Ryan Bourne writes insightfully about mistaken notions about inflation. Two slices:
Shrinkflation did happen across a range of food products, particularly in 2022. But this itself is just a manifestation *of* inflation, which ultimately had macroeconomic roots (too much money chasing too few goods).
The Bureau of Labor Statistics, which calculates the Consumer Price Index, already tries to account for inflation that manifests as shrinkflation. Their analysis shows that about 10 percent of the increase in unit prices for snacks occurred through reduced package size, with the same phenomenon, though less significant in scale, for candy and chewing gum, coffee, and ice cream. It may be the case that the basket of goods the CPI examines doesn’t capture every case of inflation, which means it’s plausible that by under‐accounting for shrinking packages, the official CPI still understates the inflation consumers have faced.
The point is that in an inflationary environment, firms must decide whether to raise their headline prices or trim product sizes. Remember, inflation, ultimately, is a rise in all prices across the economy, including firms’ costs. This doesn’t mean all prices will rise by the same amount (supply and demand shifts mean relative prices between goods change too). Nor will inflation affect all prices at the same time—for some firms, costs rose first, and for others their product prices.
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Unfortunately, many Democrat politicians seem to think it illegitimate for firms (including grocery stores) to raise prices when demand for their product rises (as opposed to their costs going up). That way of thinking also seems to have infected their macroeconomic worldview: if rising prices across the economy at any period can’t be explained by firms’ rising costs, then it must be greed or excessive profit‐seeking, rather than the first‐order effects of too much macroeconomic stimulus.
If all this were just idle musings from populist politicians, that would be one thing. But Senator Warren and others have introduced federal legislation that would make it “unlawful for a person to sell or offer for sale a good or service at a grossly excessive price” during an “exceptional market shock.”
Also writing insightfully about inflation is Reason‘s Eric Boehm.
Scott Lincicome tweets: (Or as my intrepid Mercatus Center colleague, Veronique de Rugy, says: “Industrial policy for the win!”)
Panasonic, LG, TSMC, Intel, & others are struggling to build subsidized factories in the US bc of high steel & other materials costs (thx, tariffs!) and long backlogs for essential equipment (thx, Buy American!). Now, projects are delayed or even canceled.
Vero also shares two timely charts (from Cato’s Chris Edwards).
Vance Ginn and Thomas Savidge offer insights about reining in government borrowing.
Matt Ridley busts myths about zoonotic transmission. A slice:
The World Health Assembly in May is poised to divert $10.5 billion of aid away from tackling diseases such as malaria and tuberculosis. Instead, that money will go toward combating the threat of viruses newly caught from wildlife. The assumption behind this initiative, endorsed by the Group of 20 summit in Bali in 2022, is that the threat of pandemics from spillovers of animal viruses is dramatically increasing.
That assumption is almost certainly false. A new report from the University of Leeds, prepared in part by former World Health Organization executives, finds that the claims made by the G-20 in support of this agenda either are unsupported by evidence, contradict their own cited sources, or fail to correct for improved detection of pathogens. Over the past decade the burden and risk of spillover has been relatively small and probably decreasing. The Leeds authors conclude: “The implication is that the largest investment in international public health in history is based on misinterpretations of key evidence as well as a failure to thoroughly analyze existing data.”
