Flashback – Price Deception

[On New Year’s Eve 2012 I posted a look at the various ways advertisers use prices to convey a false impression. Make prices appear low to suggest a bargain; jack them up to give the impression of special quality or luxury items. Because of the date, I ended with a brief note on champagne. Though it’s only June, why not read this and then find something to celebrate?]

We are deceived by a lot of things, by ourselves and by others, especially advertisers. We are all familiar with the pricing scheme of marking items as $19.99 instead of $20 to make them seem like a bargain, even though many people, when asked, will describe the $19.99 shirt as a $20 shirt.  Consciously we are not fooled, but subconsciously it registers as a better deal. Consider that  nine-tenths of a penny per gallon on the price of gasoline.

Surprisingly, the opposite strategy is also used. When paying a higher price, we often believe we are buying better quality even when we are really getting substantially the same thing. In prior postings I brought your attention to tests of (more expensive) organic foods showing that they are not nutritionally superior. Recently we learned that family cars outperformed luxury cars in the new crash tests. I have seen many Consumers Digest-type articles saying that ordinary moisturizers help your skin as well as the high-priced brands that claim to be superior. Higher-priced brand name drugs continue to sell well against similar or even identical generics by virtue of perceived quality. “When served microwaved food from the frozen food section in the setting of a fine restaurant, most people never notice.”

I remembered some time ago seeing a story about wine judging. Experts were asked to rate a certain group of wines. Later, in what they thought was a different event, they were presented with the same wines. The ratings of the same wines by the same judges came out completely different – no correlation whatsoever. I couldn’t find that source, but was overwhelmed by similar stories.  One told of wine tasting experts fooled in general, recommending wines with expensive labels with eloquent descriptions of their superiority over the same wine poured out of an different bottle. Experts also gave differing descriptions when served a white wine and the same wine with red food coloring added. Others couldn’t tell if a wine was red or white when they drank them from black-colored glasses.

It’s not only the experts who are fooled. “Expensive wine is like anything else that is expensive, the expectation it will taste better actually makes it taste better.” This article gave even more examples.  HDTV clarity and cheese tasting elicited the same perception errors based on price. A January 2008 study showed that adults rated the same wine as tasting better when it came from bottles labeled $45 than from ones labeled $5.

How would this apply to the art world? Experts always want to tell us what to think and what is real art. We often look at the work and scratch our heads. Here is a comment from a friend who visited an exhibition of what was proclaimed to be a major contemporary British artist at the Aberdeen (Scotland) Art Museum. “Imagine a giant empty exhibit hall with nearly-blank canvases, each about 7 feet square, or painted unevenly in reddish-orange oil. A life-size bronze casting of a rumpled sleeping bag.” I'm sure most of us would be equally puzzled at the praise for such an exhibit, but in the art world there is so much hype, and it’s so easy for the experts to pompously fall back on the accusation that others "just don’t get it." We buy that logic and that’s why we get what we get. (For an amusing spoof on contemporary art check out a film called Untitled).)

The effects of high price and over-reliance on so-called experts apply in many other fields. So before you buy something based on the name or the price, do the research. Whether it’s food, art, drugs, wine, cosmetics or cars, more expensive is not necessarily better. When all you have to go on is expert opinion rather than evidence, you are usually safe to trust your own taste.

Which brings us to the real topic for today – champagne. It is, after all, New Year’s Eve.  In this case I have done the research for you, and guess what?  More expensive is not necessarily better. As this British source says, “In a blind test that has thrilled the marketing departments of the major retailers and perturbed at least one of the grande marques, six wine experts gave a resounding vote of support to some of the less glamorous bottles.”

So buy what you like and save a little cash. Happy Critical Thinking in the New Year [or Independence Day], and Cheers!

Food Labels are Confusing

It began with a local health-news report that led me to the Consumer Reports website. The problem: Food labels are confusing. Not all claims and seals on food packaging can be trusted. 

Consumer Reports wants to help shoppers by making sense of some of the more common labels. But the labels they refer to are the ones designed to lure uninformed shoppers, enticing them to pay more for imaginary benefits like all-natural, non-GMO and organic.

I’ve written before about the science behind GMO foods and organic growing practices. Genetic modification acts as a short cut to the crossbreeding that has been practiced in farming for thousands of years. In some cases it will be the only way to save certain crops from going extinct due to diseases or pests. Organic produce has been tested and found to be marginally cleaner than traditionally grown crops, but if you wash your fruits and vegetables before preparing them, as everyone should, it makes no difference. (See the links for a fuller explanation or enter GMO or Organic in the search box in the upper left of this screen.)

Consumer Reports lists 6 seals of certification rated from fair to excellent: Grass Fed, Certified Humane, Animal Welfare, Non-GMO Project Verified, United Egg Producers, and USDA Organic. A deeper dive tells more about the certification process of each. For example, United Egg Producers Certified is rated fair overall for being very good in terms of verification but poor for animal welfare. Three labels are rated poor: Natural or All Natural, No Antibiotics, Non-GMO.

At a local grocery store I found seven different varieties of large eggs. Prices ranged from $1.09 for one dozen generic eggs in a gray container to $5.79 for a dozen labeled as organic and pasture raised. Priced between them were the cage free; cage free brown; free range; and the no-hormone, no antibiotic eggs. Apparently people will pay five times more for eggs to be reassured that the hens were leading a happy life, frolicking in a pasture. Of course, there is no label to tell how the hens are treated after they reach their 5- to 7-year period of peak production.

These decisions are mostly made by people who have never seen a chicken, pig or cow close up or visited a farm. They get their news from websites like this one that claims “rearing of farm animals today is dominated by industrialized facilities…that maximize profits by treating animals not as sentient creatures…” Each animal, according to them, is a “social, feeling individual capable of experiencing pleasure. The vast majority, however, are only familiar with deprivation, fear, and pain.” (Perhaps they called in an animal psychic or Dr. Doolittle to confirm this statement.)

Another site, with a more realistic and less of a concentration camp concept of farms, contradicts the factual part of the above statements. “About 98% of U.S. farms are operated by families – individuals, family partnerships or family corporations (America’s Diverse Family Farms, 2018 Edition).”

 Is this another form of virtue signaling, paying almost $6 per dozen for eggs because we care so much about chickens we will never meet? It’s no wonder that earlier this month the headline read: Consumer debt reaches record-high of $14 trillion.” As long as the cows, pigs and chickens are happy, what’s five dollars here and there?

Perhaps instead of trying to make sense of the seals and claims to help you understand the meaning behind them, Consumer Reports should have published the fact that most of those are simply marketing tactics playing on the egos, guilt and fears of consumers following the popular sentiment of the day.

What comes in the next issue, how to buy the right saddle for your unicorn?

Super Foods

Critical thinking leads me to believe that all the talk about super foods is crazy. People read about some newly christened super food, adopt it in the hope of improving their lives, convince themselves that they feel so much better, and spread the word. This is particularly dangerous in the case of celebrities. 

Here is a sample I pulled from a Gannett article over four years ago.

Alas, for 2015 we find out that quinoa is out and kaniwa, “sourced primarily from the Andes Mountain region of South America,” is this year’s super-food, “high in protein, fiber, iron and calcium” and gluten-free!  In the search for a better sweetener, “coconut sugar is making its way onto the scene.” Actually, all things coconut are in fashion as part of the Paleo food trend.  Almonds are out and pistachios are in along with Nduja and spreadable salami.

Just last year I commented on a TV ad for beet powder as a circulation super food, with the power to support increased energy without stimulants, promote heart health and support healthy blood pressure levels. (Notice how these products sold as supplements always support and promote without really promising to do anything definite.)

Finally, here is one from this year that sounds extremely confident and enthusiastic. It begins: “Move over kale, quinoa, and coconut water! …There are some new superfoods on the block, packed with powerful nutritional benefits and exotic tastes.” To reduce the shock of finding yet another new super food, they remind us how the super-food trends of today would seem “rather bizarre” just a few years ago – now that’s comforting!

It continues: “These are the superfood trends you should not only watch out for, but get excited about.” Included in the list are nut oil, chaga mushrooms, cassava flour, watermelon seeds and tiger nuts; and try maqui berries, instead of the so-passé goji and acai. Wash it all down with some probiotic water. When making your heart-healthy smoothy, try substituting moringa for your matcha, maca or spirulina. (Who does this stuff?)

That’s why I was so pleased to find this article. Although when I saw the headline, “The Definitive Superfood Ranking,” I expected more of the same, the picture showed apples and broccoli, so there was hope that some sanity would prevail. 

The piece begins: “It seems like everything in the grocery store is labeled ‘super’…[but] which foods are actually proven, by science, to be good for you and which ones are all hype.” They go on to say that many dietitians think the term super foods should be eliminated because it is so misleading, sometimes intentionally so by food marketers. Such labeling raises the price and promises to do what no single food can do alone, make you healthy.

The article begins by exposing the gluten-free myth. “Unless you have celiac disease or suffer from a true gluten intolerance (example: you are doubled over and running for the bathroom post-pizza), there are no proven physical benefits from going gluten-free.” Then it explains how orange juice is not the best source of Vitamin C and adds that the benefits of coconut oil, chia seed, kimchi, sweet potatoes, almonds, acai and beets are more hype than reality.

At this point in the story, the emphasis changes to address truly healthy foods: eggs, cherry juice, broccoli, coffee, apples, green tea, black beans, dark chocolate, red wine, salmon, turmeric and blueberries. Each are backed by some valid scientific research and their prices are not inflated by fads and hype. (I also noticed that not a single one of them caused problems with my spell-check, unlike about half of the so-called super foods in the lists above.)

Wow! Are real foods eaten in moderation the answer? Despite that, the odds are good that in 2020 someone will discover another new super food in some remote jungle, and the masses will jump on board. (Excluding those who were mauled to death trying to harvest tiger nuts!)

How To Watch News

I found myself talking back to the CBS Evening News a couple of nights ago. Usually they are pretty good, although like most of their competitors they don’t seem to be working as hard as they used to – over trusting anonymous sources, not confirming stories in a rush to be the first to bring us breaking news and presenting a dismal view – until the end when they throw in the obligatory heartwarming story. So critical thinking dictates that I treat their information skeptically.

The story that got me going was about tariffs. Now generally, I am for free trade and against tariffs. American tariffs are merely an indirect tax on us. They raise the prices of imported goods that we all buy and make the trading relationship with other countries less efficient – we don’t get the best goods for the best price. It’s basic economics. When they say something negative about tariffs I’m totally on board, but it’s not what they said but how they said it.

Jeff Glor started by saying, “Many Americans are already feeling the effects” of the $34 billion in tariffs on Chinese goods, the ones that went into effect less than 5 days earlier – really? That's a very fast supply chain. “The US is now threatening tariffs on thousands more Chinese products.” Then he turns to Jill Schlesinger who “looks at the impact” – the impact of what, imposing tariffs that he characterized as “threatened” just seconds before? Are they jumping the gun?

We learn that the next round of Trump tariffs, 10% on $200 billion of Chinese goods, “could hurt consumers.” Wait a minute. We were just told that many were already feeling the effect – now we are told the next round could hurt. They show a list of sample products: shampoo, baseball gloves, refrigerators, soap and cameras. Some are frequent purchases and inexpensive, while others are expensive but might be put off until a “trade war” is over.

“Already the lumber tariffs have added about $9000 to home prices”, Jill continues. I had a few problems here. Lumber tariffs are between the US and Canada, not China. Prices are not the same as costs. Are builders taking advantage of trade war news to boost prices like gas stations raise prices in anticipation of holiday demand? Besides, home prices are not uniform across the US, so any estimate will have different effects in different locations. 

“The North American Food Equipment Manufacturers said tariffs could raise prices at Chick-fil-A simply by increasing the cost of a pressure cooker used by the restaurant.” It makes me wonder how many pressure cookers they buy per year, what they cost, how much food they prepare before a pressure cooker has to be replaced, and what that comes down to on a per meal basis – I’m betting it’s mere pennies. (Not unlike the beer can story I told back in April.)

Finally, jobs could be impacted. They gave examples of Harley-Davidson and BMW saying that they would move more US production overseas. Do companies of this size hear about tariffs in April and 3 months later pull the trigger on an overseas move? This is very doubtful. It takes a lot of planning and many decisions. If they do move, it’s likely they had something in the works  a long time ago and the timing just happened to be coincidental (making the bosses look pretty smart).

But what can small businesses do? Jeff asks. “They can’t just move overseas and don’t have enough money to absorb price increases...” Wait another minute! What is this talk about absorbing increases? If any absorbing is going on, the consumer will be hurt less. How does this statement fit in at all with the rest of the piece?

All those unanswered questions and apparent discrepancies happened in a minute and a half. They don’t take any responsibility. (Jill Schlesinger is a financial planner, not an economist.) It’s up to us to be skeptical and think about what they are feeding us before swallowing it as indisputable fact. We must force them to do better than this as they try to make us panic.

Foods That May Kill You

Nothing the media and others like better than to find ways to scare us.  If one subject works, gets followers or assists in raising funds, we hear it over and over.  A reliable standby continues to be food safety.  Here are two examples: one with an erroneous, but widely believed, message; and one with possibly serious, but mostly ignored, consequences.

Everyone should know that when you pick fruits or vegetables from the garden or fresh at the grocery store, they must washed (sometimes soaked) before anyone eats them.  If this is not yet common knowledge, it would be quite reasonable to start a campaign to inform and remind the public.  Instead for the last 15 years we have gotten the "Dirty Dozen" list from the Environmental Working Group (EWG).  They use inspections of popular fruits and vegetables to rank them according to pesticide contamination.

“EWG emphasizes studies that show pesticides in high concentration can lead to health problems, especially in young children.” But they fail to point out that the resulting levels, based on USDA- and FDA-sponsored tests of almost 39,000 non-organic fruit and vegetable samples “found that overall pesticide chemical residues…are far below what has been scientifically deemed tolerable for human consumption…[and] do not pose a health risk.”  Nevertheless, the group, characterized by CBS in this report as an “activist group,” continues to peddle the fear.

Notice that the list is based only on non-organic fruits and vegetables, which allows the EWG to promote organic food.  But there’s a catch.  As another site correctly points out:  “Your Organic Food Is Treated With Pesticides, Too.” Not only that but the USDA organic program allows some pesticides not classified as synthetic, and tests for only those pesticides disallowed by the organic program.  “So the EWG is reporting the stuff on conventional crops without considering what’s present on organic crops.”  That makes a difference, because according to What Gardeners Should Know About Pesticides(Purdue Extension PPP109), organic pesticides “are not necessarily safer” and “all products – organic or synthetic – have the potential to be toxic.  In some cases, buying organic might expose you to more pesticide residues, just a different pesticide.

Forbes calls the list “an egregious, science-free misinterpretation," and adds "What that [USDA] data actually demonstrates is the outstanding safety profile of the U.S. food supply, but EWG twists it into an argument for consumers to pony up the extra dollars to buy organic.”

In contrast, there is a frequently disregarded real danger, not within the food supply itself but in the realm of food preparation.  The USDA stresses on their website the absolute necessity of following proper procedures in handling, cooking, and storage of food.  This includes washing of all fresh fruit and vegetables, but it goes beyond that.  The experts also stress the need to cook beef, pork, veal, lamb, steaks, chops, roasts to a minimum internal temperature of 145 °F and allow a rest time of at least 3 minutes. (It keeps cooking when it rests.)  The reason for these precautions is that it is impossible to “see, smell, or taste harmful bacteria that may cause illness.”

But it has been the trend for quite some time to order steaks medium-rare. Those of us who prefer our steaks cooked longer are considered gauche and uncivilized.  “At Porter House New York in Midtown, executive chef and co-owner Michael Lomonaco says more than 60 percent of his customers order medium-rare.”  How does this compare to the recommendations?  “Most chefs regard beef cooked to medium-rare – with an internal temperature of 130 degrees off the grill and 135 degrees after resting – as the best way to bring out flavor and retain moisture in tender cuts such as rib-eye and top loin.”  That’s about 15 degrees out of the safe zone.

But a second problem compounds the first.  If a steak is overcooked and sent back to the kitchen, the only recourse is to cook another one.  But if a steak is undercooked and sent back, it can be cooked a little more, avoiding waste and financial loss.  It makes better business sense to give a customer a slightly undercooked steak, pushing up the possibility of illness a bit more.

So once again we find an example of Americans getting upset, changing behavior and spending more money based on faulty information, while they ignore valid advice about a real potential problem.  All we need to do is wash our fresh produce and cook our meat a little more, and there is nothing to worry about.

Beer Will Cost More And It’s Trump’s Fault

I was stunned yesterday by a prime example of lazy (or borderline deceptive) reporting.

The story lead-in was how the new tariffs would affect the price of beer.  A local news reporter talked to a local canner and a local college economics professor to get the scoop.  No one gave a definite answer, but the tone of the overall report was doom-and-gloom.  They left no doubt that either the canners or the beer drinkers would be suffering depending on who had to absorb the increased cost.

The size of the problem was never addressed, and it left me scratching my head.

Less than 15 minutes later I had an answer!  With the internet it was so easy.  (Even a college economics professor could have done it, but apparently he didn't bother.)

First, I looked up on a recycle website:  How many empty aluminum cans does it take to equal 1 pound?  Answer:  approximately 31 or more precisely 30.442 at an average weight of 14.9 grams.

Then I looked up the wholesale price of aluminum, assuming that is what the canner would pay.  On March 29 it was 91 cents per pound.

That puts the cost of a can at 91 cents divided by 30.442 cans or 2.99 cents per can, call it 3 cents.

Next we have to determine the affect of the tariffs on that price.  A third site confirmed what we heard at the time of the announcement last month.  Aluminum imports would be taxed at 10%.

That puts the added cost of your beer, assuming that the tariff equalizes the cost of both domestic and imported aluminum at – drumroll please – a whopping 0.3 cents per can.  That’s 1.8 cents for a six-pack.  At a beer a day that's almost $1.10 a year! How are the poor beer drinkers going to afford that?  They may be forced to switch to Starbucks coffee instead!

Of course, I’m being a little sarcastic.  But the point is that the news media will blow any story out of proportion just to keep our interest up (and possibly to promote a political agenda).  They have advertisers to attract and to do that they must keep viewers glued to the screen for the next bit of “breaking news.”  So it’s not in their best interests to do the 15 minutes of research to get the real answer to the question, especially when keeping the question hanging is a little scarier.  (It’s just a miniature version of the “summer of the shark attacks” and similar stories intended to induce panic when there is no reason for it.)

This is yet another reason for the importance of critical thinking in the modern world.  If we don't watch out for ourselves, no one else will - not the media, not advertisers, not the government!

Food as a Human Right

When I saw the headline on LinkedIn that food is not a commodity, but a human right, I wondered why we weren’t trying to solve the food insecurity problem in the US the same way we are trying to solve the healthcare problem.  Now that both food and healthcare have become human rights, wouldn’t it make sense to treat them the same?

In that case, Congress should immediately start debating a bill to provide food insurance for everyone.  It’s not fair that some people with good jobs at big companies should be able to provide sustenance for themselves and their families while people without a job or with a minimum wage job struggle to do so and must rely on food stamps (SNAP) and a number of other government programs.  (Many of these programs are so obscure or complex that local food banks have strategies to educate the poor about what programs they may be eligible for and how to apply for them.)

If talking about insurance will solve the healthcare problem, surely it can do the same for food.  Just set up a system where citizens have to sort through a list of insurance providers (depending on the state they live in) and then sign up with the one that best matches their eating needs.  Of course everyone must be forced to participate and pay the same premiums regardless of the size of their family, how much they eat or how often they shop.  Each insurance company would negotiate prices of every food item with some of the grocery stores.  You would just go in, pick up your items and hand over a small co-payment at checkout.  Months later you would receive an Explanation of Benefits (EOB) from your insurance company telling you what amount was covered and what you owed.  Some time later you would receive a bill from the grocery store telling you what the insurance was paying for and what they think you owed.  If there were any discrepancy, you would spend hours on the phone trying to work it out (and no one could help you without written permission because of food privacy laws).

If you had one brand of insurance, you would be covered at Kroger and Target; but when you were on vacation you might have to shop “out of network” and pay higher prices.  (One insurance company has a policy that would cover you at home and on vacation, but it’s not offered in your state.)

The grocery stores could stop advertising prices, because only people with certain insurance would be covered at their store and not at the store down the street.  And you could only buy the brands of food available in your store.  As farmers and food companies increased prices to them, the stores could use that as leverage with insurers to increase prices.  This would force the insurance companies to increase premiums and force the government to increase the subsidies to those who couldn’t afford it.  Various groups would demand that the government require everyone, even vegetarians, to be covered for the purchase of steaks, and that those who chose to shop at more expensive or exclusive grocery stores offering all-natural, organic or health food items must have the right to do so (regardless of their personal financial situation).

Would that be a wonderful system to ensure that prices for food be kept under control and that everyone was treated fairly?  Of course not!  There is no incentive for anyone to worry about costs, prices or service.  Grocery stores would be competing with each other based on the size of the selection regardless of the cost of adding extra shelf space.  Lobbyists would be out in force to make sure every special interest (except the customer) got their piece of the action.  The paperwork would be a nightmare.  Customer service and responsiveness would drop like a rock, because those who used to be their customers and made choices (voting with their feet and their dollars) would be helpless participants.

This may not be the perfect analogy, but anyone who believes tinkering with insurance will solve the problems of affordability or quality with food, healthcare or anything else is missing the point.  Think about it.