Inflation Meme


A popular meme on social media contains serious mistakes and should be ignored.

Bottom line

The meme claims that food prices increased by 46.22 percent from January 2020 to January 2024, based on the sample items shown in the meme’s table.

There is a better sample of items: the Consumer Price Index published by the U.S. Bureau of Labor Statistics. It shows that food at home increased in price by 25.5 percent over the same period. This is a large difference — 46.2 vs. 25.5. Besides this, there are serious problems with the meme, as follows.

Arithmetic is wrong

A simple problem with the meme is the arithmetic. The meme shows totals of $39.28 and $53.74 for the two columns of prices, but the correct totals should be $45.84 and $66.24. However, the numbers in the Price Increase column are correct.

Prices are not credible

Some of the prices for January 2024 in the meme seem unrealistic. On May 16, 2024, I gathered recent regular prices (not sale prices or special offers) from Dillons in Wichita, Kansas. Table 2 shows these results. Some of the meme prices are lower than what I found, while others are much higher—as detailed in a footnote to the chart. Although I gathered prices in May and the meme shows January prices, this difference should not significantly affect the comparison.

Consumer Price Index

The meme treats each item as equally important, which doesn’t make sense.

The U.S. Bureau of Labor Statistics (BLS) gathers price data and publishes the Consumer Price Index (CPI). The CPI measures the average change over time in the prices paid by urban consumers for a market basket of goods and services (1) The BLS collects prices from 75 urban areas across the country and about 23,000 retail and service establishments. They also gather rent data from around 50,000 landlords or tenants (2) Some of this data goes back as far as 1913. The CPI is the most widely-cited price index and is a key source for monthly headlines and news about inflation, although the BLS Producer Price Index is also used.

Price data is expressed as an index referenced to a base period where the price of an item is given the value 100. Most food items use an index based on the average value in the years 1982 through 1984. For example, the index value for fresh whole milk in January 2024 was 250.7, referenced to a value of 100 for the base period 1982-84. We can say the price of milk is 2.507 times the 1982-1984 price, or that the price has increased by 150.7 percent.

The index is calculated using a market basket of goods and services, which are weighted by the average amount spent on each item. For example, the weight for food is 13.561, meaning that is the percentage of total spending that the average household spends on food. Food is composed of food at home at 8.177 and food away from home at 5.384.

Shelter is 36.222, energy is 6.644, apparel is 2.541, medical care services is 6.543, motor vehicle insurance is 2.828, and so on. (3)

Regarding the meme, it treats each item equally when calculating the supposed increase in food prices. However, as Table 4 in the appendix shows, items like bananas and tomatoes are about half as important as milk. Any calculation should take these differences into account. This is why I did not include the average of CPI increases in Table 1.

Table 1 shows the data from the meme along with the change in the CPI for the same period. (See table 3 below for the CPI data.) I also show the difference. For example, the claimed price increase for potatoes is 50.17 percent, while the increase in the CPI is 13.7 percent, meaning that the meme overstates the increase by 36.4 percentage points (which is an error of 72.6 percent).

Not inflationary

“In economics, inflation is a general increase in the prices of goods and services in an economy.” (4) The key is a general increase. The rate of increase may vary by item, but overall, prices rise due to large-scale factors like overall demand and supply. Also, famously described by Milton Friedman: “Inflation is always and everywhere a monetary phenomenon,” meaning that inflation is fundamentally caused by an increase in the money supply that outpaces economic growth.

Prices of individual items can change for reasons beyond general inflation. For example, egg prices spiked in 2022 due to a reduction in supply caused by bird flu, which led to the slaughter of tens of millions of birds. This is not what is typically meant by inflation. If it were, we would have to conclude that inflation rapidly declined in late 2023 when egg prices dropped from $4.82 to $2.04.



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