Hidden Inflation: the Economics of Toilet Paper

Amateur economist
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Whether we like it or not, we are all either a victim or benefactor of economics. Since we all buy things, we are subject to the economics of price and product inflation, or in some cases, deflation. Various products we purchase, including toilet paper are examples of economics and product price inflation.

Beginning in the late 1990’s and continuing into the 2000’s, various products have been re-introduced (either silently or with great fanfare) in smaller sizes and quantities. A few examples are:

Bottles of liquid dish detergent
Old: 30 oz.
New: 24-25 oz.

Bags of Sugar
Old: 5 lb. bag
New: 4 lb. bag

Packages of cheese slices
Old: 24 slices
New: 22 slices

Roles of paper towels
Old: 90-98 sq. ft.
New: 80-85 sq. ft.

Cartons of premium ice cream
Old: 16 oz.
New: 14 oz.

And countless other examples.

During the late 1990’s and early 2000’s, food and product costs were increasing as the result of commodity inflation. Product makers chose to decrease the size of their products vs. increasing the product’s price on the shelf. Unfortunately, this hidden inflation was not counted in official inflation numbers. Government statisticians assume product sizes are constant in size and weight from year to year and have no mechanism to adjust the rate of inflation for such product size or quantity changes.

The information and data used by the U.S. government to calculate the Consumer Price Index (the CPI, which includes food and other products) is not available to the public. In addition, the U.S. government has changed the way it calculates inflation more than 20 times. So, more than likely, the real rate of inflation is higher than what was reported in the past. Some economists estimate the real rate of inflation to be twice that as now reported.

However, since the Great Recession of the late 2000’s, inflation has not been of concern in the U.S. or the Western World, deflation (the falling of prices) has been of major concern. Despite lower raw material and commodity prices, producers and sellers of products have not increased the sizes or quantities of their products back to previous packaging sizes.  By leaving the smaller package sizes in place, along with lower ingredient and supply costs, many of these companies have had record profits over the last few years. The reasons for the record profits are often missed by economic commentators.

Amateur economistLastly, but not unimportant, the size of a roll of toilet paper reflects the economics of inflation to us all. Prior to the late 1990’s, toilet paper rolls were 4 1/2 inches across in width, fitting snugly onto the roller in your bathroom.

However, several years ago, the width (and in most cases the length of the roll as well) was reduced. Now, most toilet paper rolls are only 4 inches wide, giving much more space on either side while on the roller.

So the next time you are standing, sitting or contemplating in your bathroom, take a look at your smaller toilet paper roll and realize that, like it or not, we are all either a victim or benefactor of economics.