The elusive quest for Giffen Good took economists to the depths of potato hunger in Ireland, the poorest parts of the Chinese countryside, the laboratory rat cage at Texas A&M University. Now, Giffen Good has been discovered at a Disney theme park. But what does Giffen Goods really tell us about how the global economy works?
Giffen Goods was first explained in Alfred Marshall’s ubiquitous textbook economics principles. Marshall generously credited to the well-known Victorian Robert Giffen, who appears to be on every economic committee you can imagine, but his biographer said that his “uncompassionate power and fame seem to be inequality.” [his] “A practical contribution to economic science.”
it doesn’t matter. Thanks to Marshall, Giffen’s ideas are now found in every economics textbook. The idea is that in some circumstances, price increases can increase demand for products that no one really loves.
A standard example was potatoes, which was the cheapest source of calories for subsistence farmers in Ireland in the mid-19th century. During the horrifying trauma of the great potato hunger, the prices of those potatoes rose, and even more expensive foods such as meat and milk became crowded. Giffen Good was a trap. The more expensive the potatoes are, the less capable they have to buy anything other than potatoes.
To the extreme, Giffen’s actions themselves cannot be maintained. Things are truly hopeless and people only consume potatoes. Therefore, as potato prices continue to rise, they starve.
For a product that is both attractive yet dominant household budgets, this is a theoretical story, but it is extremely curious.
“Only a very clever person will find that exceptional case,” Marshall’s modern-day Francis Edgeworth said, “Only a very silly man would consider it the basis of the rules of general practice.”
Economists no longer believe that potatoes are giffen merchandise during great hunger, so the quest for “exceptional cases” continues. In 1990, economists Raymond Batario, John Cagel and Carl Cogut convinced lab mice to drink more bitter quinine water and less sugary route beer by increasing the price of rewarding quinine water. (The “price” in this case was the number of times a mouse had to press a button to get a quinine drink.)
This was a classic Giffen Good Territory, but it’s impressive how difficult it is to observe in humans rather than in laborats. It wasn’t until 2008 that Robert Jensen and Nolan Miller released compelling evidence that Rice was Guifen’s good in the poorest parts of Hunan, China. Jensen and Miller had conducted randomized trials in which some households received vouchers to lower the price of rice. (Subsidies changed, but were around 10-25% of the normal purchase price.) According to this, household consumption was reduced. When the experiment was over and the prices of rice rose again, these poor households were forced to buy more of that expensive rice.
I’m glad that the story doesn’t end there. Last year, economist Garth Hutel released evidence that theme park rides could become giffen products. Park visitors did not pay cash for each ride – instead, like Labrat, they paid in terms of the effort needed to enjoy each ride.
Heutel claimed that there was a strictly limited time budget amid the constraints of the day at the theme park. Visitors may queue for a few hours for the popular roller coaster, but only 15 minutes are waiting to jump into the carousel. So, what if the carousel queue time doubles to 30 minutes? In that case, Heutel says people might actually decide to ride the carousel more often. Like regular potatoes, the carousel consumed much of its time budget, so there was little time to ride anything else. Using data from four Disney theme parks in California and Florida, Heutel discovered that rides from several theme parks are in fact Giffen Goods.
By satisfying that it’s about focusing on the originality of an economist, the real lesson from Giffen Goods suggests that strange things can happen when people return to the corner. Two years ago I noted that some of the cheapest foods, such as sliced white bread and unadorned pasta, had prices that had risen the most quickly after the pandemic. The point isn’t that sliced bread is Giffen Good, but that people feel trapped in such price movements. If the price of a flashy product soars, those who buy a flashy product can always switch to something easier. But for those who have already bought the most basic ones, there is no place to trade down.
The financial turmoil of the past few weeks has thrown another interesting example. The US Dollar and the US Treasury have several Giffen-esque qualities. Think of the US Treasury as the potato of the financial world. Potatoes are a source of unadorned calories, while the Ministry of Finance is an insecure source.
Usually, when the US economy is thriving, the dollar is strong, when the US economy is struggling, the dollar is weak, but when the US economy is in fact in trouble, the dollar often rises. reason? When the US is in trouble, everyone is in trouble. And when everyone is in trouble, it’s best to be in the safest place. This “dollar smile” pattern isn’t exactly Giffen Good, but it reminds me of Giffen Good’s counterintuitive movements.
One of the market moves that has been shunning market movements following President Trump’s tariff announcement on April 2 was that the dollar and the US Treasury Department did not rise. I don’t know how much Giffen and Marshall can tell us about this, but the atmosphere seems uneasy. When blight really settles, bad things happen. Or roller coasters are better similarities. The ride is rattling and passengers are vomiting.
Written for and first published Financial Times May 2, 2025.
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