Lately, there has been a kind of mock-panic at the thought of a bacon shortage, driven by higher feed costs and a drought throughout the Midwest. However, the effect of these conditions hasn’t been a shortage, but rather higher prices passed on to consumers — which might make bacon less accessible, but doesn’t create a shortage. This lesson in economics and reality comes to us not through AEI or the Chamber of Commerce — but through NBC, hardly known for its adherence to Hayek:
Even though headlines for the past couple of days screamed, “Bacon shortage!” (including one of our own) and social media blew up with jokes about the impending “porkocalypse,” it’s all a lot of oinking over nothing.
The summer drought, and rising corn prices have hurt hog farmers for sure. Soy, a component of hog meal, is also costing more, driven by ravenous demand by China. But all that will only lead to bacon being temporarily more expensive, not an outright “shortage.”
Why not? Because in a free market, pricing allows for maximum efficiency between the tension of supply, demand, and costs:
First, as long as prices are allowed to rise and fall freely, there can be no shortage. Shortages only occur when the government fixes prices and consumers want more supply than exists. That results in rationing. There’s zero evidence to suggest the government would do that, or that there would be any “runs on the pork bank.”
“As long as prices roam free, there’s never a shortage or a glut,” said Bob Brown, an independent meat market analyst in Edmond, Okla. “It will find a way to clear the market.”
Those of us old enough to remember the gas lines of the 1970s need no lesson in the economics of shortage. The lines formed during two OPEC economic attacks, while the US limited domestic production through a complicated series of tax and regulatory policies. The shortage came from artificial limits imposed by government on the markets, not through actual shortage conditions. (The same was true in the 1940s, but there was a rational reason for the government action — it needed the gasoline for the war in Europe and the Pacific.)
The lesson from this should be clear: we should avoid government price-fixing. Unfortunately we don’t, and probably nowhere more so than in agriculture, where price supports and subsidies distort markets. So far, though, that hasn’t impacted the bacon market enough to cause real shortages, at least not in the US.
So how did this rumor get started? It started in Britain, where producers want more price fixing rather than freer markets:
The only sign of a pork shortage is a press release from Britain’s National Pig Association proclaiming, “A world shortage of pork and bacon next year is now unavoidable.”
But let’s put on our critical reading glasses. The rest of the notice points to declining sow herds in the EU and asks British supermarkets to pay higher prices to pig farmers. It asks for shoppers to only buy British-made pork to protect British farmers, identifiable by the “Red Tractor” symbol on the package as part of a “Save our Bacon” campaign.
“British supermarkets know they have to raise the price they pay Britain’s pig farmers or risk empty spaces on their shelves next year,” said NPA chairman Richard Longthorp in the press release. “But competition is so fierce in the high street at present, each is waiting for the other to move first.”
Get it? This is an attempt by British pig producers to build grassroots support among British shoppers to apply pressure to supermarkets. Their tool for propping up prices is fear, wrapped in bacon, wrapped in the Union Jack. It’s pork propaganda.
This is why everyone is better off with the free market, rather than command-and-control economies. It avoids the possibility of a Baconocalypse, a goal that should generate support across the political spectrum. It’s a great micro lesson in the virtues of free markets, and a surprising one from the same news division that runs MSNBC.