Dried out bay leaves are super tough – they’re unpleasant to eat and they can actually be a bit of an irritant on the digestive tract – and run the risk of hurting your throat on the way down. Fresh bay leaves are less tough (though still a little bit), but still do have that irritant effect. And powdered bay leaf loses a lot of the flavor, because the oils that are inside seep out. And in my experience store-bought powdered spices tend to be less powerful than the fresh version, and bay is no exception, though you’ll sometimes find spice mixes that include a bit of it – powdered poultry seasoning usually contains bay.
At the end of the day, it just winds up being easiest to use whole leaves and pull them out of whatever they’re flavoring once the job’s done, so that nobody’s eating the actual fibrous leaf. Other “hard herbs” like rosemary, sage, thyme, etc. (the ones with woody stems or fibrous leaves) are often used the same way. Sure, we can use the finely ground versions or tear off the small leaves (depending on the herb), but it’s often more convenient in soups, sauces, braises, etc. just to tie a little bouquet of the herb, drop it in a simmering pot, and pull it out at the end.
EDIT: corrected my thing about powdered spices, cause I phrased that part poorly.
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