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Except basic microeconomics demonstrates that profit is maximized when production is raised to the point where marginal revenue equals marginal cost. Semiconduc

Except basic microeconomics demonstrates that profit is maximized when production is raised to the point where marginal revenue equals marginal cost. Semiconductor fabrication is one thing, because cost of entry is astronomical. But these are chickens we’re talking about. We are probably just seeing the effects of egg producers trying to avoid a bullwhip effect where in two years we are drowning in eggs because the market over-responded. So, they limit investment in production increases today while enjoying the result of an exogenous supply shock on prices. Poof: record profits. What else should we do? Price controls? They provably cause more harm than good. Force companies to invest in egg production? Ridiculous overreach. The market will adapt, people will reduce egg consumption (perhaps durably), and we can play out the counterfactual in 20 years to see if the egg industry shot itself in the foot or not.

stephencanon 4y ago
> Except basic microeconomics demonstrates that profit is maximized when production is raised to the point where marginal revenue equals marginal cost. Basic microeconomics demonstrates that this holds true _in a competitive market_. The record profits tell us that prices have come decoupled from marginal cost, from which we can conclude that major egg producers have been allowed to merge to a point such that the market is no longer competitive.
- mech765 4y ago
  This is the short term during a market disruption where supply is constrained due to an avian flu outbreak. Long term prices will fall back to normal. The difference between the cheap eggs of 2 years ago and the expensive eggs of today is not that too many egg companies merged. Blaming all high prices on anticompetitive behavior is throwing the baby out with the bathwater.
- didgeoridoo 4y ago
  > in a competitive market Yes, hence my point about semiconductor fabs vs. hen cloacas. You can’t just point to a single product type undergoing a price shock and declare the market has failed. Preferences are sticky, but substitutes abound. People will adjust their preferences, and egg consumption will drop. If prices stay high, other products will begin to take the place of eggs in various contexts. We aren’t entitled to cheap eggs, but neither are the producers guaranteed record profits beyond a quarter or two. This too shall pass.
  - stephencanon 4y ago
    Preference for eggs is remarkably sticky; there effectively is no substitute good for most uses.
locococo 4y ago
Only considering market forces and saying the market will fix itself is a shortsighted argument. We live in a society and the market does not factor in societal impacts in terms of the "greatest good". Markets need a balancing counter force to make sure eggs are not only available to the rich and the poor are exposed to malnutrition. I say this because in the US we have this dominant idea that there is nothing better than not interfering with the market while forgetting that the market is only valuable to society if it serves our greater good. The statement that price controls do more harm than good is not true in a general sense. When society chips in to save banks no one seems to have a problem with that, try to make eggs affordable is blatant overreach.
BaseballPhysics 4y ago
> What else should we do? Price controls? Many modern, western countries have supply management policies in place to help steady commodities markets, e.g. Canadian dairy management. Heck, US farm subsidies exist specifically for this reason: to help support producers when markets soften. There's just no policies in place to moderate market behaviour when prices swing up (privatize the profits, socialize the losses, baby!) There is a middle ground between unfettered, free market neoliberalism and full blown state control. Unfortunately, the kind of thought-limiting rhetoric you're demonstrating here shuts down discussions before they get started.

stephencanon 4y ago

> Except basic microeconomics demonstrates that profit is maximized when production is raised to the point where marginal revenue equals marginal cost. Basic microeconomics demonstrates that this holds true _in a competitive market_. The record profits tell us that prices have come decoupled from marginal cost, from which we can conclude that major egg producers have been allowed to merge to a point such that the market is no longer competitive.

mech765 4y ago
This is the short term during a market disruption where supply is constrained due to an avian flu outbreak. Long term prices will fall back to normal. The difference between the cheap eggs of 2 years ago and the expensive eggs of today is not that too many egg companies merged. Blaming all high prices on anticompetitive behavior is throwing the baby out with the bathwater.
didgeoridoo 4y ago
> in a competitive market Yes, hence my point about semiconductor fabs vs. hen cloacas. You can’t just point to a single product type undergoing a price shock and declare the market has failed. Preferences are sticky, but substitutes abound. People will adjust their preferences, and egg consumption will drop. If prices stay high, other products will begin to take the place of eggs in various contexts. We aren’t entitled to cheap eggs, but neither are the producers guaranteed record profits beyond a quarter or two. This too shall pass.
- stephencanon 4y ago
  Preference for eggs is remarkably sticky; there effectively is no substitute good for most uses.

locococo 4y ago

Only considering market forces and saying the market will fix itself is a shortsighted argument. We live in a society and the market does not factor in societal impacts in terms of the "greatest good". Markets need a balancing counter force to make sure eggs are not only available to the rich and the poor are exposed to malnutrition. I say this because in the US we have this dominant idea that there is nothing better than not interfering with the market while forgetting that the market is only valuable to society if it serves our greater good. The statement that price controls do more harm than good is not true in a general sense. When society chips in to save banks no one seems to have a problem with that, try to make eggs affordable is blatant overreach.

BaseballPhysics 4y ago

> What else should we do? Price controls? Many modern, western countries have supply management policies in place to help steady commodities markets, e.g. Canadian dairy management. Heck, US farm subsidies exist specifically for this reason: to help support producers when markets soften. There's just no policies in place to moderate market behaviour when prices swing up (privatize the profits, socialize the losses, baby!) There is a middle ground between unfettered, free market neoliberalism and full blown state control. Unfortunately, the kind of thought-limiting rhetoric you're demonstrating here shuts down discussions before they get started.