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Shrinkflation (wikipedia.org)
34 points by kaffeemitsahne on Nov 25, 2019 | hide | past | favorite | 55 comments

My limited understanding of inflation calculations is that this should result in a increase in inflation as we're getting less product for the same price.

I read a long time ago about some quirks of the inflation calculations:

Say 27" TVs are part of the basket of products, but it's no longer so easy to buy a 27" TV, so they pick up the next size up, say 32" and the price is the same as for 27" but because this is a better TV (bigger for sure), it is deemed that the price of TVs have fallen as your buck can buy more TV.

I would dearly love for somebody with knowledge of the subject to confirm/deny/clarify the above

Inflation is typically measured by the price of a basket of goods and services designed to be representative of what is actually consumed. If the shrinking or growing of offerings simply changes what is consumed, then there is no real inflation change. What is measured depends on the definition of the basket of goods (does it contain "Mars bar" or "62.5g of chocolate bar").

The definitions of baskets of goods used to measure inflation tend to be changed over time to represent changes in consumption, such as 27" TV to 32" like you mention. As the 32" TV would be more expensive, this would create sudden inflation, however, this is diluted by the large size of the basket.

The quantity or size of the product is not important for measuring inflation, unless it creates a change in consumption. E.g. do people now buy two chocolate bars to sate their appetite? Do people buy fewer TVs because a TV of twice the areal size can substitute two smaller TVs?

Eric Weinstein, physicist, economist, and podcaster has referred to a pretty nasty fight he and his wife had about this very thing - I believe he calls it the problem of hedonic substitution, and he and his wife had come up with a theory that could model it rigorously (gauge theory) but as far as I know he's never discussed gauge theory for laypeople.

here's a clip from an interview where he discusses the subject: https://www.youtube.com/watch?v=2xiEEtoa-_4

Edit: I realize I worded that misleadingly - he and his wife were on the same side, against government economists who wanted to be able to estimate the value of hedonic substitution on an ad-hoc basis.

This clip. Christ.

There are many ways for the conversation to go if you want to get try an understanding of gauge theory. Joe Rogan is not on any of those many branching paths.

Gauge theory is already a thing in physics. Maybe he should come up with a different name?

My understanding is that his innovation was applying gauge theory to calculating the 'real' rate of inflation. But the only academic talk of his I've seen assumed a base level of knowledge which I don't have.

I don't understand how the situation above is a 'quirk' and not a straightforward example of deflation. The price of a typical TV - now represented in the basket of goods as a 32in TV - has fallen.

The fact that lower prices might lead people to buy larger TVs is no more surprising than a fall in the price of meat leading people to buy more steak.

The price is the same, it has not fallen.

You get a bigger TV for the same price but this is not the same thing as a lower price for the same TV, which is what most people would recognise as lower inflation.

That's why I said it was a quirk

The price of a 32in TV has presumably gone down though right? And the same would surely be true of a 29in TV if you could find one. The fact that the market has moved on and you have to tweak your basket of goods is a measurement quirk, not a definition issue.

It's not very different to finding out you can buy a 12-pack for as much as a 6-pack used to cost. Also deflation.

> quirks of the inflation calculations

it's correct - improvements to tech is considered this way as well. I personally don't believe this is a good measure.

When it comes to the atrocious American diet, smaller fast food portions could be as much a feature as a bug.

Yes, but that’s irrelevant.

Americans are being told inflation is x because the CPI doesn’t normalize.

And this has huge socio-economic consequences

The CPI has been gamed into uselessness because governments and corporations have indexed things like pension increases to it. The "hedonic substitution" concept is particularly disingenuous. Seniors can't afford steak any more and buy hot dogs instead? Inflation's gone down, yay!

I don’t think the US government would use something that obvious to fool people.


The problem with US CPI is that the nation isn’t moving in the same direction as a whole, with some places and populations making gains far greater than others. It’s impossible to capture this one metric.

The CPI does normalize. There's a hedonic adjustment model which takes into account everything from TV screen sizes and types to sleeve lengths. https://www.bls.gov/cpi/quality-adjustment/questions-and-ans...

It isn't perfect - arguably there is no such thing as a perfect way of capturing the differences between changes in what's available and what's expected over time with respect to things like CRT vs LCD monitors - but portion sizes are relatively simple for adjustment

If you pay less - why not. But that's not what's happening.

I believe Consumer Reports used to show instances of this and call it the "grocery shrink ray." Corporate greed and willingness to deceive: news at 11.

What is the deception? Are the measurements correct on the packaging? Does the calculator app on phones work? It’s really not too much to ask people to divide price by quantity.

Choose to give business to shops that show unit prices.

In 2018, Koopmans reduced the weight of their buckwheat flour packages by 20% from 500g to 400g - claiming 'renewed' on the package, without specifying that 'renewed' only meant that less product was provided. It is unknown whether wholesale prices were affected, while it is certain that retail pricing remained exactly the same.

From the article, this example almost seems as if there was a deception. They claim their product is "renewed" but in reality all they have done is lessen how much you get. If I read renewed I would think they have changed the formula of their food, hopefully for the better, and that is why I am receiving less of their product. The fact is, nothing was changed, there is no renewed product and I am being sold less for more. Yes the price is still listed and I can make a decision as to if I buy it or not but be honest in this situation the company putting "renewed" on the packaging is hoping you believe they have improved their formula.

> If I read renewed I would think they have changed the formula of their food, hopefully for the better, and that is why I am receiving less of their product.

Why would you think that? If I read renewed, I would think that it’s some BS marketing, since there was no verifiable claim made.

Deception is not the same as lying. The information can be accurate, but presented in a way that is intended to fool the other person. Increasing the price is a more obvious way of charging more money for a product; reducing the package size is less obvious. There's a reason why a company would choose the latter: they know full well that most people will pay less attention to the unit price than they will to the package price.

And that’s the buyer’s problem.

Unless one is suggesting legislation requiring the use of certain package sizes, I don’t understand why people shouldn’t be expected to suffer the consequences of not understanding the concept of unit price.

It would be interesting if sellers were required to show a 52 week graph of unit price though with each product.

Yes, it is the buyer's problem. And no, it doesn't follow that just because a person acknowledges sketchy business policy that the person believes that the answer is legislation. In my case, I understand unit pricing, but It's easier to remember whole package pricing than remembering unit pricing, as well as sizes that were in whole units versus fractional units. It's also aggravating that I have to buy more product than I need in order to make certain recipes that have been geared toward old standard sizing. There are also people out there who lack the intelligence to understand simple concepts and obviously they are expected to suffer the consequences for being less capable intellectually.

It's worth noting that in the UK until fairly recently bread could only legally be sold in either 400g or 800g loaves.

Using the same container volume with less net weight, for example. Those of us who have the luxury of not being particularly busy can certainly keep logs of unit pricing, but it's not practicable for most.

All the stores I go to show unit price on the labels. What difference does it make if something costs less last week? It is what it is now, so all a buyer can do is compare the options on the shelves, and choose one or not choose at all.

Claiming on the packaging that the product is 'renewed', without mention the size reduction, seems pretty much deception?

Might as well outlaw marketing then. Generally, business don’t advertise negative changes.

In this case, the relevant information for a buyer is clearly stated, and accurate, and no false information has been conveyed. The buyer simply has to check the unit price and ignore the other words.

> Might as well outlaw marketing then.

Yes, because reasonable regulation requiring clear communication to consumers about product changes == outlawing marketing.

How would one propose that legislation with clear instructions that doesn’t get caught up in courts? And now the taxpayers have to spend money enforcing that legislation?

We already have a system. Show the amount of product being sold. Show the price. Require showing unit price, if anything. Any more is unnecessary.

First, it's pretty simple. Require that if net weight changes that either the size of the container decreases proportionately or that a standardized label (a la "Nutrition Facts") on the front of the container contains the old size and new size prominently.

And oh, the horror that taxpayer money might be spent protecting the public. I'm down for that.

I’m not opposed to protecting the public. I’m opposed to unnecessary spending of money. It’s far cheaper to educate people to pay attention to unit prices in 3rd grade than it is to enforce legislation about communicating changes in product sizes or packaging types, as loopholes will be found around the legislation, and then we stamp out loopholes, and spend more and more on lawyers.

We can do both, though if we did just one, I'd be with you, domestic economics should be taught from the earliest age.

> Corporate greed and willingness to deceive

* Need to maximize profits.

Is it greed on the part of market participants or price inflation necessitated by an overall inflation of the money supply?

In the EU, the price indication directive helps consumers to deal with this. In addition to the item price, unit prices (e.g. per kilogram or per liter of product) must also be indicated.

I have no idea whether there are any regulations in the US regarding this, but nearly every chain store that sells grocery products also lists prices normalized to some product-relevant unit. These prices are on the shelves, directly next to the actual price, often in another color.

That is the case in the U.S. as well. Although I've seen unit pricing of products in different sizes use different units (e.g. one product using ounces and the other quarts) that if not done deliberately to make comparison difficult still has that effect.

Not a problem with metric units.

Only if the density is close to that of water. A quick google search says that approximating 1g = 1ml would work for yogurt (1.04g/ml), but not for honey (1.40g/ml).

They don't mark out honey in different base units. Some things are sold by volume, but even yogurt is sold by mass. It's partially because packing density is rather variable between different sources/grades, and also not as easy to handle as weight (just add on top, and don't care about the shape of the contents of the bowl).

Wow, I didn't realize how different things were over there. In the US, stores automatically started doing this without the need for government to step in. Maybe it became compulsory in other states but it seems like a huge waste of time to pass a law relating to this

At least here in Belgium, I do not remember there being consistent and uniform unit pricing before the directive was issued in 1998. From my point of view, the directive appears to have improved things so I would not characterize it as "a huge waste of time", quite the opposite.

Yes. And in the US, the units are still not uniform, so it means standing at each product for a few minutes with a calculator converting between units. It has wasted way more time than passing a law that requires the same units for each product.

Ask your grocery store to fix it or go to a different store in the area. In my area Kroger run stores have everything comparable, I would imagine their subsidiaries are equally as capable.

I think to claim an x-flation, you need to be describing more than just a price/quantity change. It has to be at "monetary" scale.

Anyway, the end of definition for shrinkflation (or inflation/deflation generally) is the interesting part these days

"process of items shrinking in size or quantity, or even sometimes reformulating or ^^reducing quality ^^"...per dollar.

Shrinking burger sizes (most of the Wikipedia examples, amusingly) aren't a trend to be worried about. There's only so much that can go under the radar.

Reformulating or reducing quality OTOH... This one is a total black box in many senses. It's hard to say if services are increasing/decreasing in quantity and quality. These are far less legible than steel & automobiles.

What's the price controlled trend in quantity/quality for financial services, legal services, etc. educational services.... These illegibles are trending up, as a proportion of the overall economy, so their trends matter a lot.

Coca-Cola South Africa reduced the size of a can from 340ml -> 330ml -> 300ml. Their justification was that the government introduced sugar tax to fight obesity. Yep. We do have African countries with obesity problems. Price has always gone up. Anyway, it is a healthy move. They must reduce it further and we will have a healthy nation.

Here in British Columbia we just raised the cost of a can deposit from 5 cents to 10 cents. I already whined about the size of the can decreasing and now you pay twice as much deposit for even less pop. Overall I only ever drink pop rarely but with the added deposit I have been reconsidering if such a small pop size is worth my money at all.

This year in France, Coca Cola reduced the standard size of their bottles from 1.5L to 1.25L while keeping the same price. If I remember correctly the main argument was to handle a new tax on soft drinks without (overtly) increasing prices.

This is pretty bad in Russia now. Since economy and real incomes are shrinking, it's hard for retailers to just raise the price. So everything is shrinking in volumes, literally all groceries now have smaller package than two years ago.

Inflation is commonly measured against the price of goods, at the consumption end of the pipeline. Are there other measures of inflation that incorporate the price but where it is also normalized by what consumers actually get for that price?

Somewhat flippantly as an additional example to shrinkflation, if price indices now incorporate AAA games, how do they account for Fallout 4 (2015, 85% rating) versus Fallout 3 (2008, 90% rating)?

Just noticed this on toothpaste from Costco.

Same with discount supermarkets, they seem to have a supply of almost identical products, but with more 'air' in the box and a visually competitive price, but per KG not competitive, not all supermarkets show the price conversion, and if you are a mother of 3, with 30 minutes to buy groceries it's not really meant to be a challenge to understand the value offering of a product, 'supermarkets' markets are not super efficient markets, they are leased boxes where various mega-corps battle it out for who can sell some basic low-grade ingredients for a significant mark up.

Keep in mind that on most items, supermarkets have margins of just a few percent. There’s a reason why everything else tends to be more expensive, but you are right that the quality of goods sold have seriously declined and continue to decline.

Costco's Kirkland toilet paper is now half an inch narrower than before. Food manufacturers are making packages and serving sizes, like yogurt, smaller and smaller.

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