Super Bowl Sunday is a time where millions in the United States gather with friends and family to watch football and eat a lot of food. A little over a week ago, not only was there the Super Bowl, but one of the Super Bowl commercials was a public service announcement (PSA) by President Biden. What did the President speak about in his PSA? How soft drinks are smaller and how bags of chips have fewer chips than they used to have. The phenomenon that the President addressed was "shrinkflation", which is the practice of reducing the size or quantity of a product while maintaining its sticker price.
The business practice of "shrinkflation" is a form of stealth inflation in so that customers are less likely to notice the smaller quantity than they would be of a price increase. Businesses partake in "shrinkflation" because they understand a certain aspect of human psychology related to the elasticity of demand. What shows up in academic research is that consumers are more sensitive to price increases than they are to package downsizing (Çakir et al., 2021; Yao et al., 2020; Wilkins et al., 2016; Çakir and Balagtas, 2014). As such, businesses partake in "shrinkflation" to improve their profit margin.
At first glance, I can understand how consumers would be annoyed. They are paying more for less, but doing so in a way that comes off as deceptive. Senator Elizabeth Warren portrays the practice of "shrinkflation" as corporate greed. This is hardly the first time the Senator has pushed her "greedflation" theory. I can tell you her "greedflation" theory is bunk. I wrote in October 2022 how corporate greed was not the main cause of the persistent inflation and how the theory does not withstand scrutiny.
There are already federal laws mandating the quantity or weight of each product. As the St. Louis Federal Reserve Bank brings up, it is the consumer's responsibility to compare weights against prices, but I digress. Warren et al. think that cracking down on the practice of shrinkflation would solve the problem. It would not. Businesses would simply increase their sticker prices, which would make consumers even more irate than they already are with the persistent inflation that Americans have been dealing with in recent years. If anything, Biden should be thankful for shrinkflation because it is masking and obfuscating inflation during an election year to which Biden contributed.
Am I saying that Biden is solely responsible for the inflation? Nope. Go back to the piece I wrote in November 2022 on the inflation that continues to this day. I threw plenty of blame at the Federal Reserve for expanding money supply. But guess what? Biden is also to blame because he signed the American Rescue Plan (ARP) Act, which greatly contributed to inflation. As a recent paper from the Economic Policy Innovation Center (EPIC) shows, large amounts of deficit spending during the COVID pandemic played a major role in this inflation (Beach, 2024).
While Trump was responsible for some of that deficit spending, Biden continued to amp up the deficit spending, even after the pandemic crisis was averted. If it were not for Biden's expansionary fiscal policy, businesses would not have to use "shrinkflation" practices in the first place. Biden wants us to ignore his vital role in increasing inflation and making goods and services much more expensive now than they were five years ago. That erodes the consumer's purchasing power, which means it is harder to enjoy life. As a consumer, you have a right to be angry. But don't be angry at businesses for "shrinkflation." Businesses have been trying to adapt to supply chain issues and increasing producer prices with "shrinkflation." Be angry at the government who flooded the economy with money and drove up consumer prices in the first place.
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