More on milk

If you want to know just how ridiculous our agricultural programs are, consider this: for about half a century, we priced milk based on how far the cow was from Eau Claire, Wisconsin. No, I swear, I am not making this up. Apparently, the USDA scientifically determined that Eau Claire was the perfectest place in the entire world to keep cows, and that therefore the farther you were from that fabled city, the harder you must find it to produce milk.

Of course, this created a magnificent self-fulfilling prophecy; since famers in Wisconsin got the lowest price, only the most efficient ones survived.

In 2002, we reformed the system. Now we use a weighted average of the Wisconsin and Minnesota prices to determine the support levels for the rest of the country. You really cannot make this stuff up.

Comments

I look forward to government pricing of health care under Mr. Obama.

Posted by Nessuno | May 20, 2008 7:00 PM

Uh, so what? I mean, as Thomas Sowell (and others) so aptly say, price is a message, a measurement of what is otherwise unfathomably complex. It makes no more sense to "set" a price -- by any means whatsoever -- than it does to try to legislate the boiling temperature of water or the value of pi.

Any mechanism for "setting" the price of milk is absurd. At least this one is transparently so. God forbid Congress should dream up a mechanism that is on the surface more rational. If people are going to be surpassingly stupid, I prefer they do so in obvious ways, so that their camp followers are fewer.

Posted by Carl Pham | May 20, 2008 7:36 PM

Let's set up a market for breast milk on the same principles.

Posted by D | May 20, 2008 8:07 PM

Let's set up a market for breast milk on the same principles.

The farther you are from Selma Hayek, the more subsidy you get.

Posted by Rob Lyman | May 20, 2008 8:28 PM

You didn't make it up, the late Senator William Proxmire, D-Wis, of the "Golden Fleece Awards" fame did, circa 1960. When the government guarantees to buy a commodity at a support price in unlimited quantities, producers will use that surplus market to borrow money to expand production. Large dairies sold powdered milk and cheese to the government as a means of growing to dominate the marketplace, in place of smaller farms and cooperatives. The large dairies could offer grocery store chains contracts for greater volumes of dairy, even while small dairies were willing to sell for a less than or equal price. This is how the small, family dairy farm disappeared from the American landscape. The government price-support system, intended to help the small farmer, instead helped create the large "factory" dairy farms of today.

Posted by Paul Niemi | May 20, 2008 9:16 PM

What is a constant source of amazement is that advocates of central planning always think they go down their favored path, and not have outcomes like this. They are like carpenters who always place their thumb over the head of the nail, and are surprised when they smash their thumb repeatedly.

Posted by Will Allen | May 20, 2008 9:35 PM

You drastically oversimplify. Wasteful you may consider the dairy program to be, but Green Bay Packer fans are "cheeseheads" for a reason, and that's the same reason it made sense to key off Eau Claire for milk used in manufacturing butter, cheese, and dry milk. It's such uses, not fluid milk, that makes the national market.

Posted by Bill Harshaw | May 20, 2008 9:40 PM

From the previous post:

I'm neutral on WIC, but keep the facts straight - you do NOT need to get everything on the WIC check. I work in a grocery store, and people choose not to get certain items all the time, and it's not a problem.

Fact check, Ms. McArdle. I have a lot of respect for you, and I don't want to have to give it up because you are too hasty in your posts.

Posted by Brittany | May 20, 2008 7:57 PM

Posted by It Bears Repeating | May 20, 2008 11:57 PM

When Hillary Clinton decided she was a lifelong Yankees fan, instead of a lifelong White Sox fan, and came here to NYS to claim an empty Senate seat, the first thing she did upon arriving was endorse the upstate farmers' milk cartel (and the Northeast Interstate Dairy Compact). She knew she was going to carry liberal NYC and this is what she had to do to get votes in upstate farm country.

Yes, after years spent building her political brand of being "for the children" and "against exploitative business profits" the first thing she did was endorse a cartel openly designed to provide businesses with above-market profits by raising the price of milk for children.

A perfect example of the political rule: "Every poltician really, sincerely and truly wants to do the right thing as his or her second priority".

Because after all, you can't help the children and fight extortionate business profits if you don't get elected.

Well, a year after she went to the Senate it let the Interstate Compact lapse, so I guess she wasn't much better at representing the dairy farmers than at running a presidential campaign.

Posted by Jim Glass | May 21, 2008 12:49 AM

Carl,

Nobody is suggesting Congress dream up a different scheme for pricing milk, least of all Megan. What lots of us would like is for Congress to simply give up the sordid, economically wasteful, immoral business entirely.

Posted by Kirk Parker | May 21, 2008 3:14 AM

Brittany--re:WIC. Because the states administer WIC it's possible everyone is right--one state does the all or nothing, another permits selection.

Posted by Bill Harshaw | May 21, 2008 11:47 AM

Depends on whether you worship at the alter of economic efficiency/free markets/individual right to contract, or whether you understand that markets are imperfect, barriers and externalities can make entry costs exorbitant, and that sometimes once something is gone, it isn't ever coming back. Once a farm goes under, the chances of it being farmed again are pretty remote ... chances are it's going to be carved up and developed.

Dairy farming, done at the most efficient, would be controlled by a few huge industrialized farms in places like California, Wisconsin, Texas, Oklahoma. They'd milk with robotic machines and employ illegals. Milk would be cheap, and trucked around the country. (At least until transportation costs become significant!)

But some of us think that protectionist (and make no doubt about it, it is protectionist) policies to preserve smaller, less efficient dairy farms in places like Vermont, or upstate New York ... where production costs are higher, efficiencies of scale are unattainable, are worth having the diversity and flexibility of production. Think of it as a cost of insurance.

Dairy farmers in the NorthEast aren't getting rich; the price per hundred weight is about the same as it was 30 years ago, without any adjustment for inflation.

It's like the difference between generating all of the nations power in one big centralized power plant, versus having hundreds or thousands of plants scattered about the country.

You can choose efficient, or you can chose resiliant and flexible, but you don't get to chose both.

Posted by ruralcounsel | May 21, 2008 1:16 PM

Kirk, politics is the art of the possible, not the ideal. This is why the Framers set up a God-damned Gordian knot of a government, with built-in insane inefficients that have us ignorant inheritors fussing about Congressional gridlock and pork-barrel waste, instead of an ideal streamlined government that could exert as much power as possible as cheaply as possible. The ideal would be cheap, efficient, benevolent government. Won't happen, not building it out of H. sapiens. What they set up in their wisdom instead is a practical government: expensive, inefficient, and reliably non-malevolent.

For the same reason, I don't waste my time hoping for Congress to exhibit rationality and justice with every bill, and prefer that when they exhibit the more typical ignorance, short-sightedness, and corruption that they do so in such an obvious way that the rest of us (re)learn the lesson that asking a million fools to elect a wise man to make decisions for them is logically inane.

Posted by Carl Pham | May 21, 2008 3:41 PM