the Baby Ruth effect

As iceberg recently reminded me via email, Murray Rothbard pointed out that inflation can lead to more than rising prices:

All sorts of monstrous situations will occur. Decline in quality, for example. We will find that there will be more air in the Baby Ruth — you can’t find the Baby Ruth anymore anyway. There will be less chocolate in the chocolate. There is no way the state can police this, of course. And it’s very harmful to the public.

I fleshed out Rothbard’s example in "What ever happened to sexy stews?" and gave my own example:

With many goods, quality can vary significantly, not always in easy-to-measure ways. If people are used to paying 25¢ for a Baby Ruth, to use Rothbard’s example, then the Baby Ruth company is going to be loath to raise the price to 50¢, even if inflation has doubled all their input costs. What they do instead is cut whatever costs they can to keep the price at a quarter. So maybe they cut the number of peanuts in half, dilute the chocolate with cheaper vegetable oil, and make the candy bar 10% smaller. The product looks the same on the outside, and many people won’t notice the difference on the inside. But fans of the Baby Ruth chocolate bar will notice that the quality has fallen.

In my case, it wasn’t the falling quality of the candy I noticed, but the ever-crummier toy surprise in a box of Cracker Jack. Grownups would tell me about the whistles and decoder rings their childhood boxes of Cracker Jack had contained. Meanwhile, I watched plastic toys become cardboard-and-plastic toys become pure cardboard crapola.

Now it’s happening to the McDonald’s "Dollar Menu":

McDonald’s Cuts Cheese to Save Dollar Menu

080408burger.jpgTurns out the cheese in McDonald’s cheeseburgers is actually made with real dairy! The Wall Street Journal reports that the rising cost of cheese has put the franchise’s famed Dollar Menu in jeopardy. Some restaurants are now pushing a double cheeseburger with just one slice of cheese instead of the usual two. At other locations the price has been jacked up to an obscene $1.10. Now McDonald’s executives are considering yanking cheese from it altogether and calling it a double hamburger. But then there’s the price of beef to consider, which is also rising! It’s only a matter of time before the double mime burger – wheat-free bun, some lettuce and a little imagination – is rolled out.

(via Gothamist via iceberg)

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4 Responses to the Baby Ruth effect

  1. neural says:

    Yes! Nothing like scatologically suggestive images of candy bars to get the day started…

    Anyway, on reading this entry, I was reminded of my similar experience with the Mr. Goodbar.

    http://www.hersheys.com/products/details/mrgoodbar.asp

    Note the timeline indicates a formula change around 1992.

    I used to *love* the Mr. Goodbar. The chocolate was dark and snappy, and tasted excellent. Then, in 1992, my favorite candybar was ruined. Hershey’s claims “more peanuts”. Well, that might be, but the quality of the chocolate plummeted. They started using that nasty soft waxy chocolate that appears more grey than brown, and leaves a sickeningly sweet chalky coating in the mouth.

    Repulsive.

    Essentially, they dropped the cocoa content and replaced it with sweeteners, vegetable oils and emulsifiers.

    I don’t know that it was a cost reduction measure on Hershey’s part, but as a result I haven’t purchased a Mr. Goodbar since my first taste of the new formula 16 years ago.

  2. John Petrie says:

    Did you notice that cartons of ice cream used to be half-gallons and now they are 1.5 quarts? Well, a lot of them are, anyway. Breyer’s, mainly.

  3. Anthony gregory says:

    I was going to write about this for Lew a year ago! How the Fed Makes Fast Food Worse.

  4. Pingback: Blagnet.net » Rothbard on inflationary booms

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