The internet has surely increased the amount of raw information available to the general public. But it also allows fools and charlatans to make claims that seem plausible but are ultimately silly and false. So, what do we do?
There is no surefire answer, but here are three simple tests for any claim: Does the claim sound plausible? Does the claim check out? Is there a cogent theory behind the claim?
A recent internet meme on Facebook claimed: “Doritos removes 5 chips from each bag, Bounty trimmed its rolls by three sheets, and Wheat Thins determined that family size be 2 ounces smaller—all for the same price as before.” This seems plausible. We have noticed and documented “shrinkflation.” Sellers don’t want to raise prices, fearing the loss of market share. But rising costs, typical with accelerating inflation, squeeze profit margins. So, reducing the amount in each package might be the firm’s best strategy.
But then the meme goes on: “The company that makes Doritos made $42 billion in profit last year. The company that makes Bounty toilet paper made $39 billion in profit last year. The company that makes Wheat Thins made $11 billion in profit last year.”
Something sounds fishy here. The numbers seem implausibly high. A check of public annual reports for each company indicates actual profits in 2021 were not even remotely close to the meme’s claim. After-tax net income for PepsiCo, maker of Doritos, was $7.6 billion; for Procter and Gamble, maker of Bounty, $14.3 billion; and for Mondelez, maker of Wheat Thins, $4.3 billion. The meme concludes: “This isn’t inflation. It’s corporations ripping you off.”
“Napoleon Dynamite” is a charming 2004 movie about teenage angst. Its anti-hero, named Napoleon Dynamite, is a perpetually irate, neurotic, klutzy, inarticulate, but ultimately endearing high school student. When asked by a younger grade school student, “What are you gonna do today, Napoleon?,” Napoleon jerks his head away and briskly responds: “Whatever I feel like I want to do—gosh!”
We deem the theory that inflation is caused by corporate greed the “Napoleon Dynamite” theory of inflation: Prices rise because that is just what corporate types feel like doing that day. Gosh! Maybe someday they’ll not feel so greedy and prices will go back down. There is no theory here, cogent or otherwise.
Funny the fact-checkers at Facebook didn’t catch this one. But somehow we’re pretty sure you are probably smarter than they are, anyway!•
Bohanon and Curott are professors of economics at Ball State University. Send comments to firstname.lastname@example.org.