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Cake day: August 9th, 2023

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  • But why are the prices of food rising faster than the costs paid by companies (this is inclusive of all costs)? The naive assumption is that if all costs were originally x and prices were 1.1x, then as costs become 1.3x, prices become 1.1*1.3x. However, their profit margins as a percentage rose. So instead of 1.1 we now have 1.4.

    Obviously the numbers used are fake, but this is why people are angry and it’s not something I’ve seen explained using economic principles that don’t involve terms like market consolidation at best or collusion at worst on any article. Rage sells so telling people their groceries cost more because there aren’t enough grocers or the grocers are collaborating is good business for newspapers as long as they can find an expert or group to make the allegations for them.













  • In Florida the issue has little to do with rising sea levels at the moment. There’s a Bad Faith law that makes the insurance companies responsible for the policyholders legal bills if the decision increases the amount of the settlement. There are a lot of lawyers that take cases and only bill if they win, and if they do win they bill a lot. There is also a lot of insurance fraud in Florida, both of which drove up the legal costs to insurers. Catastrophic events are more impactful to insurers in Florida since Florida has passed a law preventing international reinsurers from being used. So when a hurricane hits rather than having the costs borne by a larger number of insurers across the globe, only US insurers will be spending money on the catastrophe. This has pushed many insurers to insolvency.

    In California rate increases could allow insurers to keep up with rising costs. Note that the percent of homes affected by wildfires is only somewhat up over the past roughly 20 years, the real problem is the increase in severity due to rising property values and insurers being unable to raise rates due to Prop 103. Prop 103 allows for public interest groups to have hearings with the DOI and the insurance company to determine if a rate increase of 7% or higher is justified, and the insurance company must pay the legal costs of the public interest group(s). The lawyers who lobbied for this law have set up a public interest group and start hearing whenever an insurer tries to increase rates at 7% or more. Said group tries to drag out the hearings as long as possible, since it’s free money.