The life-cycle of a tariff

Suppose you're a virtuous person in California. You are troubled by the plight of egg-laying hens in large, crowded commercial farms. You go to D.C. and try to persuade Congress to require all American farmers to give their hens twice as much room, but you fail. You then try the same thing in the California legislature, and succeed.

But wait. California consumes more eggs than it produces, so it's a big importer from other states. What's more, requiring California farmers to give their hens twice as much room will put them at a competitive disadvantage with out-of-state egg producers. You could rely on the innate chicken-empathy of your fellow California citizens, but you worry that some of them lack ideological purity and will buy cheap, unenlightened out-of-state "conflict" eggs.

The obvious next step is to ban the transportation across the California state line of conflict eggs. This prevents your fellow Californians from making the incorrect ethical choice, and protects the local farms from unfair competition. It's arguably a violation of the Interstate Commerce Cause, but that will take a long time to work out in the courts. In the meantime, eggs were $1.18 in California a dozen a couple of years ago but have risen to between $3.16 and $5.00 now. Can price caps be far behind?

Over the holidays I noticed that our local grocery store was having trouble keeping eggs in stock--lots of empty shelves. I thought it was just an outbreak of holiday baking enthusiasm, but maybe not! It may be a ripple effect from the growers in the Midwest who want to maintain access to California markets, and had either to invest $40 a chicken in larger cages or to slaughter half their chickens to make room. In any case, my neighbors who sell fresh eggs may find that their free-range prices are starting to look pretty competitive.  Maybe the next law needs to prohibit all municipal anti-noise poultry-raising regulations and promote "victory" chicken gardens.


Grim said...

... or to slaughter half their chickens to make room.

Well, they're going to slaughter all their chickens in short order anyway. Egg-laying chickens live longer than meat chickens, but need frequent replacement because the factory farming conditions are stressful enough that they soon stop laying eggs. That's OK, because meat chickens are turned over so often that there are always new females available. So if this would bring them into compliance -- which I doubt, because I believe the cages themselves are the issue -- they'd need to buy only half as many new hens.

Grim said...

Maybe the next law needs to prohibit all municipal anti-noise poultry-raising regulations and promote "victory" chicken gardens.

This reminds me of the fun California law against clotheslines. They're so green, but so unsightly, that you end up with conflicts.

Well, they're not that unsightly. We used clotheslines for years.

Texan99 said...

When they replace their surviving chickens with half as many in a year or two, they're still going to have to charge enough for the eggs to make up for the fact that they've got to have twice the facility size to produce half as many eggs as they used to. The fact that it won't cost them as much to buy twice as many hens isn't going to keep the cost of eggs down under those conditions.

I hope you never go into business!

Grim said...

I'm aware of basic laws of economics. You're missing my point.

The point is, egg-laying chickens are not like milk cows where slaughtering a large number of your herd is an expensive option for the farmer. It's something you were going to do anyway, not just to half of them but to all of them. If that would solve your problem, it's not out of your way. That it would raise the price of eggs isn't the farmer's problem: that's the consumer's problem. From the farmer's perspective, you buy half as many chicks and you start selling in California where you can draw higher prices.

Except I'm pretty sure that doesn't solve the problem, because what California is concerned about isn't density so much as the cages themselves. These things are so small that the chicken can't turn around, which makes it relatively easy to automate egg collection and "manure management." So filling only half the cages probably won't mean compliance with California's regulations: the option of buying half the chicks isn't really on the table at all. What you have to do to comply with California rules is replace or eliminate the cages, which changes your entire operation.

Texan99 said...

I didn't suggest that the hen slaughter was an expensive long-term proposition for the farmer. It did seem a strange outcome of a policy intended to exhibit mercy towards chickens, but as you say, they're going to die soon anyway.

The long-term upward pressure on egg prices is pretty clear, though. Will it put pressure on the net profits of a lot of egg farmers? Not necessarily; I didn't mention a concern about the viability of their future operations. As you say, they'll probably pass the extra cost on to consumers in California, if they can. If some Californians turn to other food sources for their protein, egg farmers may lose some market share after a while. But my main exposition concerned the impact on the prices consumers will pay, at least in California, and possibly nationwide, to the extent that a lot of egg-growers change their operations in order to preserve their access to California markets.

I can live with higher prices. These particular higher prices reflect a greater value accorded to the comfort of chickens than to the cheapness of a handy source of protein for consumers. Naturally I'd prefer the consumers to be the ones to express that valuation preference, instead of its being arrogated by the California legislature. But I generally look at prices as something to be endured unless and until we do something to alter the supply and/or the demand for the product. If supply or demand can be adjusted by reversing a silly legislative initiative, great. If not, something else always works in the end.

The thing is, I doubt my views on consumer prices will be shared by the California legislature, which is sure to start work soon on legislation to prevent unscrupulous egg farmers from denying the benefits of healthful eggs to vulnerable voters at a reasonable price. I'm guided in this prediction by California's past behavior concerning things like ballooning in-state energy prices. That's how tariffs work.

In the meantime, I'll happily buy more expensive eggs from local free-range producers, because I personally do allocate a lot of value to the comfort of chickens, and am willing to put a burden on my own resources to further that goal.

Grim said...

Well, and as you suggest -- like oil prices did for fracking -- if the prices drift high enough, we may just see a lot more free-range production. That brings prices of free-range eggs down, as supply increases, while also obtaining the good of more comfortable chickens.

So it turns out maybe this is not such a bad thing.

Texan99 said...

Right, pretty much the same way charging extra for bottled water after a hurricane will help improve emergency supplies in the long run without inflating costs as much as we might originally have feared. But in the short run, I predict efforts to freeze prices instead. In any case, when a new price equilibrium is reached, all we can really be assured of is that it will bring the forces of supply and demand back into balance. There is never a guarantee that the resulting price will be as low as it was before. In fact, if the upward pressure resulted from a value judgment that more of a burden of production should be shared by the consumers than before (in this case, the burden is the cost of making chickens happier), we can confidently predict the price will stay higher than it originally was, even if not as high as it initially rose after the first disruption.

Also, it makes a big difference to me whether a price spike is imposed on consumers by their own preferences or by those of their betters.

Grim said...

I'm not biting on the natural disaster argument, where I understand the supply/demand issues perfectly well but insist that we have a moral duty to fellow citizens that eliminates the option of using that method.

As for the price spike being imposed by consumers or government, it's probably the case that government has its thumb on both sides of the scale. You mention anti-noise ordinances that prevent people from owning backyard chickens, which is one example; zoning ordinances in general often prevent it. I remember when we lived in Warrenton, VA, many local residents were horrified to discover that there was nothing preventing the owning of backyard chickens, so they couldn't stop one of our neighbors from doing it.

To the degree that the concern is about pricing and the poor, who often have more time than money, letting them grow their own eggs is a good option. A government that really wanted to prevent independent chicken ownership while also helping the poor could set up a community chicken house, as some do community gardens, where you could have eggs if you came and did part of the work of keeping it orderly and collecting the eggs.

Texan99 said...

We've never disagreed about the moral duty, only about who is supposed to pay the cost of fulfilling it. When I hear "we" have such a duty, I always want to ask "What's this 'we' jazz, paleface?'"

I agree about the better regulations available to address the chicken and egg issues.

E Hines said...

That brings prices of free-range eggs down, as supply increases[.]

But down as far as the original price of eggs in general, including the non-free range eggs.

Separately, non-California egg producers are starting to stop selling into California, declining to incur the cost of cage conversion and the resulting impact on their rest-of-the-nation sales.

California's move is just another installment of the Left's War on the Poor.

Eric Hines

douglas said...

I personally know several people who are now keeping chickens. I suspect that will be a trend.

Grim said...

We'd have 'em, except...