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

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.