Cecil Bohanon & Nick Curott: Don’t believe everything you read on the internet





Economic Analysis: Cecil Bohanon & Nick CurottThe internet has certainly increased the amount of raw information available to the general public. But it also allows fools and charlatans to make claims that seem plausible, but are ultimately foolish and false. So what do we do?

There is no surefire answer, but here are three simple tests for any claim: Does the claim sound plausible? Is the claim correct? Is there a compelling theory behind the claim?

A recent internet meme on Facebook claimed: “Doritos removes 5 chips from each bag, Bounty cut the rolls at three sheets, and Wheat Thins found the family size was 2 ounces smaller – all for the same price as before.” This seems plausible. We have noticed and documented “shrinkage”. Sellers don’t want to raise prices for fear of losing market share. But rising costs, typically with increasing inflation, weigh on profit margins. Thus, reducing the amount in each pack could be the company’s best strategy.

But then the meme continues: “The company that makes Doritos made $42 billion in profit last year. The Bounty toilet paper company made $39 billion in profit last year. The company that makes Wheat Thins made $11 billion in profit last year.”

There’s something weird going on here. The numbers seem unbelievably high. An audit of public annual reports for each company indicates that actual profits in 2021 didn’t even come close to the meme’s claim. Net income after tax for PepsiCo, maker of Doritos, was $7.6 billion; for Procter and Gamble, maker of Bounty, $14.3 billion; and for Mondelez, maker of Wheat Thins, $4.3 billion. The meme concludes: “This is not inflation. They are companies that rip you off.”

“Napoleon Dynamite” is a charming 2004 film about teenage anxiety. The anti-hero, named Napoleon Dynamite, is an always furious, neurotic, clumsy, unspoken, but ultimately endearing high school student. When asked by a younger elementary school student, “What are you going to do today, Napoleon?” Napoleon pulls his head away and quickly responds, “Whatever I feel I want to do — gee!”

We consider the theory that inflation is caused by corporate greed is the ‘Napoleon Dynamite’ theory of inflation: prices rise because that’s exactly what companies feel like that day. Oh dear! Maybe one day they won’t feel so greedy and prices will drop again. There is no theory here, persuasive or otherwise.

Funny that Facebook’s fact-checkers didn’t get this one. But somehow we’re pretty sure you’re at least smarter than them!•

Bohanon and Curott are professors of economics at Ball State University. Send comments to ibjedit@ibj.com.




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