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“Dairy farmers are free-market guys—they don’t want to be told how much to produce,” Sounds like a contradiction - if no one else, free-market will tell you ho

“Dairy farmers are free-market guys—they don’t want to be told how much to produce,” Sounds like a contradiction - if no one else, free-market will tell you how much to produce. Does not look like farmers are listening.

Matticus_Rex 8y ago
And don't we have price floors for milk in the US? In a free market the price would just keep dropping, which can't happen here, so you just get a glut.
- mynegation 8y ago
  Do you? Article says that subsidies to milk farmers are virtually non-existent these days and they dump the excess milk.
- setr 8y ago
  At some point, the cost to package & bring the milk to the store will exceed the price of selling the milk, so you’ll hit a price floor regardless. And it becomes the same issue: you now can’t sell the excess milk but you still have all the production facilities. So you store it in your buffer and hold onto production, and eventually if you end up overflowing the buffer, you’ll have no choice but to drop production (which is expensive to bring back up, so highly avoidable)
- sciurus 8y ago
  It seems that we don't currently have a milk price floor in the US, although farmers are lobbying for one. https://www.usatoday.com/story/money/business/2018/05/01/americas-dairyland-reels-low-milk-prices-destroy-family-farms/569277002/ https://www.usatoday.com/story/money/business/2018/05/01/ame...
  - tedunangst 8y ago
    Neither that article nor this one seem to even mention existing policies? https://www.ers.usda.gov/topics/animal-products/dairy/policy.aspx https://www.ers.usda.gov/topics/animal-products/dairy/policy...
pjc50 8y ago
No, absent collision and when you have fixed costs, in a free market any individual producer ends up producing as much as possible. The market regulates production by people going out of business entirely. This is why the EU built a complex production management system.
- daveFNbuck 8y ago
  When I go to the doughnut shop at the end of the day, why are they almost out of doughnuts? It would be possible to produce a lot more doughnuts than that.
  - fzeroracer 8y ago
    When I go to the grocery store, why do I see them tossing out tons of perfectly good bread, boxed products etc? Presumably if the free market could reach equilibrium then we would see only as much food produced as necessary, so then food waste should be minimized. Yet that's obviously not the case and we see vast amounts of waste.
    - daveFNbuck 8y ago
      Right. Players in free markets neither maximize nor minimize waste. The goal is to maximize profit.
- wyattpeak 8y ago
  That might be how the free market is explained to a tenth grader, but it's not remotely the full picture. - Do you spend on production or ramp up marketing instead? - Do projections support taking out a loan to expand future production? - Do you have other products where your capital would be better directed? - Is there a point where marginal cost exceeds sale price? The list of further considerations is endless. Nobody is just blindly producing as much as possible.
  - hexane360 8y ago
    It's definitely not how it's explained to a tenth grader. In high school economics classes I was definitely introduced to marginal cost curves for firms in perfectly competitive markets, like so: https://upload.wikimedia.org/wikipedia/commons/4/43/Economics_Perfect_competition.svg https://upload.wikimedia.org/wikipedia/commons/4/43/Economic...

Matticus_Rex 8y ago

And don't we have price floors for milk in the US? In a free market the price would just keep dropping, which can't happen here, so you just get a glut.

mynegation 8y ago
Do you? Article says that subsidies to milk farmers are virtually non-existent these days and they dump the excess milk.
setr 8y ago
At some point, the cost to package & bring the milk to the store will exceed the price of selling the milk, so you’ll hit a price floor regardless. And it becomes the same issue: you now can’t sell the excess milk but you still have all the production facilities. So you store it in your buffer and hold onto production, and eventually if you end up overflowing the buffer, you’ll have no choice but to drop production (which is expensive to bring back up, so highly avoidable)
sciurus 8y ago
It seems that we don't currently have a milk price floor in the US, although farmers are lobbying for one. https://www.usatoday.com/story/money/business/2018/05/01/americas-dairyland-reels-low-milk-prices-destroy-family-farms/569277002/ https://www.usatoday.com/story/money/business/2018/05/01/ame...
- tedunangst 8y ago
  Neither that article nor this one seem to even mention existing policies? https://www.ers.usda.gov/topics/animal-products/dairy/policy.aspx https://www.ers.usda.gov/topics/animal-products/dairy/policy...

pjc50 8y ago

No, absent collision and when you have fixed costs, in a free market any individual producer ends up producing as much as possible. The market regulates production by people going out of business entirely. This is why the EU built a complex production management system.

daveFNbuck 8y ago
When I go to the doughnut shop at the end of the day, why are they almost out of doughnuts? It would be possible to produce a lot more doughnuts than that.
- fzeroracer 8y ago
  When I go to the grocery store, why do I see them tossing out tons of perfectly good bread, boxed products etc? Presumably if the free market could reach equilibrium then we would see only as much food produced as necessary, so then food waste should be minimized. Yet that's obviously not the case and we see vast amounts of waste.
  - daveFNbuck 8y ago
    Right. Players in free markets neither maximize nor minimize waste. The goal is to maximize profit.
wyattpeak 8y ago
That might be how the free market is explained to a tenth grader, but it's not remotely the full picture. - Do you spend on production or ramp up marketing instead? - Do projections support taking out a loan to expand future production? - Do you have other products where your capital would be better directed? - Is there a point where marginal cost exceeds sale price? The list of further considerations is endless. Nobody is just blindly producing as much as possible.
- hexane360 8y ago
  It's definitely not how it's explained to a tenth grader. In high school economics classes I was definitely introduced to marginal cost curves for firms in perfectly competitive markets, like so: https://upload.wikimedia.org/wikipedia/commons/4/43/Economics_Perfect_competition.svg https://upload.wikimedia.org/wikipedia/commons/4/43/Economic...