Let Us Not Eat Cake An Especially Tasty Example of Hidden Inflation

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I
wonder if the statistical geniuses at the U.S. Bureau of Labor Statistics
include “anti-improvements” in their inflation calculations. Their
penchant for “hedonic pricing” – adjusting inflation figures
downward
due to product improvements (esp. computers) has, of course, been
well-documented. But what about the converse – i.e., product
deterioration? Does BLS increase its inflation figures when product
quality decreases – or is this simply ignored? I’ll leave it
to others more knowledgeable than myself to answer this question;
however, one example should suffice to show how seriously underestimated
inflation truly is.

When
I was a boy there was a Philadelphia-based company named Tastykake,
Inc. It produced individually-packaged cakes and pies which sold
regionally for 10 to 12 cents each. None of its competitors (Drake’s
Cakes being a feeble pretender, if memory serves) could touch it
in terms of the quality of its products. My favorite Tastykake was
“Tandy Takes” (a bizarre name which would be changed to Kandy Kakes
sometime before the arrival of the 21st century). There were two
varieties of Tandy Takes: chocolate and peanut butter. For 12 cents
you got three discs about the size of a 3/4-inch thick slice of
bulk sausage. Each consisted of a 1/2-inch thick round of cake;
the chocolate variety had chocolate cake topped with a generous
smear of vanilla cream and was completely enrobed in dark chocolate,
while the peanut butter Tandy Take had golden cake slathered with
peanut butter and drenched in milk chocolate.

While
I can’t possibly recall the ingredients in these 1960-era goodies,
I’m absolutely certain they contained substantial amounts of real
chocolate. The reason I’m so positive is that every summer, Tandy
Takes were always moved from the supermarket’s bakery section to
its freezer section. If this wasn’t done the cakes would simply
melt.

Tastykake
is still in business today, and is practically an institution in
the Philadelphia area. However, its products have deteriorated to
the point where, apparently, consumer fraud is necessary to keep
sales flowing. Decades ago I stopped ingesting Tastykake’s products
when it became obvious that the quality was gone; everything looked
the same, but the lip-smacking taste was just no longer there. I
thought it might be due, at least in part, to the human aging process:
the deterioration of one’s taste buds or olfactory organs, etc.,
but a recent trip to the corner store proved that wasn’t the problem.

The
Peanut Butter Kandy Kakes box proclaims “Milk Chocolate Covered,”
but its ingredients label belies that statement – it in fact
contains no chocolate, no chocolate liquor, no cocoa butter. The
“Dark Chocolate Covered” Chocolate Kandy Kakes’ label does show
chocolate, but it’s so far down on the list (below salt) that I’d
be floored if it constituted more than 1% of the product. The peanut
butter version is thus clearly a consumer fraud, while the chocolate
version is at minimum a fraud in essence (and likely a consumer
fraud as well). I invite readers to visit www.tastykake.com
to see for themselves. By the way, my complaint to the company resulted
in a coupon for “bringing this to their attention,” but no admission
of guilt.

The
price of Kandy Kakes has gone from 12 cents c. 1960 to 65 cents
in 2005, if you buy the family pack of six. The putative inflation
rate of this item can, therefore, easily be calculated by BLS as
442%. However, since the quality of the item has deteriorated into
virtual tastelessness, an additional inflation factor should be
considered. In my opinion, the 2005 product might taste approximately
1/4 as good as it did in 1960 – so there has actually been
four times the inflation over that based solely on price. Does BLS
include the decline in quality of this and countless other products
in its inflation calculations? I think not. For if it did, the cost
of Kandy Kakes in 2005 over the cost in 1960 would be calculated
as 1,768% higher! This does not even include product shrinkage,
which in the case of Kandy Kakes would certainly increase this figure
to at least 2,500% – compounded over 45 years this is 19% annually!
No wonder BLS likes to strip out “volatile” food prices from its
CPI announcements.

June
29, 2005

Andrew
S. Fischer has worked in various fields.

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