Is Michigan's DNR Action a Reminder of FDR's AAA?

Michigan's Department of Natural Resources (DNR) recently issued an Invasive Species Order, or ISO. Some believe the ISO to include "heritage or "old world" breeds and open-range pigs" that are found on small farms. This order basically allows the DNR to kill the animals that don't conform to the standards set by Michigan's DNR. Some, who oppose this idea, see the order as a result of the Michigan Pork Producers Association's influence. Those who oppose the order are basically saying that the MPPA sees the small pig farmers as a threat to their business. By allowing the smaller farmers' pigs to be killed, the people, who are buying pig meat of any kind, will be forced to buy the meat produced by the large pig factories. However, if you take a look at this situation, the supply is going to be depleted somewhat if the pigs are killed. This decrease in supply could result in a short-run increase in price, which is what the larger pig farmers would love to see.

This is what happened during Franklin D. Roosevelt's term in office when the Agricultural Adjustment Act was passed. Livestock was killed off (and this was during hard economic times of the United States) to raise the price of livestock for the farmers. The end effect was intended to help the farmers economically, but what it actually did was cause consumers to find it difficult to buy meat for their families. Hopefully, we won't make the same mistake twice. 


Owen said...

Governments unfortunately never learn their lessons. They don't think what happened in the past has any relevance on what is happening currently. It is not like meat prices are already at high levels since Obama has been president. I remember just a few years ago when I could get pork ribs for $1.20 a pound on sale, good luck with that today.
It would be completely ridiculous to lower the food supply now at a time when the consumer is already paying double prices over the last four years. But I am sure the DNR will do it, because unlike regular business’s, the government isn’t held accountable for its bad decisions, in fact history has shown that some of the worst presidents ever for the economy are the most revered. Just look at FDR.

Dr. Tufte said...

Jake: 100/100
Owen: 50/50

Jake: it sounds like they are already making the same mistake twice!

Broadly, this situation falls under the idea of "regulatory capture". This occurs when one side gets enough influence over regulators to have them start using the regulatory apparatus to benefit that side at the expense of others.

This is also broadly related to the field of public choice. In public choice, it is argued that the government actions we see are one in which the benefits are focused on the few, and the costs are spread out over the many. In this case, the effect of the ISO on the marginal profit of "corporate" pigs is probably far higher than the marginal cost to the consumer for each, say, pork chop.

I think Owen is right: governments don't tend to learn their lessons. I'm speculating here, but I think the response of political parties to the electoral process is to blame. I'm not claiming I have a solution, but there's some odd behavior here. Think about it: a politician does something dumb, so they get voted out, and instead of allowing the politician to stand the next time and make clear that they've learned a lesson, the party typically settles on some new candidate. So, the government officials may very well have learned their lesson, but the parties keep replacing them with people who haven't even been exposed to the lesson. If football coaches did that, you'd pull all the starters on defense after the first touchdown and put in the second-stringers.

Dr. Tufte said...

WTF: Google added a hyperlink with an advertisement to my comment. And now that I look, it's done that to a few comments I've written this morning.

Miz Ava said...

I agree that during FDR's term it was a terrible decision to slaughter livestock, especially since so many people were starving. I wish the farmers of the Great Depression had donated the slaughtered pigs to poor houses. The pigs in Michigan are probably totally going to waste as well. I think it prudent for these farmers to donate the pigs to qualified charitable organizations so they may take a tax deduction and feed those in need. Donating the slaughtered pigs would at least improve public relations after a making a very stupid pricing decision.

Dave Tufte said...

Miz Ava: 50/50.

Typically, this sort of donation has to be banned. The reason is arbitrage: people will pick up the donated meat and resell it, thus continuing to undermine the price that was the problem in the first place.

This is why the U.S. gives out so much food aid internationally: they're trying to make it as hard as possible for people to spot the arbitrage opportunity and re-import the diverted food.