Cardi B is Very Upset About $7 Lettuce

Butterhead lettuce

When inflation sits above 5% for any length of time, even the financially sturdiest begin to take notice. Earlier in the year, rapper and songwriter Cardi B, with 155 million social media followers, a great many music awards and an estimated $80 million net worth, had such a moment. In The Economist, Cardi B vented about how crazy it is that lettuce surged to a cost of $7 a head. She also tried to imagine how middle-class people or people not as well-off might be responding. With Cardi B’s financial success and fame, it is unlikely that $7 lettuce would leave much of a mark on her household budget. Even so, she expressed empathy for folks who are not so well off financially. According to Nick Cutsumpas, urban farmer and author, California farmers lost as much as 80% of their lettuce crops due to the impatiens necrotic spot virus, which caused a lettuce pandemic in the fall of 2022. And when supply drops dramatically and demand stays constant, prices rise sharply.

Often overlooked in our discussions of inflation, however, is the role of choice. As consumers, we almost always have choices. We can discontinue what would normally be on our shopping list because we want to try something new or because it has become too expensive. The consumer-price-index (CPI) is the most well-known measurement for price changes based on an average of prices for a basket of goods and services. A much less well-known measurement, preferred by the Federal Reserve, is the personal-consumption-expenditures (PCE) price index. The basket of goods and services for CPI are only re-weighted once a year. In contrast, the selections for PCE are re-weighted every month. PCE has a dynamic advantage because it captures how Americans actually spend their money. In deference to Cardi B, CPI assumes the constant purchase of lettuce even after it becomes a luxury, whereas PCE follows how consumers replace lettuce with less costly produce.

A significant example of how PCE tracks actual spending can be found in housing. A recent Pew Research analysis showed that 50% of Americans ages 18 to 29 are living with their parents as of July 2022. According to the Bureau of Labor Statistics, U.S. shelter costs have increased by 7.7% from a year ago, and rental costs have increased by 8.0%. Due to the high cost of living and student loan debt, young people are choosing to live with their parents until they are stable enough to move out. These choices in personal housing expenditures may not be ideal for both parents and children, but if the result is financial independence for the young adults, then it is a sacrifice worth making.

Tim Morris, age 23 in Akron, Ohio decided to move back home in 2021 to accelerate paying off his $53,000 in student debt (Wall Street Journal 3/6/23). One sacrifice on his part is that his dating opportunities have been greatly limited. As Tim tells it, “It’s just not that enticing to just date someone who still lives with their parents.”

While inflation can certainly be painful, there are ways to lessen the sting. We can utilize substitutes or even alter behavior to curb spending. For example, hybrid work, a combination of working from home and working at the office, helps alleviate some of the pain of high gas prices. However, there are plenty of other expenses that cannot be avoided. The difficult aspects of inflation occur when no practical substitutes exist. Reasonable consumers learn from their choices – which to keep and which to change. And, as she tweeted this summer, even Cardi B loves a good budget – despite her millions.

With core PCE inflation now falling to 4.1%, consumers might not have to make as many tradeoffs and can find room for a head of lettuce in their budget again.

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