Economics: Economic illiteracy from our elite

Wow – she has zero understanding of economics. Zero.

Lindsay Owens on X: “@Groundwork @KatieJWells @ConsumerReports @MorePerfectUS @bencasselman @nytimes Companies no longer price according to how much it cost THEM to make something. Instead, they price based on what YOU are willing to pay. An army of pricing advisers–a cross between the Geek Squad & Seal Team Six–is helping them to execute these high-tech pricing experiments. 6/9” / X

She has a Ph.D. in Sociology, and was an economic policy advisor to Sen. Elizabeth Warren – yet she is an economic illiterate who does not understand the basics of microeconomics.

Prices are determined by what the market will bear – this is known as the market clearing price.

Costs are determined by the market price. If you can’t make your widget at a cost that can sell at the market clearing price, your business fails. This is economics 101.

⚖️ How Markets Actually Set Prices

• Market clearing price:
  In competitive markets, the price is determined where supply equals demand. This is the equilibrium price—the point at which buyers are willing to purchase the quantity sellers are willing to supply.
• Costs are constraints, not determinants:
  A company’s costs don’t dictate the market price. Instead, firms must align their cost structures so they can profitably sell at the prevailing market price. If they can’t, they exit the market.
• Price signals:
  Prices communicate scarcity and value. Rising prices signal strong demand or limited supply; falling prices signal oversupply or weak demand.

💼 Why Companies Blame “Rising Costs”

• Narrative framing: Firms often justify price hikes by citing higher input costs (labor, raw materials, energy). This is partly PR—customers are more accepting of increases framed as “out of our control.”
• Cost-push inflation: While costs don’t set the market price, they can shift the supply curve. If costs rise, fewer firms can profitably supply at lower prices, nudging equilibrium upward.
• Strategic cover: In oligopolistic or concentrated industries, “rising costs” can serve as a coordinated excuse for price hikes, even when demand-side dynamics are the real driver.

Housing: Market clearing prices (set by demand and supply constraints) often far exceed construction costs. Builders must adapt costs to fit what buyers can afford, not the other way around.

Healthcare: Providers cite “rising costs” to justify higher prices, but the real determinant is market power and demand inelasticity.

Generational shifts: Younger consumers face markets where symbolic assets (housing, education, healthcare) are priced at clearing levels far above historical cost benchmarks, forcing lifestyle adaptation.

Prices are set by markets. Companies that can’t align costs with the clearing price fail. Those that can, thrive. The “rising costs” narrative is more about legitimizing price changes than explaining them.