Inflation and, more specifically, grocery prices have become a hot election issue. If elected, Vice President Harris has promised controls in order to end “price gouging” by grocery stores. Basic economics tells us that price controls never work. One obvious outcome will be shortages. Do we really want to wait in line for a ration of bread, milk or any other daily staple once we have government price controls?
But, the law of unintended consequences will extend further than just shortages. Grocery store margins are already razor thin – reported to be just 1.6%. Profits are an economic wonder drug. They allow businesses, their employees and shareholders to thrive. As importantly, profits allow grocers and their suppliers to invest and innovate.
Innovation extends not just to the products that we consume, but their packaging and the garbage that packaging becomes. No one likes the waste that is left over whenever we make a purchase. That’s why “garbage” and “trash” have such negative connotations. We humans have been throwing our detritus into pits for at least 5,000 years. But, worrying about and trying to reduce the amount of waste that we generate is a much more modern concern. Societies only start to care about environmental issues as they get wealthier. And, when businesses earn enough profit to do something about it.
It probably was not until the 1980’s that we started to get serious about limiting waste. Since then the progress has been astounding. In 1960 for every trillion dollars of GDP (inflation adjusted) we generated nearly 20.6 million tons of municipal solid waste (MSW). But, that number dropped 42% in 2018 to 11.8 million tons.
National figures are not available after 2018. However, looking at two states, Florida and Texas, which saw rapid economic growth over the last few years, we see that in Florida MSW tonnage per billion dollars of gross state product (GSP) declined from 18.1 million to 17.3 million tons between 2018 and 2022. In Texas MSW tonnage per billion dollars of GSP dropped from 17.2 million to 16.4 million tons over the same period. So, I would expect similar progress throughout the country.
Elimination of unwanted packaging is as much an economic benefit as a more tangible product like sirloin steak or a head of lettuce. It’s just that most of us do not realize that we were/are buying it. But, just like a box of crackers, there is a supplier somewhere who has invested in order to provide it. Yes, sometimes it costs more to get less of what we don’t really want.
The largest consumer packaged goods companies have made commitments to further reducing packaging and increasing recycling. Most seek to have fully recyclable packaging in the near future. Continued progress can only come with innovation and investment. And, that takes profits. Campaign promises are often quickly forgotten. Let’s hope that imposing grocery store price controls becomes one of them.
