Given today's extensive price making activity - particularly in non tradable sectors - why aren't there more problems for inflation, broadly speaking? While price making (in contrast with the resource coordination of price taking) could theoretically still contribute to aggregate inflation, for the most part this potential occurrence has been internally controlled, by both supply side participants and policy makers for quite some time.
Recall that inflation is one possible result, when reciprocity for given sets of time based activities is deferred to uncertain points in the future. Granted, fiscal activity was once notorious for high inflation outcomes. But more recently, despite a high degree of fiscal dependence, non tradable sectors have become more likely to take aggregate redistribution capacity into account at the outset. Imagine for instance, how many members of a conservative healthcare administration might adamantly oppose general inflation, which of course translates into "keeping a lid" on supply side demand as well. Alas, a supply side increase in this instance could either lead to external (general) inflation, if not the relative price taking of diluted wage capacity.
On the other hand, tradable sector supply side limits occur for reasons which aren't closely related to ongoing efforts to suppress inflation. Even though families may face discretionary income limits for tradable sector product, these processes lack the stigma associated with government budgetary limits. Likewise, tradable sector activity responds more to stimulus efforts, since much of this production is easier to ramp up or down as needed. Meanwhile, a growing reluctance to ramp up non tradable sector activity, currently translates into a low growth environment, despite our historical time frame of services dominance.
Despite the recent decades of low inflation environments, there's plenty of reflexive reaction regarding potential inflation, even though actual inflation has scarcely been problematic for advanced nations since the Great Inflation. Yet during the sixties and seventies, monetary policy struggled with various levels of structural fallout, as non tradable sector dominance began to supplant a longstanding dominance of tradable sector activity. In this not so distant past, price making contributed not only to the internal inflation dynamics of newly dominant non tradable sector activity, but also the external inflation of nations, albeit in retrospect for a relatively brief moment in time. Still, plenty of multi sector jostling for space ensued, before central bankers determined the necessity of imposing limits.
Towards the end of the twentieth century, what had been a long held consensus of globally coordinated price taking, started to suffer the effects of locally derived price making patterns and their demands on disposable income. And once overall resource utilization became less capable of spontaneous coordination, capitalism was also increasingly called into question. Not only did sectoral shifts reduce production potential, but also the market capacity which knowledge and skill could otherwise contribute in a 21st century economy. Too many people were needlessly being left on the sidelines. In spite of what were often extensive investments in human capital, many workplaces were unable to capture more than a fraction of the potential their employees were actually capable of.
Since the desire to maintain low inflation levels still runs strong, this will continue to affect what the existing supply side for time based services can realistically provide. One important aspect of this development is the likelihood of minimal healthcare supply side response for retiring Baby Boomers, in the years to come. Any substantial expansion on current price making terms, would only add to fiscal burdens which are already quickly multiplying for other reasons.
To sum up, recent decades of the growing practice of price making, hasn't significantly contributed to general equilibrium inflation. There's an understandable preference to suppress aggregate demand in (general equilibrium dependent) secondary service markets, to prevent this occurrence. Again, the current structure of healthcare in the U.S. also puts additional pressure on the Fed, for it is compelled to acknowledge numerous constituents which are unwilling to face additional inflation.
Paradoxically, even as populations seek more time and knowledge centric services in the near future, they recoil at the additional inflation potential of this price making structure. Yet the time value of services generation, still deserves a valid price taking context. We need new forms of organizational capacity which allow resources to be reciprocated at the outset. Immediate reciprocity for time based services would generate wealth on terms that not only contribute to greater productivity, but also provide a real economy gain that safely generates monetary expansion without undue inflation.