The Fallacy of Elizabeth Warren’s ‘Shrinkflation’ Theory: Debunking the Blame on Corporate Greed

Do you hate it when the big bag of chips you bought turns out to contain mostly air inside? Well, Sen. Elizabeth Warren (D–Mass.) does, and she’s crusading to end this injustice.
In a series of tweets and videos over the past few days, Warren has come out swinging against the “shrinkflation” of Doritos, Oreos, and other store-bought products whose sizes have shrunk even as their prices remain the same.
“These big corporations are shrinking how much they give us, but they’re charging the same amount or sometimes even more. Corporate executives thought we wouldn’t notice, but they’re wrong,” said Warren in a video posted to X (formerly known as Twitter) earlier this week.
Another word for shrinkflation is an obscure concept economists call “inflation”—where general price increases erode the purchasing power of consumers’ dollars. Inflation can appear when the price of a same-sized bag of chips increases, and when the size of a same-priced bag of chips decreases. Both phenomena are still just the per-unit cost of a good increasing.
Warren’s rant about shrinking Oreo packages is just the senator’s way of adding a conspiratorial gloss to the painfully obvious effects of decades-high inflation the country’s lived through during and after the pandemic.
But one doesn’t need conspiracy theories to explain recent inflation. The federal government’s $4 trillion in fiscal stimulus during the pandemic put a lot of cash in people’s hands right as production was falling. The inevitable result of more money chasing fewer goods is higher inflation.
The Biden administration and a Democratic Congress made things even worse by passing a $1.9 trillion American Rescue Plan in March 2021, when an economic recovery was already underway.
Warren supported all these massive spending bills and at times even advocated for more generous spending on things like rent subsidies. If the senator is looking for someone to blame for shrinking cookie packages, she need only look in the mirror.
She’s opted to look into a camera instead to blame “shrinkflation” on the greed of corporate executives who’ve increased their profits faster than the rate of inflation.
“We’re not fooled. These giant corporations are inflating their profits and leaving us with the crumbs. Literally,” says Warren in her video.
This is remarkable, if facially convincing, blame-shifting. It’s true that corporate profit increases outpaced consumer inflation early in the pandemic.
That’s not because they discovered a magical ability to get consumers to spend more for less. Rather, those increased profits are also a product of policies Warren supported. Corporations raised their prices in anticipation of rising production costs. Government stimulus gave consumers a lot more money to spend on their products. Naturally, they made more money for a time.
The cause-and-effect Warren traces between smaller snack packages and higher corporate profits are really just two effects of inflationary spending policies the senator supported.
Warren has called for a “crackdown” on corporate greed, although she doesn’t elaborate on what exactly that might look like. Perhaps she wants quotas of Oreos per package?
While the senator is posing as a hawk on “shrinkflation,” she’s called on the Federal Reserve to slash interest rates, another policy that would in all likelihood increase inflation and corporate profits.
As it stands, the rate of inflation is cooling. Corporate profits are also falling as higher production costs have caught up with their higher prices.
This doesn’t mean prices will decline to pre-pandemic levels. The increased air in Doritos bags is here to stay. Consumers might rightly feel some anger when their chip bag comes to a premature end. If they’re looking for someone to blame, they’d be wise to point an orange, crumb-crusted finger at Warren’s inflationary agenda and not the corporate executives who made their snack.