How shrinkflation is playing havoc with economists’ models
economist.com
economist.com
Say supermarket bakery introduces new bread with seasame seeds only 25¢ more. Then slowly there is only new seasame seeds bread on shelves and regular bread becomes rare. Later seasame seeds is slowly dispearing from bread and voila - you have made regular bread 25¢ more expensive.
The other way is lowering quality of products. Inflation basket still contains basic bread, tomatoes and plain sausage. The problem is that the quality of these products tanked and to buy a bread of a quality of simple bread from 40 years ago you must shop in some premium, organic, hipsters bakery where it costs 10 times more then simple bread. Same goes for tomatoes and sausage.
And electric drills or washing maschines? Don't get me started. Today's Bosch electric drill lasts one building season, my fathers Bosch electric drill lasted 35 years. Price is the same or lower but you get way less for it.
But the inflation headline number stays low. And that matters as you can keep wages low (many pensions are inflation indexed). And as people used to say under communism -"Bread is more expensive but locomotives got cheaper".
Wonder Bread was popular in the 1960's, 50 years ago.
Survivor bias?
Statistics show that at least one major product category, cars, are seeing their lifespan increase:
https://www.nytimes.com/2012/03/18/automobiles/as-cars-are-k...
This way, you can quickly compare different groceries despite differing packages, and shrinking the item for the same price would be visible when looking at the comparison price.
Still, tbh, it still works on some items. Eg here most producer gradually shrinked yoghurt from 175 to 140g - pisses me off, but I must assume it works.
1. This is a dishonest comparison, because cars have 4 wheels by definition, while price labeling is very much differentiated across the globe.
2. Even if Sweden was one of only five countries in the world where cars have 4 wheels, saying "in Sweden, cars have 4 wheels" is still not the same thing as saying "Sweden is special, we have cars with four wheels, I bet no other countries do". The fact that you interpret it more as the latter says more about your own bias than what is stated in the text.
Let me try one last time with an example. In this exchange, which party is being unreasonable; A: “in Switzerland, you have to pay for plastic bags in supermarkets”... B: “it’s the same in many other countries”... A: I NEVER CLAIMED SWITZERLAND WAS SPECIAL!!!
But on average, with pretty much everything else, it works just fine.
I suppose its still possible to game with own label goods, from what I've observed it only seems to come up in a limited range of goods, sauces and suchlike.
I havent weighed a litre of oil, but a litre of water is a kg, so water based goods should be fairly comparable ml to g, that's the basis I work on anyway.
Yeah, you can easily multiply the number by 10, but it requires conscious attention.
In my experience this difference is decided by what a "normal" amount of the good tends to be. For example, €/kg is usually used for meat, flour etc, but for something like spices or herbs a price of €/kg would seem silly since you rarely buy, and it's rarely sold in, a kilo. Still, a luxury of the metric system is that even if it's listed as €/100g, all you have to do is multiply by ten (aka move the decimal one step).
This is extremely widespread, if not totally universal when it comes to really expensive items.
No-one ever seems to care or notice - I often unfold the paper so the price shows again, as it’s one of my pet peeves.
It does indicate both how blind Swedes are to the faults in their own country, and how passionately defensive they are though.
Edit: This doesn’t seem to me to be highly relevant to the general discussion on shrinkflation, but to avoid the very active downvotes I’ll post to imgur tomorrow evening (when back in town).
If you shop in stores that break the law you should take it up with the store manager, store owner, Stockholm's konsumentvägledare [0], or Konsumentverket [1]. They're violating the law [2]. I hope you had a nice vacation outside of Stockholm, no need to add an extra errand to your list when you're back in town.
[0] https://www.stockholm.se/ByggBo/konsument/Kontakta-konsument...
[1] https://www.konsumentverket.se/aktuella-konsumentproblem/anm...
[2] https://www.riksdagen.se/sv/dokument-lagar/dokument/svensk-f...
At least one supermarket forbids taking pictures tho.
Finally, all well and good but best I can tell most ppl lack the basic math skills and/or desire to make an informed decision. This is why shelf space and ad budgets are still so popular with brands.
So while Sweden had this as a national law w/o EU pushing it, I rather suspect the UK now having the same is due to Single Market harmonisation - i.e. an EU rule. That is what the SM does.
Chocolate bars used to have 200g. Some now have less than 100g. Toilet paper rolls used to have 50m; most now have 30m and some have only 10m.
This sort of thing started happening in the 1980s, because the government had frozen prices (that always works well). It became such a problem that now the law says that the packaging must clearly point out if the quantity inside has changed.
We need this law in the US. I’m not one to push for new regulations, but I have seen this happen time and again with big companies (Nabisco, General Mills) that shrink their boxes and count on the customer not to notice.
Maybe this is "my fault", but I'd guess that most consumers don't pay that much attention to the exact number of ounces (which are sometimes fractional) in the box.
Even then, I’m aware that many items have differences in content which game the price/measurement like a lower ingredient content (less cocoa per measurement and more fillers or water content).
There is not really a great way to combat these practices if you are not some kind of professional buyer that only purchases at wholesale scales.
Do you have a source for the $/Oz being due to bad behavior? From what I’ve heard it was done purely to address consumer demand.
Price/oz
Price/lb
Price/bar
Price/unit (which might be bar or package of two bars)
So you get tk calculate the difference in your head.
See the 'Background' section on page 11 of https://www.nist.gov/document/sp1181-unit-pricing-guidepdf and more generally https://www.nist.gov/pml/weights-and-measures/laws-and-regul.... So yes, it was done purely to address consumer demand... by way of laws and regulations with producers and retailers under threat of even more onerous laws and regulations.
A contemporary example to hopefully convey the situation back then: if 'right to repair' becomes law at some point, this would also be due to consumer demand. Notice the level of interest companies have in addressing this consumer demand prior to legislation being passed...
We'd end up in a miasma of litigation around whether one product is a reduced quantity of another, or if they're separate product lines.
Products already list quantities. That's enough for someone paying attention to value.
I’ll do the math. But I do want wt%
(1) Recently I wanted a bag of sugar. At my closest grocery store, the bag was 4 pounds instead of 5. No problem: At my next stop at Sam's Club, I got two bags, 15 pounds each.
(2) Sometimes dish soap comes in small bottles. Okay, at Sam's get a gallon jug of their generic dish soap and with a funnel refill the small bottles. Same for glass cleaner, etc.
(3) Pizza can be $7 to $20. Okay. (i) In a 5 quart bowl, add 750 ml water and 1 T dry yeast. Let the yeast soften. Measure 1 kg of flour. Add 1 T salt to the water, stir, add 2/3rds of the flour, stir, add the rest of the flour, mix some, and dump on a floured board. By hand mix and knead for 8 minutes. Return to the bowl, cover, and let rise to fill the bowl. Dump on the board, form in a long loaf, cut into 8 equal pieces, place each each in a covered plastic bowl, refrigerate. Starting the next day for two weeks or so, for a pizza, take one of the dough pieces, in a microwave proof plate form in a circle 7-9" in diameter, and warm in microwave for 3 minutes. Add 3 T sauce, 1/4 C shredded Mozzarella, and maybe some pepperoni, sausage, etc., place in a clean steel pan, over medium heat, covered, for 13 minutes, move to a cutting board, slice, slide to a dinner plate, add 1 T of grated hard cheese, and eat. Get the flour, 25 pounds, at Sam's, and then the flour for one pizza is about 9 cents. With good toppings, the total cost is still about $1. So, anytime, in 20 minutes, 7 of effort and 13 waiting, get a pizza faster, better, and cheaper than frozen, carryout, or delivery.
I don't know where you live, but in Manhattan your version will be cheaper, but it will definitely not be better and most likely will be no faster.
Neither your stove nor your oven can match a commercial pizza oven.
> match a commercial pizza oven.
"Match" in what sense? What I described is different but works great.
For the 20 minutes, even in Manhattan, tough to take the order, make and bake the pizza, slice it, box it, and deliver it, all in 20 minutes.
For the quality, that's a matter of taste, but frozen, carryout, and delivery don't use better ingredients.
Whatever strong opinions some people in Manhattan may have about pizza, for the world of pizza, Manhattan is a very tiny place. E.g., apparently all or nearly all Sam's Clubs scattered all across the US sell 5 pound bags of part skim, shredded, Mozzarella cheese, and no doubt nearly all of it goes for pizza: Pizza is all over the US and much of the rest of the world -- in comparison, Manhattan is a small thing!
By the way, for delivering a pizza quickly, there is a fundamental problem made fully clear in queuing theory: The orders have to arrive essentially as a Poisson process. But the pizza shop has only fixed capacity in pizzas made per minute. So, we have random demand fed to a fixed resource. Then the pizza shop has just two alternatives, (i) deliver quickly but have a lot of expensive time where the delivery people are doing nothing and (2) delivery slowly, from a queue, where the delivery people are busy but the customers have to wait.
For the actual, final baking, I'm not using an oven and am using just a common, restaurant style, all steel saute pan with a circular flat bottom about 8" in diameter. So, I get the bottom of the pizza crisp and as brown as I want. And I cover the pan to create an oven that does cook the dough some more and melt the cheese.
All of this is my response to the OP about shrinkflation. I've outlined a response -- 20 minutes, 9 cents of flour, crisp bottom, sauce, cheese, and sausage of your choice, etc. My post is just in response to the OP's shrinkflation and not throwing down a gauntlet as the world's greatest pizza, better than NYC, Chicago, Naples, etc. For one, do some arithmetic on the 1 kg of flour, split 8 ways, and the 7" diameter -- get a relatively thick pizza, and people who want pizza very thin might not be happy.
I live a couple blocks from a pizza place. I order, wait 10 min, then turn on my oven, and then pick it up 10 min later.
Except for fast-food companies, which we've been told have slyly been increasing their portion sizes and making us fat.
https://www.ncbi.nlm.nih.gov/pubmed/17585324
Or maybe we could just stop being victims of the evil corporations and we take responsibility for our lives.
Of course companies would protest, claiming that their recipes are trade secrets, but we already require that products list their ingredients, and we protect trademarks for products, which seems unreasonable if companies can alter the contents of what is being protected, without telling customers.
To be clear, though, I'm not actually advocating that the labels report precise amounts of each ingredient, but they should be forced to say something like "40% more salt" or "70% more water", at least next to the ingredients, and "New recipe" on the front (as many products already do).
Ridiculous proposition.
Formulations change pretty much constantly for various reasons (ingredients become more expensive, or you change suppliers, or you decide to adjust something to make the product better or cheaper or both), and adding bureaucratic friction as well as packaging redesign is completely impractical. Packaging can take several weeks if not month to produce and you would have to constantly throw them away with this kind of rule. Wasteful.
1. I want to be able to compare w other brands 2. I don’t want any filler at all!
If chocolate goes up in price, I’ll pay more to get the real stuff, or buy less of it. I most certainly won’t buy a bar of food wax with chocolate solids, or whatever Hershey is
Depends where you live but many brands actually indicate their content of chocolate directly on the box (70%, 80% etc... unless you buy milk chocolate.
As for not wanting any filler at all: then buy pure cocoa beans! If you buy processed food you should always assume there is some kind of "filler". And not that "fillers" are also necessary sometimes to give a proper texture to what you eat and make sure the taste is consistent from one box to another.
Large manufacturers will be fine, there's no particular reason for society to care about their wellbeing so much.
All dane-pgp's proposed law would change is that when they change the labels to match the new formulation, which they must do, they would have to include a change date or a version number of something like that on the new label.
Now if we could only get a "roasted-on" date requirement for coffee ...
The proposal was a lot more aggressive than that -- dane-pgp specified that the packaging must mention if the ingredients stay the same but their relative proportions change. Under current law, there is no reason to alter the labeling for such a change[1], so you'd be seeing a huge requirement for new labels that weren't formerly required.
[1] Actually, there are two. First, you might switch up the relative proportions so much that the rank order of the absolute amounts changes, which would require reprinting the ingredients list. This is really unlikely.
Second, you might end up altering the Nutrition Facts information. That would also require relabeling. I don't know how likely that is; the Nutrition Facts panel is a pretty low-resolution instrument.
Cue worse-tasting chocolate bars showing up in the stores, proudly proclaiming on their wrappers: NOW WITH MORE HAZELNUTS.
Some people claim it was sold as purely economic union, some claim it was well known goal back then.
But a lot of the rules that are supposedly so bad are rules that would be there in a purely economic union.
However the UK did not vote to join in a plebiscite. We joined in 73, and had a referendum on leaving in 75.
I'd suggest that the issue in the UK was in part that the changed nature of our constitution after joining was never explained in schools (no Civics classes). Plus almost all discussion of it domestically tended to use the phrase "Common Market".
So we ended up creating a generation who were naturally eurosceptic, and were quite surprised by the changes post '94 once the EU emerged, and the single market reforms came in to existence.
Basically a lot of the people in that generation were not aware that we had joined a political union, with a level of law and government above that of the nation state. The generation before (who voted in '75) should have known that. The various institutions of state (government, civil service, courts, judges, etc) knew.
However that general ignorance existed (and still exists), it being reflected in our MPs, where a lot of them still (after 3 years of confusion) still do not understand the nature of their (and our) relationship with the EU.
Note that a lot can be told just looking at the label, but few people do it. For example quality meats tend to have more protein, quality diary products tend to to have more fat. High salt and sugar is usually a bad sign.
The order of ingredients is important too: greatest amount first. It means that if the thing they advertise in front of the package is way down the list, that's not good.
Certain strong flavors, like mint, pepper, and lemon, usually appear pretty low in the ingredients list at the same time they're headlining the label.
I got in the habit trying to avoid palm oil, but there's all kinds of surprises in there.
Not in the "I'm shocked there are chemicals in my food" way. But just in the transparent differences in formulation by weight.
Check out marinades / BBQ sauces and baked beans.
The front of the package prominently declared "Made With Real Cheese!".
When she read the ingredients list, not only was cheese way down on the list--it was on the bread ingredients list, not the "cheese" dip ingredients list.
Its terrible how disconnected we are from the things that sustain us. There are so many companies involved in producing something simple. We can gradually expose the consumers to all these business processes we've accumulated over many thousands of years. I think it could be mind blowing in many ways.
People aslo behave different if someone might be looking. Investors get a tour of the facility and everything seems designed for them rather than for the customer. I've seen places remove chairs and force everyone to stand all day simply because it looked good to investors. Open floor plans anyone? From an investor perspective the less room for livestock the better. Salaries cant possibly be low enough. etc
Have them make [say] a nice video showing the production process. Have some fancy committee sign of on it. Or if the product is to embarrassed to show how it's made have it pay the 1% extra taxes.
Both width and thickness of the sheets can vary. For both, larger is better. All three measurements interact together when forming a wad of paper. All three contribute to the size of the wad.
Also, many people fold rather than wad.
This. Mass is just a nonsense unit for me as a folder. You might as well be advertising density or albedo. If anything, I'd want the base unit to be
number of sheets * number of layers per sheetThat said, the general point of your post still stands.
I think it's a very good development.
And so bottles of mustard get smaller, but stay $1.99 at Walmart. Kleenex boxes have 76 tissues instead of 88 but stay $0.99 at Walmart.
There are a number of measures, availability being one, where our modern food production system shines but on a quality measure it really falls flat against many times throughout history. The caveat there is obviously "history" is gigantic and runs the gamut from poor slaves eating gruel and starving to a patrician in Rome during its height or to a hunter gatherer in a food rich environment.
All that to say, I don't think this comparison is so simple, it is incredibly nuanced.
Still easily within reach of anyone but the poor. Sounds like pretty standard yuppie organic restaurant material.
Shopping local is so underrated.
And fast food is a much cheaper deal than if you cook veggies and organic burgers yourself - because quality does cost money.
The Bureau of Labour Statistics is already wise to the fact that products change over time, and they implement a quality adjustment factor (https://www.bls.gov/cpi/quality-adjustment/home.htm) to mostly compensate. Something simple like adjusting the quantity of stuff in the package is so blindingly obvious it should be fully accounted for in inflation statistics.
Instead, this article (and the research work it's based on) refers to the odd phenomenon of sticky market prices. In particular (from a bit past the easily-accessible blurb of the article):
> Firms that sell thousands of different items do not offer them at thousands of different prices, but rather slot them into a dozen or two price points.
This is not what you'd expect from a textbook model of economics; there's no continuous calculation that would explain why a company should prefer to sell a dozen different shirts for $14.99 despite differences in quality or observed demand.
The research also suggests the tail wags the dog:
> Retailers, Messrs Aparicio and Rigobon suggest, seem to design products to fit their preferred price points. Given a big enough shift in market conditions, such as an increase in labour costs, firms often redesign a product to fit the price rather than tweak the price.
... which is again counterintuitive given that retailers would ordinarily _set_ the price.
Ultimately, the macroeconomic point is made best at the conclusion of the article:
> What’s more, the substitution of quality for price as firms’ main way of responding to changing market conditions weakens the case for keeping inflation low and stable. Inflation makes relative prices less informative, economists reckon, making it harder to decide what to buy and how to spend. Rather than clarity, low inflation has brought a different sort of confusion: one of shrinking chocolate bars and lost holidays.
... which also makes sense given the research finding being reported on. Retailers evidently feel they can't adjust price to reflect quality (and have to go the other way); if inflation were higher but still stable, then everyone would be forced to make these sorts of adjustments more often.
If Toblerone gives you less chocolate for the same price, that doesn't mean some new thing called "shrinkflation" now exists, that means that chocolate became more expensive. But that new pricing doesn't seem to be properly hitting the inflation metrics.
If everyone who used spotify was paying 79p per track you would see massive economic growth in the music sector. However because it's an all inclusive streaming service not a huge amount more money is moving through it.
However as a consumer I am getting 1000x more music now than when I was 15yrs old. That doesn't seem to get recorded though.
So much stuff on the internet (like stack overflow or github) has gargantuan economic value but doesn't figure in GDP stats because it's mostly free.
I'm not so sure about that. Yes they are conduits to massive value, but that value is coming from us, not them. If they were to close down, equally good replacements would be (are) available immediately.
Now that the market consolidated and the losers have been driven out or bought out, the winners are quietly taking it back
Current inflation models are also flawed in other ways as it changes goods exchange. Also if a measured market good is better price is adjusted. Example larger tv size.
Quality adjustment in CPI calculation is routinely done for many products using hedonic modeling. It's important in all rapidly advancing product categories like like TV's as you mention. For a product like a smartphone price difference between the replacement item and its predecessor is almost never pure price change. For example screen resolution change in smartphones induces quality adjustment to the price change.
>What’s more, the substitution of quality for price as firms’ main way of responding to changing market conditions weakens the case for keeping inflation low and stable. Inflation makes relative prices less informative, economists reckon, making it harder to decide what to buy and how to spend. Rather than clarity, low inflation has brought a different sort of confusion: one of shrinking chocolate bars and lost holidays.
What has long been suspected by those outside the field, and rarely acknowledged by economists and statisticians inside the field. Consumer Price Index (CPI), a standard methodology of nearly every national bureau of statistics and economic measurement is susceptible to manipulation and gaming by producers and retailers because the statistical agencies employ limited resources to perform quality adjustments to the item price data.
The adjustment methodology is quite limited in what adjustments are made and the resources dedicated to comparing items and differences—there is no lab testing being performed and the most extensive research performed on some items is using product brochure data to make adjustments based on listed features at face value only (the brochure says this is better or comes with better features).
Often product data is limited so no adjustments are made, only assumptions like “we believe this product has the same quality or content” or “we will impute the missing price or data based on similarly available data or some kind of modeling abstraction.”
This standard methodology led by the U.S. BLS and other agencies has done a complete disservice to the reputability of economics as a hard science instead of a bureaucratic ideology.
This is complete false. If you ever took an Econ 101 course, you'd know the fallibility of economic stats are covered at length.
Talk at length with most economic professionals on /r/economics and you will find the repeatedly stated and unstated views that “the CPI is the most studied economic measurement in the world” and “you are welcome to perform your own study covering the inadequacies of the CPI.” I paraphrased slightly but from memory those quotes are highly accurate, as well as the general dismissiveness and institutionalism/bias pertaining to official economic data. Also for a professional economist to question the accuracy of official economic data is career suicide. Why you rarely see that topic discussed by a professional economist or in a published study.
There's simply a lot of tunnel vision. Although, as a parent comment pointed out (a bit rudely) there's acknowledgement of various shortcomings of measures such as CPI, there's also a tendency to assume these models are accurate in policy-setting institutions.
I'd say they're maybe as accurate as predicting weather in the Great Lakes Region.
Also: r/economics should not be representative of economists, as a group. (Although they do parrot a lot of bank and government economist views.) Most posters there strike me as undergrads, who are mostly clueless to the fuzzy subtleties of the study (and life in general.)
If you want informed people on economics on reddit, go to r/badeconomics which is the more tightly knit hangout for professional economists and grad students.
Otherwise, go to the economics cluster on twitter. r/economics is like r/news with an econ twist. It's too large to effectively moderate.
The problem for layman like me interested in economics is that you have absorbed so much wrong views and explanations from the news and political commentary that you must work hard to unlearn them before you can start learning.
If you know of any sources that are well known references that acknowledge the shortcomings of BLS methodologies I would be interested in reading up on them. I have not seen those kind of discussions frequently in publications.
I had a great Econ 101 professor. He spend quite a few lectures breaking down how much these key stat suck. Then we spent the rest of the time using them for study because that’s what we have.
The key message he drilled into me was that 1) don’t be so certain of your results (or at least don’t sound like an asshole making pronouncements on things) 2) data are expensive to gather and there aren’t many alternatives; don’t ignore them because they have flaws
CPI has to bridge both cheeks: it has to reflect what one person can relate to and what entire nations actually do.
"In order to accurately measure inflation, we use quality adjustment processes to account for any changes to a product’s weight, volume or size"