Driving up to the Whole Food Store in Tigard, Oregon, what did I see but an large placard advertising 'great prices'. Now, I've never thought of the Whole Food Store as competitive on price. Not for nothing is it called the Whole Paycheck Store. But no one goes there to save money. Of course, you save money but eating at home instead of eating out, but there are cheaper ways of buying groceries to feed yourself at home.
Then, I read in the David Rosenberg (Merrill Lynch) piece claiming that the economy is already in a depression. He buttresses his argument by claiming that there is evidence of a substitution effect in grocery price trends (affluent households substituting an inferior good like chicken for veal, less affluent ones substituting Spam for canned tuna).
Now, anyone who took economics in the middle of the last century will recall that argument. But it has been since sometime in the last century that, in affluent America, any substitution effect was discussed in response to rising food costs. The substitution that has been occuring for the last generation has consisted of eating at home instead of the higher cost, more convenient alternative of eating out. Rise of the two income family, both spouses working, who wants to come home and cook and all that.
If people have started playing with the menu at home, we're in a new environment. If the Whole Paycheck Store has decided to compete on price, we're in a new environment. Anybody know a fancy name for mac and cheese?