Saving Your Aluminum Pie Pans Yet?

Commentary

A friend has stopped buying paper towels. Not for environmental reasons. He just finds them unaffordable now. Curious, I took a closer look.

Sure enough, in my own buying history, I’ve documented a 70 percent increase in prices over 16 months. Others are seeing this too, and balking at spending $2.50 per roll. At these prices, it makes more sense to reuse cotton kitchen towels for quick clean-ups. This is a consequence of substitution in light of price changes.

Examining official data (Producer Price Index, or PPI, which is more accurate than Consumer Price Index, or CPI) on wood pulp products, what do we find? A huge increase in 2021–2013, followed by a crash, and then a small increase, for an overall increase of 50 percent since 2020. That’s substantial and serious, and clearly gets passed on to consumer products. The CPI does not reflect that, however.

We are seeing this ever more. People are shifting their consumption regardless of the claims that inflation is gone. We see our bills and know otherwise. Therefore people are substituting meat for pasta and rice and brand-name items for store brands and generics. The thrift stores are doing a bang-up business and people are searching for ever more ways to cut costs.

This has a powerful impact on a whole generation. It affects what we consider to be valuable as versus that which we consider trash. I never imagined that I would save plastic food containers for storage but I’m leaning this way now. I’m sure you can come up with your own examples of how your personal estimation of value is changing.

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A quick story. About 20 years ago, the elderly lady next door died and her extended family came to clean out the house. They found a room that was oddly filled with containers, mostly aluminum pie pans. They were astonished. But as we talked, I made the case for her seemingly strange habit. She grew up in the Great Depression and then faced wartime rationing. This is what formed her sense of what was and was not valuable. She held onto that her whole life.

This is not eccentric or crazy. It is just a valuation estimate based on an older sense of supply and demand that had not been updated in light of changes. To her, it was simply unthinkable to throw away a good pie pan. Back during WWII, the Office of Price Administration issued coupon books for aluminum. If you wanted a pan or foil, you had to present a coupon before you could get it.

Such an experience leaves a permanent impression. This lady never let go of it. We only think it is a bit nutty because during those years aluminum was ubiquitous. Once used, it all seemed like trash. Will that always be true? Not so much. I’m looking now at the one-year increase in aluminum prices and see that they are up 178 percent. You see this in the price of foil.

In other words, the bad old days could in fact return.

Another quick story. When I was fresh out of college and entering a journalism program in D.C., I was asked to give the students a lecture in basic economics. It was my first time to do so. I thought about what I should say and decided to focus on the price system as a source for our knowledge of how the world works, and the way in which it imposes rationing on our use of resources, and our daily habits, in ways that don’t always enter our consciousness.

The theory itself comes from F.A. Hayek but the example I used was, ironically, paper towels. Here we have a product that begins with a seedling of a tree that grows over many years. It is cut down and pulped, then bleached, then formed into thin sheets, cut and packaged, and then transported to the store. One might suppose that given all that goes into the creation of a single paper towel, it would be far more expensive.

In those days, the price was extremely low. No one thought a thing about using as much as we wanted and then throwing it away. But I warned that if paper towels went way up in price, to $5 and $10 a roll, we would either stop buying them or use them far more carefully, even drying them out between uses and reusing them.

My young colleagues were a bit incredulous at my point but I added to it. There are conditions under which we would simply stop driving, stop buying clothing like it is disposable, stop drinking soft drinks and choose water instead, and would cling to products like shopping bags and aluminum tins because they were considered extremely valuable.

My central point: prices convey information to us to help us manage our own uses of resources. This is all to society’s benefit. It happens without any central planning but only in response to conditions of supply and demand.

I cannot remember if my little lecture had any impact. But I do find it intriguing that my odd scenario in which paper towels become extremely valuable, to the point that we conserve them, is coming true today. To me, this is a very bad omen of our future.

We are surrounded by goods and services born of the great prosperity from 1950 to 2020. Yes, there were bumps along the way: the inflation of the 1970s, the banking busts of the late 1980s, the supposed dot-com bust of 2000 (which was actually no big deal), and the financial crisis of 2008.

But what we are going through right now has no precedent in any living memory.