The Economy

AG’s unique lawsuit settlement will give 1.2M eggs to hungry New Yorkers

 

https://thehill.com/policy/finance/3564912-inflation-is-providing-cover-for-price-fixing-economists/

Economists and lawmakers are warning that high inflation is providing companies with an excuse to telegraph price increases during earnings calls, reducing market competition and compounding the pain for consumers.

“They’re profiteering, and they are using this moment and their monopoly power in many industries to raise prices on consumers,” Rep. Pramila Jayapal (D-Wash.) said in an interview, ahead of dozens of companies reporting second-quarter earnings this week.

The Department of Labor reported last week that consumer inflation is now at 9.1 percent annually — the highest level in 40 years. Food prices are up more than 10 percent, energy prices are up more than 40 percent and “core inflation” — everything besides food and energy — is up almost 6 percent.

The worldwide trend of high inflation, which has led to unrest and labor protests in numerous countries, is caused by larger disruptions in the global economy resulting from the coronavirus pandemic.

However, it is being exacerbated by companies in concentrated sectors essentially acting in cahoots to further price increases, economists argue.

 

I'm more with Ragu and DQ here I think - "Inflation" just gives companies a good excuse to do something they probably wanted to do anyway, which is charge higher prices. This isn't raising the price of water with a hurricane coming - Plenty of alternatives when it comes to food for sustenance. I haven't bought eggs in more than a month, though, so I might be biased in that regard.

 

"Economists"!

 

If it walks like an economist, and quacks like an economist, (and has a PhD in Economics from Johns Hopkins) it's probably an economist.

Singer just points out that in "concentrated sectors" - monopoly sectors - like the egg business, there's a lot of price signaling and collusion. The recent history of these big players would seem to confirm that.

I'd agree with you and Ragu and DQ if what we were seeing was hundreds of thousands of individual egg farmers responding to one another in a huge open market.

But that doesn't seem to be the case here.

 

I got salmonella in October from a restaurant egg that lasted into late November. I haven't had an egg since.

 

As long as the subject of eggs has come up:
I'm in the land of egg farms. One million chickens under a single roof is not uncommon in these places. The reason avian flu can take root is because the chickens are packed cheek to jowl in cages. The "farmers" cut off hens' beaks so they don't kill each other.
I'm pretty lucky in that many of my neighbors keep small flocks, and we buy eggs from them (we used to keep our own flock, but we're getting a little old for that). Seasonal changes in production do occur, and when that happens we buy from the store -- but we buy only "cage-free" eggs. Those chickens aren't living the life of Reilly, but they're a notch better off than the battery hens.
An interesting phenomenon locally is that the price of "cage free" eggs has remained pretty consistent while the cost of mainstream eggs soared. They got a little living space, so avian flu didn't hammer them quite so badly.

 

In my Cape Cod town, a surprising number of families have "eggs for sale" signs in their front yards.

 

Oh sure. That wasn't what I was implying. I was merely chuckling at the "economists argue" bit. Some economists argue that, sure. I doubt "most" (or even "many") do.

 

Putting "monopoly" and "the egg business" within the same zip code of one another is waaaaaay off-base. The egg business isn't even all that concentrated ... using the table proffered by the dinguses complaining to the FTC, you can calculate a 4-firm concentration ratio of 36.4% and an 8-firm ratio of 52%. Neither of those is suggestive of a concentrated market. Neither is the Herfindahl–Hirschman Index (in which the market shares of all participants are squared). Only when an industry hits the 1,500 to 2,500 range would the Justice Department consider it to be moderately concentrated. The egg business' HHI is 529. Per Justice Department standards, a merger between the top two players probably wouldn't merit concern.

 

Thanks for the explainer, my friend!