Weekly Updates
Weekly Updates
- In 1943, in a pinnacle of radio broadcasting, Commissioner Hinrichs of the US Bureau of Labor Statistics starred alongside his wife in “Housewife versus Economist.” They were debating quality adjustment in calculating inflation. Mrs. Hinrichs was unhappy about paying the same price for lower-quality product.
- Consumer price measures are supposed to capture how prices evolve. Changes in quantity and quality must be accounted for. Shrinkflation (where the chocolate bar gets smaller but the price stays the same) does not deceive inflation data and will be recorded as a price increase.
- The US offers a timely example. US food prices have been rising all year. However, the retailer Walmart announced their “Thanksgiving meal” package would cost less than USD 4 per person, compared to USD 7 per person last year.
- This does not mean US grocery prices are falling. Quantity and quality changed as well as price. Last year’s package shared five pounds of potatoes among eight people—this year, the same quantity has to feed ten. Cheaper vegetables have replaced more expensive pecan pie. The customer gets fewer items than last year. Walmart does not claim to offer a standardized product each year, but this is a visible reminder that lower advertised prices do not automatically mean lower inflation.
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