“Was this product not larger last year?” “Didn’t the contents of this package last longer than a week?” You’re not hallucinating—package sizes are decreasing. The products you are buying are shrinking. In addition to the obvious inflation you can notice everywhere, you are feeling the impact of shrinkflation. Shrinkflation is the phenomenon of goods getting smaller. Manufacturers reduce the size or quantity of a product while keeping the price the same. Sneaky, right? But what motivates these folks to do that? Well, my astute reader, it's a delicate dance between cost pressures and consumer psychology. When raw material prices soar, manufacturers face a conundrum: overtly raise prices and risk consumer backlash or subtly reduce the product quantity and hope no one notices. Oftentimes, they choose the latter. Many are quick to point out “corporate greed” as the reason. However, businessmen are just reacting to the pressures they face.
Pressure on Producers
You’ve noticed inflation of commodities you need to buy regularly: food, cleaning supplies, gasoline, and many others. Of course, this phenomenon of prices of all kinds of goods increasing is not limited to you—the consumer. Anybody who needs to buy materials and services to create something of value—any producer—faces the same challenge. While oftentimes there is some leeway, profits can only be decreased so much and, especially in sectors with small profit margins, very soon rising costs need to be passed on to consumers.
This is done in various ways: The most obvious one is increasing prices of goods sold. A sneakier way consists of shrinking the products. If you track this, you can see how a product that had a size of 100g just a year ago suddenly shrank to 90g but costs the same. Another subtle way of compensating for higher costs is using cheaper materials. This skimpflation—the reduction of product quality—is also a consequence of manufacturers having to increase prices to stay profitable. Probably, you have noticed that more and more elements of products you purchase consist of low-quality plastic instead of high-quality metal—a car, for instance, is nowadays just a huge pile of plastic. However, this is not greedy businessmen enriching themselves by fooling you—it is people providing the products you desire dealing with the devaluation of money by the state.
Increasing Prevalence
As a term describing shrinking products with steady prices, “shrinkflation” has only arisen in the last two decades, but the idea of selling less for the same price to stay profitable has been around for centuries, although not as prevalent as it is today. One example is European bakers shrinking bread during grain shortages. In earlier times, it was much harder to notice this, as not many possessed the necessary measuring equipment.
However, in recent decades, although competition forces businesses to sell higher-quality goods for lower prices, shrinkflation and skimpflation have expanded drastically, with manufacturers needing to react to constantly high levels of inflation. In sectors with a lot of competition, it is distinctly less attractive to make products more expensive, but, as explained, producers need to save on some ends if their costs increase.
Government Statistics
Although the U.S. Bureau of Labor Statistics as well as government agencies in other countries try to incorporate shrinking products in the CPI, this is a complex element. The situation contributes to the issue of the CPI not accurately reflecting the rate of increasing prices. Recently, there have been some investigations around US houses, your property, shrinking, for instance. Such phenomena cannot be incorporated properly into what the U.S. Bureau of Labor Statistics calls “a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.” Producers using lower-quality products, a subjective term, cannot be reflected well in the CPI either.
Governments profit from inflation appearing lower than it is, as the population does not get agitated and does not recognize that there is something wrong fundamentally. Hence, government agencies measuring inflation tend to underestimate it and there is no incentive to fix that. Whenever there is an argument about inflation, with one side pointing at the prices of everything rising drastically, the other side is quick to look at official government numbers. At the end of the day, consumers’ wallets feel shrinkflation and their time preference rises, as they feel the need to spend their money fast before it loses its value.
The state is quick to point to “corporate greed” as the reason. However, what it can’t explain appropriately is why those evil businesses didn’t raise their prices earlier. It is true that the worldwide wealth inequality has only been increasing for decades, but this is not caused by greedy businessmen, providing you with the goods and services you desire. Instead, the main culprit for this situation is central banks, as they are inflating asset prices. The richer you are, the more assets you own. Hence, while the wealthy profit from this situation, the poor suffer.
Quality Over Quantity
A great first step towards implementing shrinkflation wisdom into your own life is recognizing that products are shrinking. A second step is switching to a money that is not melting away. Measured in gold, the price of a good suit has not changed much over the last century. Measured in bitcoin, with a time horizon of four years or more, prices of everything are falling drastically. Switch to a better monetary unit and, although products are shrinking for you as well, they also get cheaper.
Focus on quality over quantity! Seek artisanal products, where shrinkflation fears to tread. That handcrafted soap may cost more, but it won't vanish mid-shower. When buying non-perishable goods, consider not purchasing bleeding-edge produces but older products that have been produced with quality in mind.
Reacting to the Market Environment
Shrinkflation isn't evil—it's survival. In a world of rising costs, businesses must adapt—they follow their incentives to make you an offer. But as consumers, let’s be savvy. Perhaps, armed with this knowledge, you’ll savor life's little pleasures—even if they’re a tad smaller. If you want to be angry at somebody, do not hate the ones supplying you with the goods you desire. Shrinkflation and its special form skimpflation are only outgrowths government-created inflation. Where have you experienced shrink- and skimpflation?
Think for yourself and question everything, my fellow liberty people!
TKDR: I work at the end of the supply chain (manage a produce dept). From what I can see, rising food costs are almost entirely due to rising energy costs, as fresh food must be grown, harvested, transported and refrigerated. The word 'almost' in that last sentence really doesn't belong there. It is all dependent on energy and yes, 'energy' = fossil fuels. Rising cost of energy stems from failure of law framers to acknowledge production realities. That smaller bag of Cheetos, or that doubling in the price of broccoli... direct result of interference with efficiency of energy production and distribution. EVs do not haul tens of thousands of 8000 lb produce trailers up the west side of the Rockies - diesels do that job. And not too put to fine a point on it, even nitrogen fertilizer production is a fossil-fuel demanding process; personally know one small-scale grower who abandoned a 20 year business due to rising fertilizer cost witnessed post-pandemic.
David, very good article and most relevant today. F.A. Hayek, “The Road To Serfdom” should be required reading to understand the history and meaning of true capitalism and its role in providing abundance and freedom to individuals (unlike and contrasted with “crony” capitalism that has evolved with big corporations and their corruption not only of free market competition but also government and politics of free people). The failure to identify the distinction between capitalism and corporatism has led us to the brink now of serfdom to oligarchs. Stop and consider Big Ag and the control of the food supply in the hands of a small number of very large conglomerate global corporations and you begin to see very quickly that while you are right in assuming capitalism dictates that increasing costs must be paid by consumers (demand) in order to maintain supply, however it is a gross oversimplification to lump crony (fake) capitalism by big corporations into the same category when in fact they exercise anti-capitalist means to limit competition and in fact do often use dishonest business practices to maximize profits. The danger in ignoring this distinction cuts right at the heart of libertarian free enterprise and needs to be highlighted and exposed more before it is too late. The general public today is clueless of any difference and lumps it all together as “capitalism” as you seem to be doing in this article. Your thoughts?