Economics Explored

Show host Gene Tunny and Morgans Chief Economist Michael Knox explore the recent insights Reserve Bank of Australia Deputy Governor Andrew Hauser shared on monetary policy at the 2024 Economic Society of Australia (QLD) business lunch. They examine the RBA's data-driven approach to interest rates,  the equilibrium real interest rate concept, and the impacts of Quantitative Tightening (QT). Michael is one of Australia’s leading market economists and RBA watchers, and he led the Q&A session with the Deputy Governor at the lunch. If you have any questions, comments, or suggestions, please email us at contact@economicsexplored.com  or send a voice message via https://www.speakpipe.com/economicsexplored. What’s covered in EP250Introduction. (0:00)RBA's monetary policy decisions and the influence of high US debt on interest rates. (4:13)The equilibrium real interest rate. (10:29)Monetary policy, inflation, and interest rates. (14:16)Central bank balance sheet unwind and its potential impact on interest rates. (21:42)US budget deficits, bond yields, and quantitative tightening. (27:09)Chinese RMB's decline in international reserve currency status. (34:18)TakeawaysRBA's Data-Driven Approach: The Reserve Bank of Australia relies on actual data more than forecasts when making interest rate decisions.Criticism of Overconfidence: RBA Deputy Governor Andrew Hauser criticised the unwarranted confidence with which some commentators argue for monetary policy moves.Implications of Quantitative Tightening (QT): The recent period of quantitative easing has complicated the relationship between government budget deficits and bond yields. However, there are concerns that as QT continues and deficits remain high, this relationship could reassert itself and lead to higher long-term interest rates than otherwise.Links relevant to the conversationRBA Deputy Governor Andrew Hauser’s Beware False Prophets speech:https://www.rba.gov.au/speeches/2024/sp-dg-2024-08-12.htmlChris Joye’s article ‘Arrogant RBA boss should stop trying to muffle opponents’:https://www.afr.com/policy/economy/arrogant-rba-boss-should-stop-trying-to-muffle-opponents-20240813-p5k25pKevin M Warsh: Financial market turmoil and the Federal Reserve – the plot thickens https://www.bis.org/review/r080415e.pdfFull transcripts are available a few days after the episode is first published at www.economicsexplored.com.

Ben Simpson, founder of Collective Shift, a crypto education and research company, shares valuable insights into the volatile world of cryptocurrency. Because the crypto field is filled with misinformation and scams, Ben emphasises the need for comprehensive education and reliable research before making investment decisions. He emphasises the importance of understanding the risks and potential of Bitcoin and other digital assets. He also discusses the regulatory landscape in Australia and the disruptive potential of decentralised finance (DeFi). NB This podcast episode contains general information only and should not be considered financial or investment advice.If you have any questions, comments, or suggestions, please email us at contact@economicsexplored.com  or send a voice message via https://www.speakpipe.com/economicsexplored. What’s covered in EP249Introduction. (0:00)Crypto market volatility and how to navigate it. (1:40)Bitcoin as a digital gold with potential for long-term growth. (6:54)Crypto regulation, tax treatment, and education. (12:21)Investing in cryptocurrency, avoiding scams, and seeking professional help. (16:44)Bitcoin ETFs and investment options in Australia. (21:06)Crypto market volatility, correlation with the stock market, and investment strategies. (25:20)Crypto investing and decentralised finance with Ben Simpson. (31:03)TakeawaysUnderstanding Crypto Volatility: Cryptocurrency markets, especially Bitcoin, are highly volatile. Investors must be prepared for significant price swings and understand the underlying factors driving these fluctuations.Importance of Education: The crypto space is filled with misinformation and scams. Ben emphasises the need for comprehensive education and reliable research before making investment decisions.Regulatory Landscape: The regulatory environment for cryptocurrencies, particularly in Australia, is still evolving. While Bitcoin and Ethereum are generally considered safe from a regulatory standpoint, many other cryptocurrencies could face challenges.Decentralised Finance (DeFi): DeFi has the potential to disrupt traditional banking by offering financial services without intermediaries. This space is growing and may offer exciting opportunities for investors.Safe Investing Strategies: Ben advises new investors to start with Bitcoin and be cautious of lesser-known cryptocurrencies, many of which may lack real value and be risky investments.Links relevant to the conversationCollective Shift: https://collectiveshift.io/Ben’s YouTube channel: https://www.youtube.com/@BenCollectiveShiftBen and Bergs podcast: https://open.spotify.com/show/5xir3V8fvtmHTAQy2D9dQdFull transcripts are available a few days after the episode is first published at www.economicsexplored.com.

Gene Tunny welcomes Dr Nicholas Gruen from Lateral Economics to explore the decline of Australia's policy exceptionalism. They delve into the era of microeconomic reforms, the role of neoliberalism, and the challenges current policymakers face. Nicholas provides a historical perspective and discusses potential ways forward. He shares insights from his time advising the Hawke and Keating governments, discussing the successes and failures of Australia’s economic reforms from the 1980s and 1990s.This is the last episode before a four-week break. Economics Explored will return in August 2024. If you have any questions, comments, or suggestions, please email us at contact@economicsexplored.com  or send a voice message via https://www.speakpipe.com/economicsexplored. What’s covered in EP248Introduction to Australia's loss of policy exceptionalism. (0:00)Regulation, economics, and politics in Australia in the 1960s and 1970s. (4:59)Early Australian economic reform and its challenges. (10:45)Australian economic reform under Hawke and Keating governments. (16:20)Car industry policy. (21:36)Free education vs HECS - why was HECS a good reform? (32:06)Airline deregulation. (36:48)Privatisation of public assets and its consequences. (42:55)Economics of toll roads (48:18)TakeawaysSince the early 2000s, Australia seems to have lost the problem-solving spirit and policy exceptionalism of the 1980s and 1990s, struggling in various policy areas like energy.Impact of Neoliberalism: Neoliberal reforms, initially embraced by the left, significantly improved Australia’s economic landscape but also led to unintended consequences.Key reforms included cutting tariffs, higher education policy changes, airline deregulation, and other competition policy reforms, but some privatised infrastructure assets have not been appropriately regulated post-privatisation.Challenges in Current Policy: Australia faces challenges in various policy areas, including energy and housing, indicating a need for renewed reform efforts.Moving forward will require reinvigorating honest, evidence-based policy conversations focusing on problem-solving rather than fixed ideological positions.Links relevant to the conversationNicholas’s YouTube channel where Uncomfortable Collisions with Reality episode will be published:https://www.youtube.com/@NicholasGruenNicholas’s Club Troppo post on economic reform featuring Colin Clark quote:https://clubtroppo.com.au/2008/03/01/compare-and-contrast/Lumo Coffee promotion10% of Lumo Coffee’s Seriously Healthy Organic Coffee.Website: https://www.lumocoffee.com/10EXPLOREDPromo code: 10EXPLORED Full transcripts are available a few days after the episode is first published at www.economicsexplored.com.

In this episode, Gene Tunny explores the relationship between government spending and wealth creation. He talks about President Obama’s memorable expression, “You didn’t build that”, and how economists think about the role of government and wealth creation. Gene discusses the roles of both the government and private sector in generating wealth and their impact on productivity, GDP and living standards.  If you have any questions, comments, or suggestions, please email us at contact@economicsexplored.com  or send a voice message via https://www.speakpipe.com/economicsexplored. What’s covered in EP247Government role in the economy - private sector vs public sector. (0:00)Government spending and its impact on the economy. (5:52)Keynesian economics and the role of aggregate demand in determining GDP. (11:51)Government spending and its impact on productivity. (18:13)Government intervention in the economy, with a focus on public goods and cost-benefit analysis. (25:11)Government's role in the economy, potential for crowding out the private sector. (31:32)Government impact on the economy and living standards. (38:20)TakeawaysGovernment Spending and GDP: Government expenditures can contribute to GDP, but their efficiency and the type of spending critically determine their economic impact.Private Sector's Role: The private sector is essential in wealth creation due to its efficiency incentives, but it also depends on government-provided infrastructure and services.Crowding-out Effect: Excessive government spending can crowd out private investment, potentially reducing overall economic efficiency and growth.Cost-Benefit Analysis: It is vital to conduct thorough cost-benefit analyses for government projects to ensure that public funds are used effectively and do not become a drain on the economy.Links relevant to the conversationDan Mitchell’s article on the impact of government spending on economic growth:https://www.heritage.org/budget-and-spending/report/the-impact-government-spending-economic-growthDan’s article “OECD Economic Research Finds that Government Spending Harms Growth”https://danieljmitchell.wordpress.com/2016/11/28/oecd-economic-research-finds-that-government-spending-harms-growth/Episode on Alvin Hansen and Evsey Domar:https://economicsexplored.com/2024/06/19/popularizing-keynes-how-alvin-hansen-and-evsey-domar-shaped-post-war-macroeconomics-ep245/Episode on Thatcher:https://economicsexplored.com/2020/12/06/ep64-adam-smith-margaret-thatcher-with-dr-eamonn-butler/Bacon and Eltis’s 1978 book “Britain’s Economic Problem: Too Few Producers”:https://link.springer.com/book/10.1007/978-1-349-15863-8 Lumo Coffee promotion10% of Lumo Coffee’s Seriously Healthy Organic Coffee.Website: https://www.lumocoffee.com/10EXPLOREDPromo code: 10EXPLORED Full transcripts are available a few days after the episode is first published at www.economicsexplored.com.

This episode features a conversation between Gene Tunny and Stephen Kirchner about the US dollar's dominance in global finance. They examine the reasons behind the dollar's strong position, the effects of US fiscal policy and public debt, and the debate over its future role. Kirchner explains how the US's status as a net oil exporter influences currency dynamics and global trade.If you have any questions, comments, or suggestions, please email us at contact@economicsexplored.com  or send a voice message via https://www.speakpipe.com/economicsexplored. About Stephen KirchnerStephen Kirchner is the Senior Economist at the Business Council of Australia, the former Program Director for Trade and Investment at the United States Studies Centre at the University of Sydney, and a Senior Fellow of the Fraser Institute. An expert in monetary and fiscal policy, financial markets, and trade economics, Mr. Kirchner was formerly a research fellow at Australia's Centre for Independent Studies, an economist with Action Economics, LLC and a former director of economic research with Standard & Poor's Institutional Market Services, based in Sydney and Singapore. He has also worked as an advisor to members of the Australian House of Representatives and Senate.Mr. Kirchner holds a BA (Hons) from the Australian National University, a Master of Economics (Hons) from Macquarie University, and a PhD in Economics from the University of New South Wales. He blogs at www.institutional-economics.com and is active on Twitter (@insteconomics).What’s covered in EP246US dollar's global role as reserve currency, benefits, and potential challenges. (0:00)US fiscal policy and its impact on the US dollar's global role. (8:40)Monetary vs fiscal policy dominance in determining interest rates and exchange rates. (14:39)US dollar's role in global finance and its potential replacement by other currencies. (20:39)China's economy, currency, and trade agreements. (29:59)TakeawaysThe US dollar's dominant role in global finance is largely due to the unparalleled size, depth, and liquidity of US capital markets.Despite concerns about the US fiscal position, the demand for US assets remains strong, which supports the dollar's value.Other economies, like the Eurozone and China, face challenges in rivaling the US dollar due to less developed capital markets.The US becoming a net oil exporter has altered the traditional relationship between the US dollar and commodity prices.Fiscal policy in the US, while concerning, does not currently pose an immediate threat to the dollar's global dominance due to strong international demand for US assets.Links relevant to the conversationStephen’s post on dollar dominance:https://stephenkirchner.substack.com/p/dollar-dominance-if-you-can-keepStephen’s US Studies Centre article “The ‘reserve currency’ myth: The US dollar’s current and future role in the world economy”:https://www.ussc.edu.au/the-reserve-currency-myth-the-us-dollars-current-and-future-role-in-the-world-economyStephen’s post on how the US dollar is now a commodity currencyhttps://stephenkirchner.substack.com/p/why-is-the-australian-dollar-so-weakLumo Coffee promotion10% of Lumo Coffee’s Seriously Healthy Organic Coffee.Website: https://www.lumocoffee.com/10EXPLOREDPromo code: 10EXPLORED Full transcripts are available a few days after the episode is first published at www.economicsexplored.com.

In this episode, show host Gene Tunny explores the influential theories of economists Alvin Hansen, the “American Keynes", and Evsey Domar. The episode was inspired by a first edition copy of Hansen and Perloff’s 1944 book “State and Local Finance in the National Economy” that Gene was gifted. It includes a handwritten inscription from Hansen to Domar, his student at Harvard. Key topics include the Keynesian IS-LM model, the secular stagnation hypothesis, and the Harrod-Domar growth model. The episode provides a rich historical context and examines the relevance of these theories to today's economic challenges.If you have any questions, comments, or suggestions, please email us at contact@economicsexplored.com  or send a voice message via https://www.speakpipe.com/economicsexplored. What’s covered in EP245Book by Alvin Hansen and Harvey Perloff on State and Local Finance in the National Economy. (0:00)Alvin Hansen's contributions to economics, including popularizing Keynes's theory and teaching influential students such as Paul Samuelson and Evsey Domar. (5:06)IS-LM model. (11:13)Keynesian economics and secular stagnation hypothesis. (17:42)Fiscal policy and its impact on the economy. (25:28)Domar's life and growth model. (32:29)Harrod-Domar model and its implications for economic policy. (39:00)Economic growth models and their limitations. (45:22)TakeawaysSecular Stagnation Hypothesis: Hansen's theory suggesting that mature economies could face prolonged periods of low growth due to structural factors.IS-LM Model: Developed by Hansen and Hicks, this model became a foundational tool in macroeconomics for analyzing the effects of fiscal and monetary policy.Fiscal Perversity Hypothesis: Hansen and Perloff's analysis showing that state and local fiscal policies can sometimes exacerbate economic downturns.Harrod-Domar Growth Model: An important Keynesian model that emphasizes the relationship between investment and economic growth, though not fully explaining long-term growth.Legacy and Influence: Both Hansen and Domar significantly shaped the development of economic theory and policy, influencing key areas such as social security and public investment strategies.Links relevant to the conversationInscription from Hansen to Domar on Gene’s copy of State and Local Finance in the National Economy:https://drive.google.com/file/d/167cJbNhxBJpsKRwSYGHxbjupX1Q3Iacx/view?usp=sharingWilliam Easterly’s paper on the Harrod-Domar model:https://papers.ssrn.com/sol3/papers.cfm?abstract_id=11020Fiscal perversity papers:Fabrizio Carmignani’s article “Can public expenditure stabilize output? Multipliers andpolicy interdependence in Queensland and Australia”:https://www.sciencedirect.com/science/article/abs/pii/S0313592615300242?via%3DihubTamim Bayoumi and Barry Eichengreen’s paper “Restraining Yourself: The Implications of Fiscal Rules for Economic Stabilization”:https://www.elibrary.imf.org/view/journals/024/1995/001/article-A002-en.xmlAn abridged version of Skidelsky’s three-volume biography of Keynes:https://www.penguin.com.au/books/john-maynard-keynes-9780143036159Lumo Coffee promotion10% of Lumo Coffee’s Seriously Healthy Organic Coffee.Website: https://www.lumocoffee.com/10EXPLOREDPromo code: 10EXPLORED Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au. Full transcripts are available a few days after the episode is first published at www.economicsexplored.com.

Darren Brady Nelson joins Gene Tunny to discuss the evolution of competition policy in Australia over the past few decades. Darren draws on his experience as an economist in the NSW Treasury and the Queensland Competition Authority. Gene and Darren reflect on the successes of the original National Competition Policy reforms and assess the more limited scope of the subsequent competition policy review. Darren analyzes CPI data to understand rising living costs and argues for reducing government interventions. The conversation also covers unintended policy consequences (e.g. fraud in disability services provision), the US Founding Fathers’ vision for limited government, and debates around the appropriate roles and sizes of government in Australia and the US. If you have any questions, comments, or suggestions, please email us at contact@economicsexplored.com  or send a voice message via https://www.speakpipe.com/economicsexplored. What’s covered in EP244Australian competition policy history and reforms. (0:00)Free market competition and its impact on living standards. (7:56)Economic policy and its impact on individuals, including a tragic story from Karen Chester illustrating the costs of high tariffs. (12:31)Economic policy reforms in Australia during the 1980s and 1990s, including the Hilmar report and National Competition Policy (16:08)The benefits and costs of National Competition Policy in Australia. (23:36)Sequels and the original, with examples from movies and economics. (31:51)Competition policy and its benefits, challenges, and potential reforms in Australia. (35:27)Cost of living and government interventions. (40:12)Government intervention in various sectors, including energy, childcare, and alcohol/tobacco. (44:42)Government policies and their unintended consequences, including fraud in disability support programs. (49:23)The size and role of government in Australia and the US, focusing on the founding fathers' intentions. (53:43)Competition policy in Australia and the US, focusing on regulation and deregulation. (1:00:10)Economics, regulation, and antitrust law with a focus on Australia and the US. (1:06:07)TakeawaysNational Competition Policy (NCP) significantly improved economic efficiency and consumer benefits in Australia.Reforms under NCP included corporatization and privatization of government-owned businesses, and opening up markets such as telecommunications and airlines to competition, leading to lower prices and better services in many cases.Despite being from a traditionally left-wing political party, the Hawke-Keating Government was crucial in initiating market-friendly reforms.Future competition policy reforms face challenges due to political and lobbying pressures, especially in regulated sectors like pharmacies.Transparent and rational community service obligations were key to ensuring fair distribution of competition policy benefits. Links relevant to the conversationWhere you can find Darren’s submission to the Productivity Commission’s National Competition Policy analysis inquiry:https://www.pc.gov.au/inquiries/current/competition-analysis/submissionsAFR article “PC's Karen Chester's love of economics born of despair” (pay-walled):https://www.afr.com/politics/pcs-karen-chesters-love-of-economics-born-of-despair-20161206-gt4pohWhitlam Era book featuring Gene’s article on Whitlam and the Economy:https://www.connorcourtpublishing.com.au/THE-WHITLAM-ERA-A-REAPPRAISAL-OF-GOVERNMENT-POLITICS-AND-POLICY_p_511.htmlProductivity Commission’s 2005 NCP review:https://www.pc.gov.au/inquiries/completed/national-competition-policy/report/ncp.pdfEpisode featuring John Nantz, Free Markets & Limited Government: Lessons from the Founding Fathers for Today  – EP218: https://economicsexplored.com/2023/12/14/free-markets-limited-government-lessons-from-the-founding-fathers-for-today-ep218/Lumo Coffee promotion10% of Lumo Coffee’s Seriously Healthy Organic Coffee.Website: https://www.lumocoffee.com/10EXPLOREDPromo code: 10EXPLORED Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au. Full transcripts are available a few days after the episode is first published at www.economicsexplored.com.

This episode explores the resurgence of industrial policy in the US and Australia. We critically analyze whether government interventions can truly shape industries or if they are doomed to repeat past mistakes, such as those experienced during the 1970s and with the Concorde project. The episode includes clips featuring Saxon Davidson from the Institute of Public Affairs and Eamonn Butler from the Adam Smith Institute. If you have any questions, comments, or suggestions, please email us at contact@economicsexplored.com  or send a voice message via https://www.speakpipe.com/economicsexplored. What’s covered in EP243Introduction to Industrial policy and its potential consequences. (0:00)Budget, inflation, and economic policies in Australia. (8:34)Climate change policy and government incentives for renewable energy. (13:59)Australian economy, productivity, and government intervention. (19:44)UK's economic struggles in the 1970s, including strikes. (29:41)The failure of the Concorde supersonic jet project. (35:59)Failures of activist industrial policy - e.g. in Australia's car industry. (49:16)TakeawaysRevival of Industrial Policy: Governments in the US and Australia are reintroducing industrial policies to shape their economies, sparking debate among economists.Historical Lessons: The economic turmoil of the 1970s and failures such as the Concorde serve as cautionary tales against heavy government intervention in industry.Climate Policy Challenges: The push for renewable energy in Australia raises concerns about the rapid transition and its impact on the economy and energy grid reliability.Productivity Focus: Effective economic policies should enhance productivity through structural reforms rather than picking winners.Government's Role: While there is a place for government to address market failures, extensive intervention often leads to inefficiencies and unintended consequences.Links relevant to the conversationAustralian Taxpayers’ Alliance Budget Chat:https://www.youtube.com/live/MYX35Lk_ZYA?si=0kJzBt47Yh_5sUnSGene’s CIS issues analysis paper on the Australian budget, co-authored with Robert Carling:https://www.cis.org.au/publication/budget-fails-important-policy-tests/Episode with Eamonn Butler on Thatcher:https://economics-explained.simplecast.com/episodes/adam-smith-and-margaret-thatcher-with-dr-eamonn-butler-1oXNvQg_Episode on Concorde:https://economicsexplored.com/2022/03/20/concordes-economic-lessons-a-closer-look-ep131/Previous episodes on Australia’s energy transition:https://economicsexplored.com/2023/08/24/australias-net-zero-transition-successes-challenges-w-andrew-murdoch-arche-energy-ep202/https://economicsexplored.com/2022/12/19/aussie-energy-crisis-net-zero-transition-w-josh-stabler-energy-edge-ep170/Australia’s Hydrogen Production and Critical Minerals Tax Incentives:https://www.ato.gov.au/about-ato/new-legislation/in-detail/businesses/hydrogen-production-and-critical-minerals-tax-incentivesLumo Coffee promotion10% of Lumo Coffee’s Seriously Healthy Organic Coffee until 30 June 2024.Website: https://www.lumocoffee.com/10EXPLOREDPromo code: 10EXPLORED Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au. Full transcripts are available a few days after the episode is first published at www.economicsexplored.com.

Daniel Lawse, Chief Century Thinker at Verdis Group, helps many organizations, such as Seattle Aquarium, become more sustainable and contribute positively to the environment. Daniel joins Gene Tunny to discuss how organisations can make meaningful climate and environmental actions. They cover regenerative practices, the journey from sustainability to net-zero emissions, and the crucial role of long-term strategic planning. They also discuss the degrowth movement and how Warren Buffett’s annual Berkshire Hathaway meeting boosts local businesses in Omaha, where Verdis Group is based.  If you have any questions, comments, or suggestions, please email us at contact@economicsexplored.com  or send a voice message via https://www.speakpipe.com/economicsexplored. What’s covered in EP242Introduction. (0:00)Climate action plans and sustainability implementation for organizations. (3:05)Regenerative systems, circular economy, and ecosystem types. (10:29)Sustainability and environmental economics, enlightened self-interest and long-term thinking. (16:09)Sustainable growth and development, comparing nature’s regenerative approach with human economies. (23:15)Growth vs degrowth. (29:20)Warren Buffett’s impact on Omaha. (34:20)TakeawaysThrough climate action plans, organizations can take practical steps to reduce their environmental impacts and work towards goals like net zero emissions.Shifting mindsets from short-term to long-term thinking and considering impacts on future generations can drive more sustainable decision-making.Nature provides many examples of regenerative and circular systems that organizations can learn from using approaches like biomimicry.Enlightened self-interest and purpose-driven values can be strong motivators for sustainability action in addition to regulatory requirements.Balancing economic and environmental considerations is an important topic for debate.Links relevant to the conversationVerdis Group: https://verdisgroup.com/Seattle Aquarium case study: https://verdisgroup.com/case_studies/seattle-aquarium/Patagonia - Don’t Buy This Jacket, Black Friday and the New York Times: https://www.patagonia.com.au/blogs/stories/don-t-buy-this-jacket-black-friday-and-the-new-york-timesBooks on the role of energy in growth and relevant to the degrowth debatehttps://www.e-elgar.com/shop/gbp/the-economic-growth-engine-9781849804356.htmlhttps://www.amazon.com.au/Civilization-Distinguished-Professor-Emeritus-University/dp/0262035774https://www.amazon.com.au/Growth-Microorganisms-Megacities-Vaclav-Smil/dp/0262042835Previous episode on degrowth:https://economicsexplored.com/2023/10/06/growth-or-degrowth-w-oliver-hartwich-nz-initiative-ep208/Lumo Coffee promotion10% of Lumo Coffee’s Seriously Healthy Organic Coffee until 30 June 2024.Website: https://www.lumocoffee.com/10EXPLOREDPromo code: 10EXPLORED Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au. Full transcripts are available a few days after the episode is first published at www.economicsexplored.com.

Consumers have noticed bags of chips, chocolates, and many other products have shrunk, but prices have not come down. This episode of Economics Explored features a detailed discussion on shrinkflation with Gene Tunny and Arturo Espinoza Bocangel. They analyze various examples of shrinkflation and its impact on the cost of living. The episode also considers the potential for regulatory and other measures to address this practice. For instance, a US Senator wants to outlaw shrinkflation, and a French supermarket chain puts a sticker on shelves identifying shrunken products. Gene and Arturo also consider the high degree of market concentration in the grocery sector and what the FTC in the US and the ACCC in Australia can do about it.If you have any questions, comments, or suggestions, please email us at contact@economicsexplored.com  or send a voice message via https://www.speakpipe.com/economicsexplored. What’s covered in EP241Introduction to Shrinkflation (product shrinking in size while price remains the same). (0:00)Shrinkflation in the food industry, with examples of product size reductions and price increases. (5:04)Senator Casey’s proposal to stop corporations from deceiving consumers through shrinkflation. (10:05)Shrinkflation and its impact on consumer prices. (13:38)Shrinkflation as a business strategy. (19:10)Market power and concentration in the Australian supermarket industry. (25:25)Supermarket competition in Australia, with a focus on Coles and Woolworths. (30:12)Supermarket power and calls for regulation. (35:47)Coles and Woolworths' market power and supplier squeeze. (40:41)TakeawaysShrinkflation Explained: Shrinkflation occurs when manufacturers reduce the size of products while maintaining the same price, effectively increasing the unit price without consumers' direct awareness.Impact on Consumers: This practice can be deceptive, as it often goes unnoticed by consumers who end up paying more for less, affecting their purchasing power and overall cost of living.Supermarket Power: Large supermarkets like Coles and Woolworths have significant market power, which they can use to negotiate lower prices from suppliers. There are allegations of unfair use of this market power and there are a couple of government inquiries investigating this among other market power issues. Regulatory Responses: There are ongoing discussions and legislative efforts, such as those led by Senator Bob Casey in the US, to classify shrinkflation as a deceptive practice and regulate it more strictly.Market Concentration: The high level of market concentration in the supermarket sector, particularly in Australia and to an extent in the US, means that major supermarkets can allegedly make it harder for new entrants like Aldi and Costco to compete effectively.Links relevant to the conversationSenator Casey's Report on Shrinkflation: https://www.casey.senate.gov/imo/media/doc/shrinkflation_report.pdfABS on how shrinkflation is accounted for in CPI calculation:https://www.abs.gov.au/articles/quality-change-australian-cpiCarrefour’s Shrinkflation Warning:https://www.bbc.com/news/business-66809188  Sanjoy Paul's article on eight ways Woolworths and Coles squeezed their suppliers and customers:https://theconversation.com/8-ways-woolworths-and-coles-squeeze-their-suppliers-and-their-customers-223857Details on the exchange between the Woolworths CEO and an Australian Senator during an inquiry - “Greens senator threatens Woolworths CEO with six months in prison for contempt of Senate”:https://www.abc.net.au/news/2024-04-16/woolworths-ceo-threatened-with-contempt-by-senate-committee/103728244Bloomberg report on Lina Khan and FTC:https://www.theguardian.com/us-news/2024/mar/09/lina-khan-federal-trade-commission-antitrust-monopoliesPrevious episodes discussing supermarkets and market power with Simon Cowan and Danielle Wood:https://economicsexplored.com/2023/08/31/how-to-improve-housing-affordability-and-why-the-greedflation-thesis-is-wrong-w-simon-cowan-cis-ep203/https://economicsexplored.com/2024/03/12/from-the-vault-antitrust-with-danielle-wood-now-australian-productivity-commission-chair/Lumo Coffee promotion10% of Lumo Coffee’s Seriously Healthy Organic Coffee until 30 June 2024.Website: https://www.lumocoffee.com/10EXPLOREDPromo code: 10EXPLORED Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au. Full transcripts are available a few days after the episode is first published at www.economicsexplored.com.