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That only works if a sufficient majority of producers do it, and do it in a coordinated manner. If they manage to do this, then there is a strong incentive for
by maxki 11y ago
That only works if a sufficient majority of producers do it, and do it in a coordinated manner. If they manage to do this, then there is a strong incentive for individual producers to go against the "coordinated group", i.e. sell when the production is high, while the "coordinated group" is stockpiling.
- maxerickson 11y agoI don't understand your only. Absent a cartel, why can't Warren Buffett (or anyone with a big fun pile of money) buy during high production years, store the syrup and then sell it in low production years? I totally agree it will be more profitable with the coordination, but that is a big part of why there are frequently laws against coordination.
- maxki 11y ago> why can't Warren Buffett (or anyone with a big fun pile of money) buy during high production years, store the syrup and then sell it in low production years? Isn't that a price fixing scheme ? The only difference is that it uses a huge pool of purchasing power to acquire the ability do dry the market. The only difference between price fixing by "buying power" and establishment of a cartel is that the profitability increase goes to oligarchs instead of farmers. How can that be more acceptable ? I am against cartels in general, since they are a form of monopoly, and I am against monopolies in general. However I think that in some cases, they are the "less worst" solution. And I totally think that the fact that a government can "legislate into existence" cartels is problematic, and creates plenty of room for dirty politics. Now that I think about it, my opinion on the "evilness" of a cartel is that it's proportional to how much the "legislated good" is necessary for survival. The less something is essential the less you can pressure the price upwards. In this case, we're talking of a luxury good, which is why I see no scandal in the situation, or perhaps a minor one.
- maxerickson 11y agoThe point of the example was that it provides a way to match current supply with future demand without any extra coordination between the sellers. All it requires is that each be willing to sell to any buyer, which is not coordination in any meaningful sense. Your comment said That only works if a sufficient majority of producers do it, and do it in a coordinated manner., so I asked about another way that I thought would work (in fact, the way proposed in the parent of your first comment).
- pzone 11y agoIt needs no coordination, that's why futures markets exist. We get estimates of future prices of these products. If the future prices make storage attractive, speculators can purchase syrup to store for sale in the future, each based on their individual assessment of the prices and risks involved.