Tuesday, February 26, 2008

Hogs and Ham

"I see that food prices have gone up," says the president. "I don't understand. The price that breeders receive for hogs is going down, but the price of ham is skyrocketing. But it seems to me that there's a connection between hogs and ham. I may not be a country boy, but somehow that information has made it to my brain."

One doesn't have to be a country boy to learn a little more economics than the presidential brain seems to have absorbed. If hogs walked from their pens into grocery stores, he might have a point. But when they have to be transported using fuel whose price has risen sharply; when they have to be slaughtered, dressed, packaged, shipped, and retailed by enterprises using a variety of inputs whose prices have nothing to do with the price of hogs; then the matter of a "just price" for ham becomes a little more complicated than Sarko lets on.

Nevertheless, the threat to crack down on price gougers is always popular, so we have Fillon announcing une opération coup de poing and various advisors suggesting new labeling schemes that will require sellers to label goods with information about recent price variations in addition to the current price. Improved information always greases the cogs of the market machinery, but information about grocery prices, for instance, is useless if there is only one low-cost retail outlet in an area, as is the case in many parts of France owing to legal restrictions on market entry for grandes surfaces. Information is also useless if consumers don't believe it, and it is well-documented that consumer perceptions of inflation in France are at odds with official measures. Finally, information about recent price rises for a particular product won't convey any information about changes in the overall price and wage levels, nor will it take account of different consumption patterns by people of different income levels. So it is hard to avoid the conclusion that Sarkozy and the government are trying to do something, anything, simply in order to meet the public clamor for action on the purchasing power front, when they know perfectly well that what they're doing is useless. Indeed, worse than useless, since it conveys disinformation about where the real problems are.

3 comments:

Anonymous said...

I am struck by the fact the cheapest items have increased the most (i.e, store brands) as well as 'replacement items' - for example, when you can't afford meat, you'll buy ham and eggs; when you can't afford veggies, you'll buy pasta. Pasta, ham, eggs, bread, and milk have known the sharpest increases. In fact a small market in my area no longer posts discounts on beef or deli items; it now posts egg and milk prices on the door because that's how people figure prices now. (As far as I know, there is no State mandated price for milk in France.)

Anonymous said...

Sorry - I meant to add this conclusion:
As a result, the poorer you are, the more you are affected by this price hike.
I would assume that people who buy veau fermier élevé sous la mère garanti de l'Aubrac aren't affected in the same way.
Conversely, if you finished the month with French toast or eggs and ham or pasta with tomatoes, you are now finishing the month in Restos du coeur along with your kids.
I am speaking about people who work - I have no idea how unemployed people manage.

(Unrelated question: the French don't seem to have ramen noodles, has anyone found a cheap brand somewhere?)

Douglas said...

My local monoprix carries a brand called Mamee instant noodles. In Paris you can pick up the Japanese version at either Kioko near Opera or Kanae in the 15th.