I hate this argument. It is economic dogma ... and it's bullshit. Why? Bread in Jerusalem: the law of demand and supply doesn't exist for the vast majority of goods.

Jerusalem is a city like any other. Everybody has food. You can buy bread there. And while the city has big problems, not many people are starving (not quite zero, but which city can say that). Economic theory dictates that bread would follow the law of supply and demand. Is that so?

Let's say the price of bread halves. Will tomorrow see more bread sales in Jerusalem? Here's the critical piece of evidence: NO, it won't. It won't even shift from one kind to a fancier kind of bread. Let's say the price doubles. Same thing. We're in a ZERO price elasticity regime. Sure there are prices where supply and demand would work, but we're far away from those prices. But it gets worse.

Let's look at supply. Bread is incredibly cheap to make. There is at least a 80% or so margin on bread (it's quite expensive, or profitable on the other side, if you look at it from a COGS perspective). Let's say the price of bread doubles (you could argue it has, many times even). Will more bread be produced in Jerusalem? NO. Again there are prices where we'd see supply tightly tied to prices, but we're very far away from those prices.

BOTH on the supply and demand side we see ZERO price elasticity. If you look up in your economics book you will not find this situation, and even in academia people aren't exactly comfortable discussing it. Price elasticity is ZERO for bread, both on the demand and the supply side, if you belong to the economists that at least split that up.

So what makes the difference? You can make a good living selling bread, but you can't attract customers using prices ... nor can you change your profits much by playing with prices (in fact the very act of trying out prices will lose you a lot of customers). So something else needs to make a difference. What determines which bread you buy? Google does (and Facebook, and ...)

And this applies not just to bread. This applies to the vast majority of foods. One of the big complaints in European countries these days is that entire economies are running headfirst into this problem. Even labour! People can't change jobs (supply of labor is regulated by employer demands, or outright regulated with laws) and employers can't change the pool of labor by much by raising wages. Unless you're exceptional or outside of the norm (yes, programmers are, so this is the wrong forum to make that particular argument), you cannot change your income much by providing more labor! Given "no skills" labor even the difference between working and not working ... is not very large and dropping.

This, obviously, enables FANG companies to extract the profits of normal businesses. They can choose who gets the profits of many products, and demand a growing share of the profits ...