Size Matters . . .

. . . when it comes to price inflation.  A local TV station “consumer reporter” did some very interesting research that was broadcast on the evening news recently.  She found that a dozen or so household products like laundry detergent, toilet paper, etc., cost about the same that they did 5 or 6 years ago, but the amount of the product that you get for that price is substantially less.  She held up a laundry detergent that has 10 fewer ounces than just 5 years ago, for example, but sells for the same price.  Same for toilet tissue and several other products.

This is a good way to look at hidden inflation.  You are paying more per ounce of laundry detergent, but if you don’t pay attention to the labeling, you wouldn’t know it.  One wonders if the government takes this into account when it publishes its bogus “inflation” statistics.  (Hint: The answer is “NO”).

UPDATE:  Thanks to Tim W. for sending me this Zero Hedge article about how product downsizing like this has become a routine practice for profit-maximizing corporations.  In one example cited, the price inflation for a product is not the average 2 percent claimed by the Fed, but 72 percent, thanks to product downsizing that is not accounted for by the government when it publishes its inflation statistics.  I don’t blame corporations for doing what their shareholders hire them to do — maximize their profits. The real culprit here is of course the Fed.

The phenomenon of effectively increasing prices by reducing quantity and/or quality has long been discussed in the first chapter or two of most introductory economics textbooks.  Andrew S. Fisher sends me another example, in the case of “Tastykakes,” that he wrote on this Web site ten years ago.


9:31 am on November 28, 2015