Heavy Lifting - thoughts and web finds by an economist
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Sunday, May 06, 2007
The response of government officials when certain of their constituents complain is interesting. Sometimes the constituents get no response and at other times government officials create whole new laws and regulatory bodies. For instance, the beef industry is fairly concentrated in packing/processing. Cattle ranches, however, are not very concentrated.
The result? Beef processors have market power (monopsony power) and individual cattle ranchers have little to no market power. This means that prices are typically a little lower than the rancher wants (go figure) and this makes ranchers upset. What to do about this problem?
There are a number of possible solutions, one might be to enter in the processing market with a cooperative of some sort (much like what corn farmers did with ethanol before the latest government mandated surge). There are other options, but the one that is the easiest on the part of the cattle ranchers is to go to the government and demand a solution.
Unfortunately, there are at least two lawmakers in Washington that agreed to create an entirely new anti-trust/anti-competitive enforcement branch of the federal government. Rather than try to improve the efficiency of the beef market, the government will simply create a new bureaucracy that is essentially guaranteed to make the market less efficient (and cost us taxpayers more as well).
[Full disclosure: I own a few heads of cattle, so you might think I would be happy about this development.]
From BEEF-Cow Weekly:
The removal of the "disclaimer clause" is the only bullet point that seems reasonable.
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