Jul. 21st, 2012

holdthesky: (Default)
I'm naturally wary of cartels, particularly in food.

The abolition of cartels and fixed pricing are probably one of the reasons that England has a unique record in terms of freedom from famine, maybe in the whole world. I wish people would sing more about this kind of thing than the bombastic rubbish which the patriotic Cameroonies ply us with.

But I'm also an advocate of producer rights. That's a hard circle to square, again one we can be proud England has struggled with.

I was wondering about a few ideas.

One is the ability for producers or cartels of producers or producer-dominated quango board to set a maximum price for retail sales of a product. It's a producer's natural tendency to seek the highest price of their product at their farm/factory gate, but the maximum retail price could also be a valuable object to sell, ancillary to the product. Presumably an organisation which sought to profiteer would pay a premium for a higher maximum retail price, meaning that the profiteering would extend at least to the producer? Genuine pile high and sell cheap outfits would accept a lower MRP and so be able to buy the raw product more cheaply (a lower MRP having a lower value to the intermediaries than a higher one and so a lower price). It should encourage disintermediation and leaner intermediaries. But my brain is too muddled to work this through, how the various folk would act. It seems far too bizarre for me to think through: it probably has a fatal flaw!

The thing I like about it is that it allows prices to rise during shortage and people to shift from meat to grain1 and generally avoids consumer shafting typical of cartels. I wonder if someone's studied "producer set maximum retail prices"?

1. I was thinking the other day about what would happen if the crops failed in the west because you have this problem that food is so fundamental that demand is relatively inelastic. If prices need, in a strong sense, to decrease consumption to lower demand then you worry that there would need to be a collapse in almost all other parts of the economy (people shedding spending there first) before they'd be prepared to eat less: either folk would react quickly enough (including shedding debt and obligations) and so have nothing but food but live or they would die clutching iPads in their hands: neither of which are attractive. Prices would presumably suddenly rise massively non-linearly until they exceeded the cost of all other spending and then start acting linearly again to supply and demand. The big buffer it seems, to me, is meat animal food (which is mainly grain). If grain becomes less available, then meat becomes more expensive more quickly and people switch to grain and in the short term more meat becomes available as farmers slaughter early. In an omnivore agricultural system, there's always the prospect of a switch to the more efficient herbivorous system in times of shortage.

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