The New French Paradox

[robert brown]

The expression “The French Paradox” has been used in the past ten years to describe the discovery that the daily consummation of a moderate amount of red wine, as widely practiced in France, lessened the odds of having heart disease. These days, however, the real French paradox appears to be what has happened to prices of certain goods since the mandatory use of the euro. Last month I wrote about what I called “Eurocreep” in the context of restaurant meals. Having now spent additional time in France, I have found that this phantom inflation is highly pervasive at least as what people are charging for food, be they restaurateurs or farmers at the markets. I have even asked some French natives about it, and some say that food prices are as much 30% higher. One example (not a food one) my friend cited was a chain of stores similar to our 69 Cent Stores that changed its name from the “10 Franc Store” to the “Two Euro Store”: a difference of 31%.

I am curious to know if anyone has read any reportage about this shocking form of inflation. Also, does anyone have an opinion as to what portents this form of economic behavior may have? What seems most distressing to me is that the French appear to be taking it in stride. There does not seem to be any agitation or protest. Does anyone think that there could be a delayed reaction if the European economy weakens and people finally realize that their household budgets have taken a major inflationary hit? More sinister, is the government turning its back on the situation for fear as to what it means for the fiscal discipline that the Eurozone has adopted?

[lizziee]

Robert,

I found some interesting comments from The Guardian at

http://www.guardian.co.uk/euro/story/0,113...,736768,00.html

Two things struck me as somewhat odd.

On the one hand, they say that there have not been significant price hikes. "Consumer associations' major worry - that the new currency would automatically lead to heavy price increases - appears to have been mostly unfounded." Que Choisir, a consumer watch-quard group "carried out a survey in the Paris suburbs from summer 2001 to April 2002 monitoring the prices of 46 different products in 150 different stores, including supermarkets, bakeries, hairdressers and bistros. It revealed an average price increase of just 2.6% - of which fully 2% was accounted for by inflation."

On the other hand, they note that people haven't a clue what things actually cost. From the Guardian, "To be perfectly honest, I haven't got a clue how much I'm really spending," was the almost unanimous response to a brief Guardian Unlimited survey conducted at the Champion supermarket in the rue de Rochechouart in central Paris earlier this week.

"You just have to trust the labels and the check-out girls," said Marc Pestel, 39. "I pile all the usual stuff into my trolley, they tell me what it costs and I pay it. I'm not familiar enough with the euro to know what I'm spending. For all I know it could be double what I used to be. You just have to just take the plunge."

Talk about The French Paradox: things don't cost more because you don't know what you are spending!!

[Margaret Pilgrim]

Robert, we are still having problems verifying your premise. I have no doubt that it may be true. However, on our only visit since the conversion to the euro, we have both been somewhat surprised that we haven't experienced the franc-to-euro creep.

There are several instances where we notice that, in fact, we could, if we wanted to, leave less than we usually do for room service, housekeeping and concierge services. However, we feel that moving up to the next logical increment is an inexpensive investment in our equity in a hotel that we both enjoy.

We have visited this subject before, and I do have to ask if you think that this inflation is happening particularly at the upper levels of spending since we haven't seen it in our sphere. We have been, in fact, frequently surprised that we are paying so little for simple market purchases.

(I will add my peculiar way of converting francs to dollars for the last few years: I would take the figure in francs, add 1/3, move decimal two places left. e.g.: 500 francs plus 150 francs = 650 francs, becomes $6.50. My husband could never figure out my logic, but it worked for me. ;-) )

[Steve Plotnicki]

Robert - Get used to it. Euros are just the compact disks of currency. When the recording companies rereleased everything on CD, they raised the list price by more than 50% and their rationale was that the CD had 20 minutes more music on it. Yeah, 20 minutes of crappy songs that used to be left off the album. To me it sounds like the shops have used the conversion to euros the same way. They have floared it out and if it sticks....

[cabrales]

I have some confidence that, despite market imperfections, the forces of supply and demand would work well to correct any attempts by a limited group of restaurants or food suppliers to inflate prices, assuming that destination restaurants that offer differentiated cuisine are not being addressed for this purpose.

There might even be the possibility of arguing (although such argument likely has limited persuasiveness) that the introduction of the euro should facilitate price comparisons among restaurants located in different European countries, both by the residents of those countries and by Americans. The ease with which price comparisons could be made between say, French restaurants in France, on one hand, and Spanish restaurants offering French-predicated cuisine, on the other, could serve as a factor constraining a rise in prices at restaurants in France, to the extent restaurants in Spain were at least partial substitutes (that having been discussed in various other threads). Perhaps there might be an argument that most tourists do not travel for cuisine alone, and the relevant comparison should include the cost of accommodations, etc.

[Fat Guy]

Robert: Correction. The label "The French Paradox" refers to the fact that the French eat a diet high in saturated fats yet have much lower rates of obesity and heart disease than Americans. The theory that wine may have something to do with it is an attempt to explain the French Paradox. It is not the paradox itself.

[Steve Plotnicki]

How about this one. I was with a food importer last week and he told me that the Japanese, although heavy smokers, have an extremely low rate of lung cancer which they believe has to do with their drinking lots of green tea.

[Fat Guy]

Another commonly offered explanation is that it has to do with sushi:

http://news.bbc.co.uk/1/hi/health/1309091.stm

[Margaret Pilgrim]

We are straying far from Robert's original "paradox" reference, but I will subscribe to the red wine, green tea, black tea, and sushi restorative powers. At least ONE of these has to account for my superlative chemistry statistics.

[robert brown]

Steve Shaw: Somewhere in cyberspace I stand corrected. Steve P. I can’t get used to it. Some farmer with a stand outside of Entrevaux charged me 49 euros for a 2-1/2 kilo chicken, a jar of griottes in alcohol and a jar of confitures. (However, I can’t discount that there was possibly some “Here’s an American” premium built into the price). The CD comparison is a good one and supports the kind of behavior I have been discussing. Margaret, let’s see what it is like on your next trip. A friend from New York with whom we had dinner the other night noticed the same large uptick in prices when he bought food in the outdoor markets. I think my documenting the rise in restaurant prices since the publication of the 2002 Guide Michelin, the people whom I have discussed the matter with, and my own sense of the situation clearly demonstrates that something is afoot. I am willing to admit the possibility that price jumps are taking place almost entirely in small, unregulated businesses such as farm stands, and where pricing is more elastic such as in restaurants. I imagine that in the durable goods area, they are not. But as I am writing this for the benefit or enlightenment of those who purchase in France food in some form or another, I can’t help but notice that I am paying significantly more (almost New York City kind of prices now for cheese) for food than when I was here a year ago and in April.

Liz, thanks for the quick reply and avoiding having my thread hanging by a thread, so to speak, for a couple of days. It is an interesting story you found. I am wondering though if anyone can verify what a friend told me the other day: that businesses were forbidden to change their price for one month after the day the euro became the sole legal tender. That would have been the period from February 17 to March 17.

Cabrales, it is easy to notice that the menu at El Bulli is 115 euros and at comparable restaurants in Paris between 220 and 300 euros.

[Steve Plotnicki]

I'm afraid that businesses often act opportunistic whenever they convert to something new. I'm sure there are businesses saying the reason for the uptick is the expense of the changeover. Making new signs, changing computer programs etc. But people usually accept it. That's because pricing is so arbitrary to begin with. If tomatoes go up in price by 5 euros a kilo, who is going to stop buying them? The more important question, and we need the economist among us to answer it, is the price increase better for the European economy or worse? I would think that if the increase doesn't cause a proportional drop in the amount of business, that it's good because businesses will be more profitable. This is the viscous cycle for consumers. They want cheap prices but, if the restaurant business is more proftable than more top quality chefs will open their own places and our choices will improve. So which one do you prefer, cheaper and fewer or expensive and plentiful?

[cabrales]

Robert -- Whether you believe that the prices at a place like El Bulli serve as a restraining factor on prices at restaurants in France depends on whether you believe the restaurants are at least to some extent substitutes for one other. I would subjectively view most three-star restaurants in Europe as not having close substitutes. In other words, if in my assessment Taillevent both is considerably less expensive than L'Ambroisie and offers less attractive cuisine than L'Ambroisie, I may nonetheless not view L'Ambroisie as a good substitute for Taillevent. The reason is that each restaurant is distinct -- these are not fungible experiences. Perhaps that is what differentiated pricing between two restaurant suggests.

I happen to believe that not only is El Bulli not a substitute for a restaurant in France, but it is also not a substitute for another three-star restaurant in Spain. Also, I believe that a meal at a given restaurant today is not a substitute for a meal at the *same* restaurant two years from now. Restaurants evolve, perish, sometimes stagnate, sometimes reinvigorate themselves; sous chefs or sometimes executive chefs move on. Like many things in life, moments at restaurants that one values are to be "captured" as available.

[Margaret Pilgrim]

Cabralles wrote, "Restaurants evolve, perish, sometimes stagnate, sometimes reinvigorate themselves; sous chefs or sometimes executive chefs move on. Like many things in life, moments at restaurants that one values are to be "captured" as available."

Eloquently true, and perhaps an essential tenet of successful travel. Every joyous experience should be treated as if it were a singular one.

[Bux]

Robert -- Whether you believe that the prices at a place like El Bulli serve as a restraining factor on prices at restaurants in France depends on whether you believe the restaurants are at least to some extent substitutes for one other.

Most restaurants are unique. Certainly the multistarred and especially the three starred restaurants are unique and one could not substitute for another, but many of us trying to decide on a two week trip will not get to eat at all the restaurants we'd like to and have to make some selection. There's no question in my mind, that in terms of general value, one does better in the provinces than in Paris and far better in Spain than in France. However the three star restaurants are few and far between in Spain.

[cabrales]

Every joyous experience should be treated as if it were a singular one.

Margaret -- While "capturing" meals as they become available is worthwhile, at certain restaurants I also see a given meal as part of a sequence that emboldens me to consider how the restaurant has progressed over time and how it sits somewhat differently with the passing of seasons. Sometimes that allows me to better understand the restaurant; other times it prompts me to consider how I have changed since prior visits.

For instance, L'Espalier in Boston is an example of a restaurant that makes me reflect more on how I have progressed or not as I visit over time. From earlier periods when I considered the food delicious and saw a visit to the restaurant as a special occasion to now, when I consider the food acceptable, would see a visit as being in the ordinary course, and would prefer to eat at Radius or Clio anyhow (not that Radius and Clio were in place when I first visited L'Espalier). Lucas-Carton is another example of a restaurant against which I benchmark certain food-related changes in myself. It was the first three-star restaurant I visited in my life, and, despite my conclusion that Senderens' cuisine is not outstanding for me, I like the restaurant. I considered a signature dish, the foie gras steamed in cabbage, to be mediocre when I tasted it as part of that first meal -- a bit bland. When I resampled the same dish recently, I liked it considerably.

[Gary Marshall]

i too have noticed this inflation, another little example, a can of coke was 10F ,about £1 sterling, is now 2 euros, £1.20p a nice 20% difference but what can you do?

i can't give definitive examples but my recent pre-euro trips to france certainly seemed cheap in comparison to the Uk but now it is nearing parity.

won't stop me going though! but does further my already eurosceptic stance as far as Uk monetary union is concerned