Stranger [Economic] Things

More Sneakflation

We had dinner earlier this week in Marin County and noticed something new on our bill – a 4 percent living wage surcharge!   We seriously doubt the effective food price increase shows up in the “food away from home” component in the CPI inflation and/or average hourly earnings.  Isn’t transparency supposed to be a hallmark of a market economy?   

We have been all over “shrinkflation” and “sneakflation” for years. 

Pricing Inefficiencies 

After dropping off my youngest at the airport yesterday, we found one of the most blaring pricing anomalies we have seen in many years.   Check out the relative gas price between two stations within 300 yards of one another in Marin County.  I filled up at $3.59 with no lines, and a gas station just 300 yards away was busy (full of cars), charging $4.79 per gallon, or a price 33.5 percent higher.   These strange things are not supposed to happen in the classical economic model, where consumers are assumed rational.    

Marin County

But, hey, it’s Marin County, where the median household income is $120k plus, ranked 8th highest in the nation, and the home of horse astrologers, Chardonnay, hot tubs, and the American Taliban.  It’s not impossible to make a case where rationality is always positively correlated with income or where the classical model does not reflect economic reality.  Or you fill in the blanks. 

See “bounded rationality” here

Gas Prices —  Thursday, December 15,  Mill Valley, California


Inflation is clearly embedded in the economy.

We suspect it will be much more difficult to wring out the inflation than the markets expect.  The fact restaurants have found ways to raise prices without raising prices, creating the sticker shock that induces demand destruction, and gas stations have such a wide price range to sell their product are indicators, at least to us, the stock of money is still way too high. 

We define money — not as the archaic monetary aggregates, such as M2, still cited by the Fred Flinstone economists — but any asset, including cash, that has the potential to increase purchasing power, such as increases in household wealth.  Levels (stocks) matter, not just changes (flows).  

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