What Slaughtered Pigs Can Teach Us About Europe’s Wine Policy

There’s a senselessness to Europe’s attempt to manage wine supply and dictate prices that echoes the New Deal’s effort to alleviate poverty by destroying millions of pigs.

By Jon Miltimore. 

"In the spring of 1933, American farmers pleaded for help from their newly elected president, Franklin Roosevelt. Hog prices were at record lows, and the farmers wanted the government to do something.

Not one to let a crisis go to waste, FDR took action. Agriculture Secretary Henry Wallace was tasked with arranging the slaughter of millions of pigs in an effort to raise hog prices. Farmers who participated in the federal government’s hog program — later dubbed by economists “the porcine slaughter of the innocents” — were compensated. Their animals were turned into “inedible meat and bone meal,” courtesy of US taxpayers, even as hunger in America hit record highs. 

A country destroying its own food during a depression might sound like economic madness, and it is — but we are once again watching governments ramp up policies that pay farmers to destroy food.

It’s no secret that European vineyards have been disappearing for years. The trend is starkest in Pyrénées-Orientales in southern France: that region “lost nearly half its vines” between 2000 and 2020, The Economist recently reported. Limited access to water and rising energy costs played a role. But vineyards have vanished with increasing speed in recent years, thanks to government policies. 

In 2024, the French government revived a familiar tactic: paying farmers to rip out their vines. Under this national program, farmers can receive roughly €4,000 (about $4,600) for every hectare they remove. If lawmakers aimed to see the country produce less wine and hasten the disappearance of vineyards, that’s what they got.

France typically produces well over 40 million hectoliters of wine annually, but in 2025 it produced just 36 million, according to the French Ministry of Agriculture. Meanwhile, growers in the Languedoc-Roussillon region saw a surge in vines removed last year — roughly 15,000 hectares, an area approaching the size of Washington, D.C., according to The Economist.

Many might assume climate concerns drove France’s policy, but the primary reason resembles the catalyst for FDR’s “porcine slaughter of the innocents”: oversupply.

Global trends show fewer people drinking alcohol, especially Gen Z. Wine has taken a particularly hard hit, even in France, where red wine consumption recently reached an all-time low. French lawmakers say their policy is designed to “rescue” the wine industry from what the ministry described as excessive output.

To the average person, paying vineyard owners to destroy their vines likely looks crazy — but in Europe, it’s business as usual.

For years, the European Union has attempted to micromanage wine production through various incentives, including direct payments to farmers to remove vines. A European Parliament report found that the EU’s 2008 wine reform set an aggressive target: removal of 175,000 hectares with commitments to not replant. (Actual removal totaled 160,550 hectares.)

Now it appears Brussels is intent on ramping up its policy. The EU’s most recent Wine Package will, among other measures, make it easier for countries to make direct payments to farmers to destroy their vines.

“…new rules on State aid would allow Member States to use national financing not only for distillation of surplus wine,” the package reads, “but also for green harvesting (the total destruction or removal of grapes while still in their immature stage) and grubbing up (complete elimination of all vine stocks) of vineyards.”

There’s a certain irony in the policy. 

For decades, the EU subsidized wine production, resulting in surplusses critics dubbed “wine lakes.” Now Brussels wants to ratchet up efforts to rip out vines — to curb the very surplus that bureaucrats helped create.

There’s a senselessness to Europe’s approach that matches New Deal efforts to alleviate poverty by destroying millions of pigs. At least some New Dealers eventually learned their interventionist policies were failing.

“We are spending more money than we have ever spent before and it does not work,” United States Secretary of the Treasury Henry Morgenthau Jr. admitted to Congress in 1939. “I want to see this country prosperous. I want to see people get a job, I want to see people get enough to eat. We have never made good on our promises.”

Morgenthau learned the hard way that trying to engineer a market economy from Washington — through spending, controls, and heavy-handed intervention — produced results far different from those promised. 

We can only hope lawmakers in Europe eventually learn the same lesson. 

Markets aren’t perfect, but they aggregate information from millions of buyers and sellers far better than bureaucrats, who can’t seem to decide whether to subsidize vineyards to boost production or destroy them to raise prices.

These contradictions will do long-term harm to vineyards. That’s a shame. A world with less wine is a less happy world."

Lessons for Anna Paulina Luna (on farm policy)

Why would a Florida Republican stand up for an overbearing California farm rule?

By Kimberley A. Strassel. Excerpt:

"Where to start unpacking? Several GOP offices tried to do just that in the forum. One office began by (politely) setting Ms. Luna’s office straight on basic facts: Under this fix, California can still regulate its own agricultural practices. Also, the Supreme Court in its Proposition 12 decision said several times that Congress has “considerable power to regulate interstate commerce and preempt contrary state laws.”

That office then patiently provided a refresher in Federalism 101, explaining why California’s initiative is the opposite of states’ rights, since it doesn’t concern itself with only California. It imposes its mandate on 49 other states, none of whose citizens had any vote, or any recourse, through California’s process. They might have added that California has been using this trick—flexing its markets to impose national rule, under the perversion of “states’ rights”—with increasing boldness for decades. Republicans are supposed to understand such basic stuff.

The same office also tried to impart basic economics. It noted that the producers most able to swallow California’s mandate costs are giant concerns, like “Chinese-owned Smithfield.” Those hardest hit are U.S. farms and ranches, which are being pushed out of the market. It provided Ms. Luna’s office with U.S. Department of Agriculture data, estimating that the cost for pork producers of complying is about $3,500 to $4,500 a sow, one reason 12% of small pork operations have exited since Proposition 12. It further noted the demonstrated rise in consumer prices (especially in California) since the initiative’s passage.

Ms. Luna’s staffer said he “appreciated” the “viewpoints”—before banging on anew about “state authority.” California voters have a right to decide what “consumer” products are sold in their state. They should have “choice.” Another catchy word, if again totally backward, since California eliminated everyone’s “choice”—and unnecessarily. As one GOP office noted, there is an easier, freer, less costly answer. California consumers can exercise choice via what they buy. Under Congress’s new fix, morally superior Californians are free to choose to buy only costly, grass-fed California-produced chops, leaving on the shelves all the cheaper, yummier pork for the hoi polloi."

The Farm Labor Shortfall Bites

U.S. workers applied for only 182 of 415,000 jobs advertised last year

WSJ editorial. Excerpts:

"the Administration is quietly conceding that too few Americans want to work these grueling jobs, and that its policies risk driving up food prices."

It has "taken steps to make it easier and less costly for farmers to hire seasonal guest workers on H-2A visas. Last fall the department relaxed a Biden wage mandate that required farmers to pay guest workers on average $17.74 an hour—and as much as $19.97 an hour in California—in addition to providing housing and transportation."

"A Labor attorney told a federal judge last month at a hearing on the UFW lawsuit that “there aren’t enough Americans to take these jobs,”"

"High wage mandates have “not resulted in a meaningful increase in new entrants of U.S. workers to temporary or seasonal agricultural jobs.”"

Why is the USDA Involved in Housing?!

By Alex Tabarrok.

"In yesterday’s post, The 21st Century ROAD to Housing Act, I wrote that Trump’s Executive Order “cuts off institutional home investors from FHA insurance, VA guarantees and USDA backing…”. The USDA is of course the United States Department of Agriculture. In the comments, Hazel Meade writes:

USDA? Wait, what????
Why is the USDA in any way involved in housing financing?
Are we humanly capable of organizing anything in a rational way?

It’s a good question. The answer is a great illustration of the March of Dimes syndrome. The USDA got involved with housing in the late 1940s with the Farmers Home Administration. The original rationale was to support farmers, farm workers and agricultural communities with housing assistance on the theory that housing was needed for farming and the purpose of the USDA was to improve farming. Not great economic reasoning but I’ll let it pass.

Well U.S. farm productivity roughly tripled between 1948 and the 1990s as family farms became technologically sophisticated big businesses. So was the program ended? Of course not. Over time the program subtly shifted from farmers to “rural communities”–the shift happened over decades although it was officially recognized in 1994 when the Farmers Home Administration was renamed the Rural Housing Service. Today rural essentially means low population density which no longer has any strong connection to agriculture.

So that’s the story of how the US Department of Agriculture came to run a roughly $10 billion annual housing program for non-farmers in non-agricultural communities. And how does it do this? By supporting no-money-down direct lending and a 90 percent guarantee to approved private lenders. Lovely.

It’s a small program in the national totals, but an amusing example of the US government robbing Peter to pay Paul and then forgetting why Paul needed the money in the first place."

On every continent, food supplies have grown faster than the population

By Pablo Rosado & Max Roser. 

"We just lived through the period with the fastest population growth in human history. Six decades ago, there were three billion people on our planet. Since 2022, there have been more than eight billion people — an increase of five billion over this period.

It would have been impressive if food supplies had merely kept pace with population growth. But as the chart above shows, they grew even faster. On every continent, food supplies — measured by calories — grew faster than the population. This rise in food production per person was a major reason for the decline of extreme poverty and hunger.

To us, this chart documents one of humanity’s most extraordinary achievements."

 

 

Obesity Economics: How Subsidies Distort the American Diet

Federal subsidies drive food production, consumption, and — unintentionally — chronic disease. Now we’re being asked to subsidize weight loss drugs to fight what farm policy broke. 

By Laura Williams of AIER. 

"Let me introduce you to Sam. Sam has obesity, Type 2 diabetes, heart disease, and high blood pressure. His diet consists mostly of refined grains and trans fats. He’s got cabinets full of dirt-cheap junk food and sky-high healthcare costs to address its effects. He takes home $27,000 a year, but spends $36,000. He’s in debt up to his jaundiced eyeballs, and he wants his niece to foot the bill for weight-loss medication.

As a real-life niece of my Uncle Sam, I’m concerned about his diet. Some 56.2 percent of the daily calories consumed by US adults come from federally subsidized food commodities: corn, soybeans, wheat, rice, sorghum, dairy, and livestock. While these calorie-dense foods once made sense for a government preparing for famine or total war, in recent decades they’ve instead helped make us fatter and sicker. 

Obesity is a top driver of healthcare costs. One study compared the health of people who eat mostly foods the federal government subsidizes to those who eat fewer. Those who follow the revealed preferences of what the government subsidizes (rather than the diet it consciously recommends) are almost 40 percent more likely to be obese and face significant diet-related health issues. Those with the highest consumption of federally subsidized foods also have significantly higher rates of belly fat, abnormal cholesterol, high levels of blood sugar, and more markers of chronic inflammation. All these are increasing contributors to the most common causes of death in the developed world.

The negative impact of subsidized crop consumption on health — while it can’t be called causal — persists even after controlling for age, sex, and socioeconomic factors. But life does not control for those factors.

The Great Grain Giveaway

The federal government recommends one diet to Americans, and subsidizes another. The Dietary Guidelines for Americans from the USDA and HHS promote eating fruits, vegetables, whole grains, protein, and moderate dairy, while limiting saturated fats, sugars, salt, and refined grains. According to data compiled for Meatonomics, American agribusiness receives about $38 billion annually in federal funding, with only 0.4 percent ($17 million) going to fruits and vegetables. Just three percent of cropland is devoted to fruits and vegetables, despite USDA guidelines’ insistence that they should cover half of your dinner plate. Just 10 percent of Americans consume the recommended amount of fresh produce, and the poor consume the least. (Fruit and vegetable producers’ exclusion from the federal direct payments program provides a valuable example of a food industry thriving without significant subsidies. They do, however, rely heavily on migrant labor to lower costs.)

Instead, the US spends tens of billions annually to subsidize seven major commodities. The three largest farm subsidy programs contribute 70 percent of funds to producers of just three crops — corn, soybeans, and wheat. Approximately 30-40 percent of US corn, over half of soybeans, and nearly all sorghum feed livestock, heavily discounting high-fat, lower-nutrition meat and dairy (especially compared to grass-fed options). The prevalence of grain-fed livestock generates demand for commodities used to feed them, completing the circle. 

Subsidies also contribute to our consumption of refined grains, sugary drinks, and processed foods. About five percent of corn becomes artificially cheap high-fructose corn syrup (which allows it to compete with tariffed natural sugars), and half of soybeans are processed into oils, which also contribute to obesity.

My Uncle Sam is sick because he eats the food the government makes artificially more affordable. Those foods are poorer in quality and more harmful to health than their unsubsidized alternatives. We are paying to make ourselves sicker.

Diet-Related Health Issues Fuel Healthcare Costs

For more than 20 years, the FDA has known that trans fats and refined grains harm health, damage metabolism, and cause disease. Diet-related illnesses like obesity, Type 2 diabetes, and high blood pressure are increasing, while heart disease remains the leading cause of death. These epidemics are intertwined at the artery level, and both contribute hugely to rising US health care costs.

In an economic order awash with subsidies and regulation, agricultural policy is health policy. Government subsidies for agricultural products have shaped the current American nutritional environment, and they are exacerbating obesity trends.

An article in the American Journal of Preventive Medicine confirms: “Current agricultural policy remains largely uninformed by public health discourse.”

Johns Hopkins physician (and current Commissioner of the US Food and Drug Administration) Marty Makary called out the disconnect clearly. “Half of all federal spending is going to health care in its many hidden forms,” he told an interviewer in October, but Americans continue “getting sicker and sicker… Chronic diseases are on the rise. Cancers are on the rise. And we have the most medicated generation in human history.”

We’re getting more medicated every day — and more of it is at taxpayer expense. 

A Better Answer Than Ozempic?

Government spending on healthcare now exceeds the entire discretionary budget. Excess weight is a significant risk for older Americans, who are also the most likely to both have high healthcare costs and to rely on government health care. Forty percent of Americans over 60 are classified as having obesity, which is a contributing or complicating factor in diseases that kill older Americans: cancers, heart disease, infection, stroke, and cirrhosis.

Late last year, the Food and Drug Administration approved the weight-loss drug Wegovy as a treatment for people at risk of heart attack or stroke. Medicare is forbidden by statute from covering prescription drugs for weight loss alone, but in 2021 regulators approved Wegovy for reducing weight-related risks in patients with diabetes. Medicare Part D plans spent $2.6 billion last year on related compound Ozempic to keep 500,000 patients with diabetes stable. Wegovy’s list price is around $1,300 per month, but that’s still small compared to the $1.4 trillion Americans spend on direct and indirect costs from obesity.

It has a certain economic logic. Instead of waiting for a patient to develop a cascade of expensive comorbidities like heart failure or diabetes, we could consider asking Medicare to pay for anti-obesity meds on the front end. That wouldn’t work as well as lifestyle changes, but all our health and activity messaging over the past several years doesn’t seem to have moved that needle, and significant evidence suggests our efforts are counterproductive. 

The Tangled Web of Farm Subsidies

To understand the insanity of American agricultural and health policy, it’s hard to do better than comedian-illusionists Penn & Teller, who in characteristically salty style (really — you’ll want headphones and a sense of humor to watch the video) explained it this way 15 years ago: 

High fructose corn syrup is a dirt-cheap way to add sweetener and extend shelf life. And why is it so cheap? Because we subsidize corn farmers! Our government gives about 10 billion of our tax dollars to corn farmers every year so they can produce more corn than we need. They then sell the corn at artificially low prices. They spend our money to make corn syrup cheap, and now the same government that uses our tax money to keep soft drinks cheap wants more of our tax money to make soft drinks more expensive. Does anyone else think this is incredibly f—d up?

Yes, Penn. We do. And since that clip aired, obesity rates have worsened 50 percent, and rose 78 percent in children. Medical spending on the consequences of obesity doubled. Over the same period, subsidies to corn growers (which includes disaster aid and insurance) have tripled. 

Rather than cut back on his terrible diet, Uncle Sam wants us to pony up for weight loss drugs — to undo what our food policy has done."

Bad Policies Breed Bad Policies

By Jeffrey Miron , Siddharth Pakalapati , and Rishan Jaheer.

"Grocery bills are climbing again—up 3.2% over the past year—and nearly half of Americans say food prices are their biggest source of financial stress, beating out gas, rent, and utilities. Instead of fixing what caused those higher costs, Washington strangles farm labor with immigration enforcement and hikes input costs with trade barriers—and then throws farmers taxpayer money to survive. It's the government setting the fire and then selling the water.

Take the labor market. In Oxnard, California, ICE raids cut the agricultural workforce by 20–40%, leaving billions of dollars’ worth of crops to rot. Farmers had to bid up wages to keep the remaining workers, raising costs, which were passed to consumers as higher food prices. Rather than freeing up labor supply, politicians now propose to subsidize farmers with taxpayer dollars to offset the damage from the very policies that caused it.

The pattern is wider than agriculture. In Houston, construction and food service industries report the same squeeze: fewer workers, slower projects, higher wages, and ultimately higher prices for households. Meanwhile, trade barriers continue to raise input costs for farmers and manufacturers alike. Rather than removing those barriers, proposals like Trump’s industrial-policy plan double down—spending billions to patch a wound that the government itself inflicted.

This is the real cost of policy layering: inefficiency compounded by redistribution. The government creates the shortage, consumers pay higher prices, and then taxpayers pay again to “fix” the shortage."

Florida’s Citrus Growers vs. H-2A Red Tape

Without serious immigration reform, they could be put out of business

Letter to The WSJ. Excerpts:

"Sierra Dawn McClain captures the problems attending the H-2A guest-worker program in Washington state (“Red Tape Is the Biggest Crop on Some Farms,” op-ed, Aug. 29). Florida, which uses the highest percentage of such workers in the nation, knows this all too well.

The program is the source of the most frequent complaint I heard from 36 Florida citrus growers I interviewed for my book, “The Rise, Fall, and Future of Florida’s Citrus Industry.” In administering the program, the Labor Department wrongly assumes that a guest farm worker may take away a job from an American. It thus requires hourly wages 15% to 20% higher than the prevailing minimum and hours of cumbersome paperwork for employers.

Kyle Story, a Lake Wales grower and president of Florida Citrus Mutual, told me, “Fifteen years ago, the domestic labor market started going nonexistent. If I could hire the domestic employees we had 15 to 20 years ago, and if they were available, I would completely do that. But we don’t have that availability, and it’s not going to come back.” In the past decade, he says only one American has applied for a harvesting job with his company.

Paul Meador, owner of Everglades Harvesting Inc., flies in 2,000 guest farm workers every season for approximately 80 Florida growers, never knowingly hiring an undocumented worker. He told me the domestic labor market began shrinking after the housing boom started in the early 2000s. “Our domestic workers started working for landscape and construction companies and hotels and resorts, where they could get full-time employment with the benefits. We advertise in newspapers and in employment services. But we just don’t have any domestic workers applying for seasonal jobs.”

Without serious reform, the H-2A program’s expense and bureaucratic red tape are helping put Florida citrus growers out of business.

Em. Prof. David E. Sumner

Ball State University" 

Red Tape Is the Biggest Crop on Some Farms

Bureaucrats made the H-2A guest worker visa program costly and onerous. Trump and Congress can fix it.

By Sierra Dawn McClain. Excerpts:

"The Biden administration added more than 3,000 pages of regulations to the H-2A program"

"The Labor Department recently suspended enforcement of a Biden-era rule that guaranteed labor organizers access to farms and gave union rights to foreign farmworkers. The rule dodged the National Labor Relations Act, which exempted farmworkers from certain labor activities because Congress didn’t want them to go on strike, leaving crops to rot during harvest."

"Under most circumstances, an H-2A worker must return to his home country for two months after 10 months of work in the U.S. This makes it difficult for farms that need year-round work"

"Many dairies hire illegal immigrants instead."

"To request guest workers, a farmer must fill out lengthy online and paper forms—often more than 100 pages per contract—with multiple agencies."

"For a single contract, a farmer often spends thousands of dollars in administrative costs"

"The farmer must fill out a separate application for each team he requests"

"farmers must pay the H-2A worker at what’s called the “adverse effect” wage rate to prevent H-2A workers from being employed at lower wages than U.S. workers. This wage rate varies by state and is generally higher than the minimum wage. It’s $19.82 an hour this year in Washington state. Farmers are also required to provide housing, transportation and benefits, totaling another $5 to $10 an hour." 

U.S. Policy Pushes Up the Price of Cane Sugar

The U.S. government deliberately limits Americans’ access to sugar through marketing allotments and tariff-rate quotas

Letter to The WSJ. 

"Absent from “Tight Sugar Supply Is Hurdle For Trump’s Soft-Drink Goals” (Business & Finance, July 21) is mention of one of the chief culprits for the lack of cane sugar in American-made soda: the shameful U.S. sugar program.

Under this absurd policy, the U.S. government deliberately limits Americans’ access to sugar through so-called marketing allotments that restrict domestic production and tariff-rate quotas that choke off access to imports.

The result? U.S. sugar prices are typically double those of the world market.

This is the intended outcome. Constricting supply pushes up prices and sugar-industry profits—all at the expense of U.S. businesses (including soda producers) and consumers. It’s a wealth transfer perpetuated against the American people by well-connected special interests (par for the protectionist course).

To encourage sugar cane in American soda, President Trump should stop jawboning corporate executives and instead seek to rid the country of the subsidies and restrictions that make corn syrup artificially cheap and sugar cane artificially costly.

Colin Grabow

Cato Institute"

Is Cal-Maine the bad guy in the rising price of eggs?

See There’s a National Egg Crisis, and One Company Is Making a Lot of Money by Patrick Thomas of The WSJ. Excerpts:

"Egg companies argue it’s a classic case of supply and demand, where limited supply and high demand lead to higher prices. The average American eats about 279 eggs a year, and an average hen can lay around 300 eggs a year. There has long been about one hen per person in the country, and the flock has kept up with population growth for years. 

Bird flu scrambled that equation. 

The outbreak has resulted in the death of more than 150 million U.S. chickens since 2022, according to federal data. The avian flu is highly contagious and has a nearly 100% mortality rate in chickens, so if one gets sick, an entire flock has to be culled."

"Cal-Maine didn’t have an outbreak until December 2023 and has lost a smaller portion of its hens to bird flu than most competitors."

"[Chief Executive Sherman Miller] Miller says these claims misunderstand how eggs work as a commodity. “They’re not widgets that we can just go out there and turn up the machine or run an extra shift and produce more,” he says. “It’s a long planning process.”

It takes about six months for a chick to mature to lay eggs.

Inside the Edwards complex, a line of 14 metal barns house about 750,000 egg-laying hens."

"Cal-Maine has dozens of such facilities. That scale, Miller says, can be a blessing and a curse. Even a one-cent change in egg prices can have an outsize effect on its profitability.

Prices for a lot of major commodities like hogs, corn, wheat, soybeans and cattle trade on markets run by exchange operator CME Group. Futures trading in these commodities can help farmers and businesses hedge against price fluctuations.

Eggs are different. 

The egg industry relies on contracts between a customer, like Walmart or Kroger, that wants to buy a certain amount of eggs from a supplier like Cal-Maine.

Instead of producing all the eggs it sells in a year, Cal-Maine has historically handled spikes in demand by purchasing 10% to 25% from other suppliers on private exchanges such as the online Egg Clearinghouse." 

"If Cal-Maine overproduces, the price of eggs could tank and drive some egg companies out of business, industry analysts say. 

Cal-Maine executives say that the flock size is planned about two years in advance and that buying eggs from other producers helps Cal-Maine navigate spikes in demand. Ramping up production would mean hatching and feeding extra chicks, only to have to throw eggs into the landfill when demand ebbs." 

"Historically, eggs tend to retail for $1 to $2 a dozen, and Cal-Maine executives say the sky-high prices probably won’t last. The wholesale price of eggs—those sold to grocers and restaurants—has already started to come down from all-time highs. In the past year, the company increased the laying hens it has by 14% and chicks it can hatch by 24%."

Back to the farm? (or why immigrants are not taking farm jobs from Americans)

By Scott Sumner.

"At one time, most Americans were farmers.  By late 20th century, the vast majority of farmers had moved to the city for jobs in manufacturing and services.  More recently, China is going through the same sort of transformation, as hundreds of millions of people move from the countryside to the city.  This has contributed to an astounding increase in Chinese productivity.

A recent article in the Financial Times discussed the effects of deporting undocumented workers:

According to a survey carried out by the National Council of Agricultural Employers in 2020, just 337 US-born workers applied for the 97,691 season agricultural jobs advertised between March and May that year.

Critics of immigration often suggest that the so-called “shortage” of workers is a myth, and that if firms paid more there would be plenty of Americans willing to take these jobs.  But how much more?  Suppose you raised wages enough to double the number of US-born workers applying for jobs, that would still represent less than 1% of the required workforce.  Now suppose you raised wages enough to increase the number of US-born workers 10-fold.  You’d still only be meeting about 3% of the demand for agricultural workers.

To be clear, I’m not denying that there is some wage that would be high enough to produce 97,691 US-born applicants.  But that wage is likely to be far too high to allow for the profitable production of most labor intensive crops.  Fruit and vegetable fields might be replaced with wheat fields.

You might argue that farmers could raise food prices to cover the extra labor costs.  But that would lead to American produce being replaced by imports from other countries.

You might argue that we could raise food prices and put tariffs on imported food.

I don’t doubt that it would be possible to produce some mix of policies that resulted in lots of US-born workers leaving their factory jobs in big cities and moving back to the countryside, where they’d start picking fruits and vegetables.  There is some policy mix that would reverse the tides of history and begin to move us back toward our agrarian past.  But while we are doing that, I’d expect the Chinese to continue moving millions of people from the farm to the city.  Ask yourself this question: Has a country ever become a great power by encouraging its population to move from the city to the countryside?

Here’s a prediction:  The mass deportation that everyone is talking about will never happen:

“If there is a significant enforcement event on a big farm or meatpacking plant that happens to be in a red state, you will have business owners in that state saying — this is not what we had in mind,” said Muzaffar Chishti, senior fellow at the non-partisan Migration Policy Institute."

Stop Blaming Rising Egg Prices on Market Power

By Brian Albrecht. Excerpt:

"But nothing in economics says large price changes require large reductions in supply. The size of the price change depends on both supply AND demand elasticities, which are about how easily the quantity supplied and quantity demanded respond to price changes.

In egg production, supply is essentially vertical in the short run due to chicken lifecycles. You can’t instantly produce more eggs when prices rise; you need to raise more chickens first, which takes months. This means that even small supply disruptions can generate large price changes.

Eggs are a perfect example of inelastic demand in practice. Jayson Lusk wrote a great post during the last major bout of avian flu. He said that a commonly assumed value for egg-demand elasticity is -0.15, meaning a 1% increase in price only reduces quantity demanded by 0.15%.[1] Put differently, if the quantity supplied drops by 1%, prices will rise by about 6.67%. In this case, the quantity of eggs dropped around 10%, which would generate a 67% increase in prices. Prices have been volatile, so it’s hard to get a true comparison, but prices have about doubled over the past year. That’s not far off the crude estimate.

This makes intuitive sense when you think about how people use eggs. They’re a dietary staple that’s difficult to substitute. You can’t easily switch to another product when making an omelet or baking a cake. Restaurants with egg-heavy breakfast menus can’t quickly overhaul their offerings. And since eggs are typically a small part of a household’s total food budget, price changes may not drive large consumption changes. When demand is inelastic like this, it takes bigger price increases to reduce the quantity demanded enough to match the lower supply.

Think about your Econ 101 graphs. With a vertical supply curve, any leftward shift of supply (from avian-flu losses) results in the same quantity reduction, but potentially huge price increases. This isn’t evidence of market manipulation but exactly what we expect to see in competitive markets with highly inelastic short-run supply.

There’s an impulse to believe massive price swings must reflect market power. I said “swings.” That’s not accurate. Only massive price hikes actually get blamed on market power. Price cuts don’t get attributed to cost savings being passed through by a monopolist.

There’s also a tendency to conflate high prices with rising prices when discussing market power. A firm with market power will typically charge high prices, but that doesn’t mean price increases indicate existing market power.

Conversely, firms in perfectly competitive markets may see dramatic price increases when faced with supply disruptions or demand spikes. The egg market illustrates this perfectly; we see rapidly rising prices, but that tells us nothing definitive about market power. We need to look at price levels relative to costs, not just price changes, to draw conclusions about competition.

But economic theory suggests that swings don’t clearly suggest market power. In fact, competitive markets often show larger cost pass-through than monopolistic ones. For simplicity, let’s assume a linear demand curve and a constant marginal-cost curve. These aren’t trivial assumptions, but the point is to show the mechanism, not to prove it is always true (it isn’t).

With perfect competition and a flat marginal cost curve, you’d see complete pass-through.

But if it were a monopoly seller, you’d only see 50% pass-through.

It’s maybe more intuitive to think of a drop in marginal cost and why that isn’t passed through. Marginal revenue drops faster than price. With a linear demand curve, the monopolist’s marginal-revenue curve is twice as steep as the demand curve. A $1 decrease in price would mean marginal revenue drops by $2. The monopolist really does not want to pass through that cost saving, which makes more sense. But if the logic applies when moving from c’ to c, it applies in the exact opposite way if we move from c to c’.

The takeaway here is that, even with identical cost changes, market structure significantly affects how much of that cost increase gets passed on to consumers."