While I agree quite strongly with your views on price inflation as a result of the Fed's money printing (and as an EJP daily subscriber, I've got to commend your terrific work and suggestions therein!), this rise in the metrocard prices has been in the works for QUITE some time, months and months, and is a result of the absurd budget imbalances at the MTA. I wouldn't personally view this as an example of price inflation (resulting from actual inflation) so much as the result of the existence of government, which would have occurred regardless of current monetary policy.
Brilliant "it's different this time" analysis, Danger Pioneer, except for the fact that prices cannot durably rise unless more money is being created (or made available) to pay them.
Um ... I wasn't saying "its different this time" I live in NYC, this has been going on for over 2 years. The MTA has a tremendously huge budget gap and the proposed way to close that gap has been a combination of taxing the east river bridges and raising metrocard prices. Taxing the east river bridges failed, as the public outcry was too great. So they opted to raise metrocard prices.
As the MTA has a monopoly over subway transport, they can set prices to whatever they want. Its quite possible and indeed likely people will stop buying monthly, unlimited metrocards, but as this price increase is JUST going into effect, no one knows the exact impact it will have on sales.
So, while pricing in a free(er) competitive model cannot rise durably unless there is more money created (or a big increase in demand), prices in a monopolistic model CAN rise at the monopolists whim. Of course, that doesn't mean people will buy the services at that price, but there is NOTHING stopping a monopolist from setting a price at whatever it likes, at least initially
While I agree quite strongly with your views on price inflation as a result of the Fed's money printing (and as an EJP daily subscriber, I've got to commend your terrific work and suggestions therein!), this rise in the metrocard prices has been in the works for QUITE some time, months and months, and is a result of the absurd budget imbalances at the MTA. I wouldn't personally view this as an example of price inflation (resulting from actual inflation) so much as the result of the existence of government, which would have occurred regardless of current monetary policy.
ReplyDeleteBrilliant "it's different this time" analysis, Danger Pioneer, except for the fact that prices cannot durably rise unless more money is being created (or made available) to pay them.
ReplyDeleteUm ... I wasn't saying "its different this time" I live in NYC, this has been going on for over 2 years. The MTA has a tremendously huge budget gap and the proposed way to close that gap has been a combination of taxing the east river bridges and raising metrocard prices. Taxing the east river bridges failed, as the public outcry was too great. So they opted to raise metrocard prices.
ReplyDeleteAs the MTA has a monopoly over subway transport, they can set prices to whatever they want. Its quite possible and indeed likely people will stop buying monthly, unlimited metrocards, but as this price increase is JUST going into effect, no one knows the exact impact it will have on sales.
So, while pricing in a free(er) competitive model cannot rise durably unless there is more money created (or a big increase in demand), prices in a monopolistic model CAN rise at the monopolists whim. Of course, that doesn't mean people will buy the services at that price, but there is NOTHING stopping a monopolist from setting a price at whatever it likes, at least initially