Back in the early 1980s when Bohanon was just beginning his academic career, a student of his worked as a summer intern at the U.S. Bureau of Labor Statistics in Virginia. When she returned for the fall semester, he asked her what she had done. The young lady, who went on to get a doctorate in economics, had spent most of her summer visiting retail clothing outlets to measure the sleeve lengths of women’s summer blouses.
Anyone studying economics at the time would have immediately known the reason for this odd summer job. Inflation on a year-to-year basis had been over 10%. Sellers of many consumer items resorted to reducing the quantity of the product to obviate explicitly increasing the dollar price of the product.
To its credit, the BLS has always been quite scrupulous in making sure apples are compared to apples when calculating changes in the consumer price index. Or, more precisely, it will note a 12% increase in the price of a 16-ounce jar of applesauce whether the price increases from $5 to $5.60 or the jar shrinks to 14.2857 ounces while its price remains at $5.
Fast forward to 2021 and we suspect most of our readers have noted the shrinking sizes of goods, which has become particularly conspicuous at the grocery store over the last few months.
While Curott was preparing his family the all-American meal of hot dogs with baked beans and macaroni and cheese, he realized that literally every item in the entire meal had shrunk! The box of mac and cheese that used to be 9 ounces is now 7.25 ounces. The can of beans that was 16 ounces is now 15 ounces. The hot dog package still had eight hot dogs, but they weighed a total of 12 ounces instead of 16 ounces. Even the mustard was 14 ounces instead of 16 ounces.
While the price of the grocery items in that dinner didn’t change, the amount was 15% less, indicating a 15% higher price for the same quantity of goods, or, in other words, 15% inflation.
The inflation of the late 1970s was wrung out of the system only by crunching the money supply, generating the Volker recession of 1981-1982. The unemployment rate in Indiana hit double digits, peaking at 12.6% in November 1982. And while we are not yet at double-digit inflation, we fear we might face a similar fate this time around.•
Bohanon and Curott are professors of economics at Ball State University. Send comments to email@example.com.