed to support teachers and foster a new generation of educators."

Customization: Personalization for Students and Educators

Data shows that educators believe the future of the classroom is personalized—for both students and teachers, with data-driven, personalized edtech solutions making it possible to meet everyone where they are. 79% of educators say customized learning based on what students know and what they need would most transform learning and teaching in the future.

With pandemic-induced interrupted learning continuing to stay top of mind in the classroom, educators said the top tools to aid sustained learning recovery were targeted instructional materials or resources (62%), followed by supplemental resources (55%). When looking ahead, 65% of educators say technology solutions that connect instruction—including supplemental and remediation work—and assessment on one platform are will transform the next era of education.

Additional key findings from the eighth annual Educator Confidence Report include:

  • Community support for teacher compensation is key for not only retention, but for the future of the profession. Concerns about teacher salaries are up 16% since 2020, and when looking forward to the next school year, a higher salary would be most motivating for educators, especially teachers (84%).
  • Teachers are looking for more appreciation, respect and "trust in their experience." When considering long-term developments to support the profession, educators want increased community support and engagement (52%) – as respect for the role of the teacher is down 26% since 2020 and a strengthening of the connection between families and schools has dipped 18% since 2020.
  • Educator and student wellbeing emerges as a top theme coming out of the pandemic. 61% of educators agree the most positive thing to come out of pandemic-era schooling is the increased attention paid to student social and emotional needs. For this reason, there is a strong agreement around the need for well-planned SEL programs (87%).

About the Educator Confidence Report
The Educator Confidence Report is an annual independent study, distributed to a diverse national cross section. The eighth annual Educator Confidence Report, underwritten by Houghton Mifflin Harcourt and conducted between May-June 2022 with MarketCast, surveyed more than 1,200 educators, including 1,058 teachers and 143 administrators.

Learn more about the 2022 Educator Confidence Report at hmhco.com/ecr.

About HMH
Houghton Mifflin Harcourt is a learning technology company committed to delivering connected solutions that engage learners, empower educators and improve student outcomes. As a leading provider of K–12 core curriculum, supplemental and intervention solutions, and professional learning services, HMH partners with educators and school districts to uncover solutions that unlock students' potential and extend teachers' capabilities. HMH serves more than 50 million students and 4 million educators in 150 countries. For more information, visit www.hmhco.com

Follow HMH on TwitterFacebook, Instagram and YouTube.

Media Contact
Katie Marshall
Communications Manager, HMH
Katie.Marshall@hmhco.com 

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SOURCE Houghton Mifflin Harcourt

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Economics

Bank of America Awards More Than $1.2 Million to Atlanta Nonprofits

Bank of America Awards More Than $1.2 Million to Atlanta Nonprofits
PR Newswire
ATLANTA, Aug. 18, 2022

Grants to 53 organizations across region focus on basic needs, workforce development, and education in disadvantaged and vulnerable communities
A…

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Bank of America Awards More Than $1.2 Million to Atlanta Nonprofits

PR Newswire

Grants to 53 organizations across region focus on basic needs, workforce development, and education in disadvantaged and vulnerable communities

ATLANTA, Aug. 18, 2022 /PRNewswire/ -- Bank of America announced more than $1.2 million in grants to 53 Atlanta nonprofits to help drive economic opportunity for individuals and families. Grants focus on workforce development and education to help individuals chart a path to employment and better economic futures, as well as basic needs fundamental to building life-long stability.

While Atlanta's economy is recovering from the height of the COVID-19 pandemic, and Georgia's unemployment rate (2.9%) is better than the national average (3.6%), the state has also added more jobs. According to the Georgia Department of Labor, the state's jobs are at all-time high.

Employment is a key driver of economic mobility in Atlanta. That's why the bank is focused on building pathways to employment by supporting a range of workforce development and educational opportunities that will help vulnerable individuals and families stabilize and advance.

"Investing in partnerships with nonprofit organizations addressing issues like workforce development, food insecurity and affordable housing is part of our approach to driving economic opportunity and social progress in Atlanta," said Al McRae, president, Bank of America Atlanta. "This recent philanthropic investment in Atlanta nonprofits is just one way Bank of America deploys capital locally to help remove barriers to economic success and build a more sustainable community."

One Bank of America grant recipient is Georgia Justice Project (GJP). For 15 years, GJP has helped individuals clean up their criminal history to remove barriers to employment, housing and education. With this support from Bank of America, GJP will be able to help people leaving the criminal justice system become empowered members of our community.

"One mistake should not mean a lifetime without opportunity," said Georgia Justice Project's Executive Director, Doug Ammar. "This support from Bank of America will help Georgia Justice Project expand its commitment to Georgians who have been impacted by the criminal legal system and help marginalized people get a second chance. Our gratitude to Bank of America for furthering our mission to reduce crime and recidivism in our communities by empowering individuals to make positive changes in their lives."

The full list of organizations receiving grants are:

  • Asian American Resource Foundation
  • Atlanta Business League
  • Atlanta Center for Self Sufficiency
  • Atlanta Police Foundation
  • Atlanta Victim Assistance
  • Atlanta Volunteer Lawyers Foundation
  • Back on My Feet
  • Bigger Vision of Athens
  • Catholic Charities of the Archdiocese Atlanta
  • CHRIS 180
  • City of Refuge
  • Clark Atlanta University
  • Communities in Schools of Atlanta
  • Cristo Rey Atlanta Jesuit High School
  • Dalton State College Foundation
  • East Lake Foundation
  • Families First
  • Family Promise of Hall County
  • Food Bank of Northeast Georgia
  • Genesis Joy House Homeless Shelter
  • Georgia Justice Project
  • Georgia Mountain Food Bank
  • Grady Health System
  • Grove Park Foundation
  • Jonathan's House Ministries
  • Junior Achievement of Georgia
  • La Amistad
  • Latin American Association
  • Local Initiatives Support Corporation
  • Meals on Wheels Atlanta
  • Must Ministries
  • Nana Grants
  • Open Hand Atlanta
  • Partnership Against Domestic Violence
  • Per Scholas
  • Saint Joseph's Mercy Care Services
  • Shelters to Shutters
  • Strive International
  • Teach for America
  • The Posse Foundation
  • The Summit Counseling Center
  • The Urban League of Greater Atlanta
  • Trees Atlanta
  • United Negro College Fund
  • United Way of Greater Atlanta
  • University of Georgia Research Foundation
  • Urban League of Greater Columbus
  • Urban Health and Wellness
  • Women in Technology
  • Women Moving On
  • Year Up
  • Young Men's Christian Association of Athens, GA
    - Young Women's Christian Organization of Athens, GA

Since 2017, Bank of America's nearly 5,000 Atlanta teammates have contributed over 255,000 volunteer hours and $30 million in grant support to organizations in metro Atlanta. These investments are part of the company's commitment to responsible growth to improve the financial lives of individuals, families, and communities across the state.

Learn more about Bank of America's Philanthropic Strategy

Bank of America

Bank of America is one of the world's leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 67 million consumer and small business clients with approximately 4,000 retail financial centers, approximately 16,000 ATMs and award-winning digital banking with approximately 55 million verified digital users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business households through a suite of innovative, easy-to-use online products and services. The company serves clients through operations across the United States, its territories and approximately 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.

Reporters may contact:

Matthew Daily, Bank of America   
Phone: 1.404.607.2844
matthew.daily@bofa.com

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SOURCE Bank of America Corporation

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Economics

OUT OF HOME ADVERTISING REVENUES IN Q2 2022 HIT $2.62 BILLION, ON PAR WITH PRE-PANDEMIC RECORD-HIGHS OF 2019

OUT OF HOME ADVERTISING REVENUES IN Q2 2022 HIT $2.62 BILLION, ON PAR WITH PRE-PANDEMIC RECORD-HIGHS OF 2019
PR Newswire
WASHINGTON, Aug. 18, 2022

OAAA OOH Ad Revenue Report Also Shows Q2 2022 Up 28.9% YOY
WASHINGTON, Aug. 18, 2022 /PRNewswire/ — …

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OUT OF HOME ADVERTISING REVENUES IN Q2 2022 HIT $2.62 BILLION, ON PAR WITH PRE-PANDEMIC RECORD-HIGHS OF 2019

PR Newswire

OAAA OOH Ad Revenue Report Also Shows Q2 2022 Up 28.9% YOY

WASHINGTON, Aug. 18, 2022 /PRNewswire/ -- Out of home (OOH) advertising revenue increased 28.9 percent in the second quarter of 2022 compared to the previous year, accounting for $2.62 billion, based on figures released by the Out of Home Advertising Association of America (OAAA). These Q2 revenues are roughly equivalent to pre-pandemic highs, when Q2 2019 OOH revenues totaled a record-breaking $2.69 billion. Year-to-date through June, OOH revenue is now at $4.43 billion, and up 33.4 percent compared to the same period in 2021 – in line with the first half of 2019, at $4.47 billion.

The digital OOH format led total OOH growth with a 37 percent increase over second quarter 2021. The Billboard and Street Furniture categories increased double digits, while the Transit and Place-Based categories rose triple digits reflecting a strong pandemic recovery.  

"This is a watershed moment – with OOH revenues nearly matching historic, pre-pandemic highs," said Anna Bager, President and CEO, OAAA. "I am confident that these gains will continue. Recent Comscore research found that OOH delivers tremendous value in comparison to other channels, so we are in a good position to continue this momentum, despite any economic headwinds."

Eight of the top ten product industry categories increased double digits led by Public Transportation, Hotels and Resorts industry category at a 56.5 percent jump, which reflects recent reporting of increased consumer spending on services. The next four best performing industry categories all increased more than 30 percent, and included Financial, Media & Advertising, Government Politics and Organizations, and Schools Camps and Seminars.

Specific segments which were top revenue performers within the product industry categories, ranked by total OOH ad spend, included):

  • Hospitals, Clinics & Medical Centers +13%
  • Legal Services +18%
  • Quick Serve Restaurants +20%
  • Consumer Banking +36%
  • Domestic Hotels & Resorts +35%
  • Local Government +20%
  • Colleges & Universities +29%
  • Real Estate Agents, Agencies & Brokers +39%
  • Computer Software (excluding games & education) +321%
  • Food Stores & Supermarkets (chain) +13%

Ranked in order of OOH spending, the top 10 advertisers in the second quarter were McDonald's, Apple, Geico, Universal Pictures, Anheuser-Busch, American Express, Amazon, HBO, Dunkin, and T-Mobile.

Almost four in five (78%) of the top 100 OOH advertisers increased their OOH spend from Q2 2021, and over a quarter (27%) more than doubled their spend. Advertisers on this list who did not spend in Q2 2021 included: Capital One, Expedia, IHG, Canada, and Thirty Madison.

Over 20 percent (22) of the top 100 OOH spenders were technology or direct-to-consumer brands, eight were quick service restaurants brands, and seven were healthcare related (providers or insurers).

OAAA issues full industry pro forma revenue estimates that include, but are not limited to, Miller Kaplan and Kantar Media (which is not adjusted to reflect changes in data sources), and member company affidavits. Revenue estimates include digital and static billboard, street furniture, transit, place-based, and cinema advertising.

For detailed charts, go to https://bit.ly/3wbSlV7 and https://bit.ly/3ppb4ZB.

About the OAAA
The Out of Home Advertising Association of America (OAAA) is the national trade association for the $8.6 billion U.S. out of home advertising (OOH) industry, which includes digital out of home (DOOH), and is comprised of billboards, street furniture, transit advertising, and place-based media (including cinema).

OAAA is comprised of 800+ member media companies, advertisers, agencies, ad-tech providers, and suppliers that represent over 90 percent of the industry. OAAA is a unified voice, an authoritative thought leader, and a passionate advocate that protects, unites, and advances OOH advertising in the United States.

OAAA-member media companies donate over $500 million in public service advertising annually. Every year, the industry celebrates and rewards OOH creativity via its renowned OBIE Awards (obieawards.org). For more information, please visit oaaa.org.

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SOURCE Out of Home Advertising Association of America

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