So the price is both two low and too high? This is not a failure of the marketplace (aka price discovery), this is the U.S. deciding that cheap milk and overproduction is in the nation's best interest and we should socialize some of the production costs.
There are logical (milk as a staple product and avoidance of shortages), and illogical (milk lobby takes too much effort to oppose) reasons for it, but it is not a marketplace failure. Remove the subsidies and the market would quickly find the higher price at which dairy farmers could produce milk profitably and consumers would purchase it.
If it is in our societal interest to produce more milk so people can eat, and the market doesn't do so, requiring subsidy, then that is a failure of the market to meet society's need.
You're conflating the failure of a marketplace to function properly (as in smooth functioning of supply, demand, liquidity, etc) with the failure of the marketplace to provide social benefit.
The free market can empower to make their own decisions on what they think is moral. In most cases that's a much better choice than the government deciding for you.
Via the subsidy the U.S. is forcing everyone to spend a small portion of their income on milk production.
Or some people don't have the money to spend on it at all. This is the fundamental issue with using "willingness to pay" as proxy for "utility consumer gains."
But this still doesn't address tail risk like war or disasters. Importing 100% of the nation's food might make sense from a market POV but is a significant risk from a strategic POV. Markets do not seem to handle low probability events very well.
There are many better ways of accomplishing the geopolitical goal of maintaining enough food supply and production capacity to keep people going in a crisis.
US is a net exporter of food products.
Do you know who lacks food? China!
Milk consumption dropped and we need to drop financial incentives for it.
The program was developed in response to shortages of milk during wartime.
1. Maintaining the political support of farmers
2. Maintaining surplus food production capacity in case of some contingency (e.g. war).
The same is true for many developed countries. The US government actually produced “government cheese” with surplus milk to help support dairy farmers, providing the cheese to schools and welfare recipients. The EU has also experienced subsidy-related supply surpluses, including a “butter mountain” and a “wine lake”.
There's one issue with supporting individual products - government cannot change these rules with the consumption patterns of individuals.
As such - it's not the subsidies that are the primary issue, it's the fact that the government decided that milk gets the subsidies... but almond milk gets the full market price.(As in - vegans are actually financing carnivorous american lifestyle more, than the other way around)
In any case, almond farming in particular is just awful.
Failing to meet people's needs is definitely a problem, but not a uniquely market-driven one. If there is a specific phenomenon which causes markets to fail in the delivery of socially desirable goods, it would be good to come up with a specific description and corresponding term of art.
> 'Market failure' is a term of art, and it's generally best to avoid redefining terms of art unless there's a very compelling reason to do so.
The person conflating "market failure" with what they were talking about is the GP.
The original comment was about the market failing to accomplish a goal, which is a perfectly idiomatic usage.
>"... they'll never think a failure to meet society's need is a market failure..."
If they only meant to talk about "market failures" as such, then they are guilty of pedantry
That dairy producer's lobby is quite powerful and politically important to both parties. See the key role they played in the politics Trump was playing around NAFTA renegotiations last year.
Apparently HN does not agree with me, I challenge my downvoting fans to find citations for "socializing losses" in the way you're talking about, prior to 2008.
"Lemon socialism" (gov't bailing out lemons) existed, but that actually has a different tone entirely.
The long and the short of it is that the person you originally responded to was correct to call the behavior "socializing costs." You were incorrect in your response where you claimed that a subsidy is not "socializing costs," since that's exactly what the term means in common parlance. The downvotes probably come from your not recognizing and admitting your mistake.
The title translated in English reads as
"SOCIALIZATION OF THE COSTS OF THE DEVELOPMENT OF THE LARGE INDUSTRIAL ENTERPRISE"
https://www.jstor.org/stable/41630721?seq=1
"Socializing costs" is a widely used idiom, at least in my language, it might be true that America is miseducated to the meaning of socialism, but subsidizing the production of goods and services it's a form of socializing the costs in a non socialistic way (in which the state produces those goods and services)
Social is used in this case to intend the society, public money, people taxes.
The exact phrasing of "privatize the profits and socialize the losses" seems to have become popular in 2008, if not actually originating there, but the concept of the problem is much older; its essentially a new phrasing of what has both before (and even since) popularly been phrased as "Socialism for the rich and capitalism for the poor" [0].
But "socialization" for distributing a cost/benefit outside of the participants in a transaction, and "privatization" for concentrating it there is a common term that is disconnected from "socialism" except that their shared "shape" is not mere coincidence, but because they have related-though-not-derived-from-each-other meanings.
> And it speaks more to American's mis-education about what socialism is (or its history) than anything else.
That's true of the older form (though less so the newer, though it derives some rhetorical utility from the similarity in words), though not in the obvious way. At least the earlier form was coined and is still popularly used by people who know very well what socialism is; it deliberately and directly leverages the way (not just the fact, but the specific arguments used) that the people who support what it criticizes have poisoned the well against socialism and misleading used to promote capitalism, turning it against the system.
[0] https://en.wikipedia.org/wiki/Socialism_for_the_rich_and_cap...
While true in many cases, I don't think it's always initiated this way. Many subsidies start as a social good and then perpetuate based on lobbied interests.
My favorite example is the subsidy for alpaca wool. This was started as a social good to ensure there was enough cold-weather gear to fight the Korean War. However, this subsidy continued into the mid-1990s.
But this isn't to say subsidies are bad in and of themselves; rather it means you need strong leadership willing to make tough or even unpopular decisions. The recipient's opinion should have very little bearing on whether the subsidy is an overall good.
E.g., the market decides to off-shore manufacturing. This is good short-term as it leads to lower prices for consumers. But it's also potentially a failure at a national long-term level as it has reduced our manufacturing capacity. The short-term bias of the market can adversely affect long lead-time strategic interests. See: the inability to quickly pivot to manufacture medical goods in a pandemic or military goods in a large-scale conflict.
These types of market failures are what lead to the socialization that you mention.
That isn't a market failure. It's just a recognition that the economy is global, not national. The market doesn't optimize for the benefit of one nation against others. As for "short-term bias", the market just reflects the biases of the people making the decisions—the same as any other system. If people are inclined to stockpile medical supplies or materiel for self-defense, the market will support that too.
The market's only real "failure" is that it's too democratic for the liking of certain individuals who feel they have a better idea of how a society should be organized than the poor, ignorant, gullible masses that actually comprise that society.
True, and good point.
>just reflects the biases of the people making the decisions...The market's only real "failure" is that it's too democratic
This is a failure if you can agree that people are less than optimal at making decisions, i.e. that humans have biases that work against their own rational self-interest at times. Meaning the market can exacerbate faulty decision heuristics. Behavioral economics is full of examples of this that classical economics simply labels as "anomalies". I tend to think the socialization aspect is an admonition that markets don't always work best when humans are at their most emotional/least rational.
Most people excluding the most ardent anarcho-capitalists recognize there are times when a completely free market doesn't serve the best interest of society (e.g., healthcare, monopolies). Sometimes I think people get it inverted and think society serves the market and not the other way around.
In my opinion the best interests of society are best served by letting people make their own decisions regarding themselves and their own property, and not by aggression or deliberate attempts at social engineering. I tend to be pro-market on average but really it's not the market I'm interested in so much as liberty. I also take a very expansive view of what the market entails; not just materialistic concerns but the full spectrum of human preferences. Does it always lead to a perfect outcome? Of course not. No system comprised of fallible and incompletely-informed human beings could possibly do that. It's just better than all the alternatives.
All the human failings which prevent markets from achieving optimal results are also problems for the various political schemes that aim to regulate them, magnified by the introduction of force as a "legitimate" means of achieving the desired end state. (It's ironic, for example, that people turn to governments to save them from monopolies—mostly government-created monopolies—when the government itself is the biggest monopoly of them all.)
In the end the real goal isn't to make people "happy"—we could do that much more easily with drugs. Rather, it's to ensure that people can live their lives the way that they choose, so that they can seek happiness, or purpose, or whatever else means the most to them. The fact that people make choices that (in someone else's opinion) probably won't make them happier is not sufficient justification for taking away their freedom to choose for themselves. I happen to think the moral, principled position also happens in this case to be the one that leads to the best outcomes for the most people from a purely materialistic point of view, but this is merely a happy coincidence; it would still be the right thing to do even if it resulted in abject poverty.
In the end getting back to the OG topic - it ends up being forced social engineering, instead of freedom and social fluidity. People who can only et paid 6 figures by virtue of geography are going to shout and scream about COL being awesome. People who are awesome get shafted. And humanity's progress is limited, because we get sub-optimal use of resources.
PS: Hi fellow libetarian.
I think this is the cynical view that paints it in an arrogant light. The alternate is there is an acknowledgement that the system is less than ideal and could be improved.
>People who are awesome get shafted
I mean, isn't this par for the course in any group environment? If you're healthy, you get shafted by paying more into insurance than you use. If you're wealthy and subjected to a progressive tax structure, you get shafted by paying a disproportionate amount of taxes. Sometimes I wonder if getting shafted is part of the cost of living in a stable society. You agree to carry a load so that in the event you need it, somebody can carry the load for you. Game theory shows that this leads to more optimal solutions as long as you can keep free-loading within certain bounds.
I used to be a staunch libertarian but came to realize society doesn't work so well when it's structured to only let the top percentile be successful. At a certain threshold, the top percent will always be successful. The utilitarian in me is concerned with finding a way to may the most people successful, which means gearing some policies to the mean rather than the high performers. To that utilitarian perspective, I think it's a more optimal use of resources if you consider human capital one of the more useful resources.
I've noticed libertarians tend to be those high performers who would tend to benefit (or perceive themselves to benefit) from not being held back. I personally moved away from it because most of the discussions seemed to lack nuance. Even Ayn Rand collected social security when her health started failing...
Because it is arrogant to say that vegans must subsidize milk production(which they do), it is arrogant to say that an atheist must pay compensate for Church tax exemptions... and the farther away the taxing authority, the more arrogant it is. The biggest issue that I have with my taxes here in US - subsidies for military to fight a war on behalf of the Saudis in Yemen.
If you're willing to pay for or contribute to something bigger/better - then why use tax for it?
> I mean, isn't this par for the course in any group environment
When you voluntarily join said environment - sure.
Funny... Being gay, growing up in Lithuania and living on $10 per week(between me and my mother) - I got to be libertarian well before I got to earn those 6 figures.
PS: I also detest Ayn Rand.
I think everybody has policies that their tax dollars support that they don't agree with. That is part of the compromise of living in a society. I don't think the solution is to have individuals decide on each line item they are personally willing to support unless we want to be a yeoman farmer society. Modern society is too complex and I think the ship has sailed on that point.
I do think there is room for middle ground. I think it would be useful for people to see, say, on their tax returns how much of their individual tax money goes to each high-level government agency. This would bring it out of the abstract and connect them more closely to those policies so they can adjust them to their particular values by voting at the polls while reducing the overall information budget they have to digest.
You stance optimizes for liberty as you rightly point out. People, however, generally want a society that balances liberty and stability. Laws and policies are enacted to try and find that right balance. It's similar to the centralized banking model vs. a completely laissez-faire economy; it's enacted to provide stability, perhaps at the expense of some liberty. I don't think people inherently have an issue with the government having a monopoly as long as they have a say in how that government functions. In a well-functioning democracy, the people are the government so the idea of a governmental monopoly is diluted somewhat.
Stability is certainly a worthwhile goal, to a point—in the end nothing alive can be completely stable—but there is no reason why it must come at the expense of liberty. The main issue is negative externalities, which are already addressed by the Non-Aggression Principle; i.e. your liberty applies to yourself and your own property, not other people or their property, unless they consent. Libertarian society is not a free-for-all. What little scope for petty conflict remains can be addressed adequately through social means rather than force.
> In a well-functioning democracy, the people are the government so the idea of a governmental monopoly is diluted somewhat.
Even in the ideal model, "the people are the government" in approximately the same way that individuals cells are a human being. Part of a vast collective, in other words, with no individual influence or control, retained only to serve the collective, and ultimately disposable. That's fine for cells in the body but a horrible way to think about sentient beings.
I do think there are times when they are juxtaposed. "The Constitution is not a suicide pact" is the cliché. Ideally they can coexist, but for the libertarian ideal to work, humans have to be rationale. I think we are anything but rational although we like to pretend we are most times.
>unless they consent.
That consent, to a certain extent, is implicit on being a willing participant in a free democratic society. It's part of the social contract.
>"the people are the government" in approximately the same way that individuals cells are a human being
I don't think I agree with this analogy. A collection of human cells cannot volitionally decide for the human being to become something wholly different. A government, by the people, can change it's entire makeup to serve it's changing values. When I say the people are the government, I mean the people in a functioning democracy have the power to make the government reflect their value system. I feel like you are misinterpreting my statement by reading it through a individualist/collectivist lens.
It's interesting to see this sort of rhetoric re-emerge after it took a long break after the '08 recession. Of course, the idea that the market is "too democratic" is absurd. At least, I haven't seen a democratic system where 1% of the population gets 40% of the vote.
As long as "willingness to pay" is the market proxy for the utility a consumer gets from a good, the market is not "democratic".
In a pure voluntaryist market system everyone gets 100% of the vote (i.e. veto power) when it comes to how they use their own labor and resources. If one has acquired more wealth then one has more options available and more decisions to make, but still doesn't get any direct say in how other people use their property, no matter how rich or poor they may be. This is far more egalitarian and in keeping with the ideals espoused by most democracies than the idea that every person's freedoms and property are subject to a glorified opinion poll.
Yeah, so uh... not democracy.
I'm not going to relitigate the entirety of Anarchy, State & Utopia in the HN comments section, but suffice to say that these ideals are far from objectively "egalitarian" and the idea that other's negative, non-inferential side-constraints must be sometimes violated in the context of social cooperation is actually foundational to republican (as in the political philosophy) thought.
We used to consume much less milk pre-WWII. And we are consuming less and less cow's milk.
It's dubious on many levels, but has its defenders.
"Alternative" products like duck eggs, water buffalo or goat's milk, etc. do not count, so there is some room for market diversification there, I guess.
It has the net effect of keeping dairy prices at what's seen as an acceptable stable level that also keeps dairy farmer's in business, at the expense of diversity in the marketplace and access to new farmers.
I think most Canadians feel that the supply-side management of dairy and some other food products works for us fairly well, and that the Taxi license system doesn't. I guess that means the reasons for them working well or not are something other than the concept of supply-side management?
When you go making your own homemade cheese or yogourt though, then you notice how painfully high our (consumer) milk prices are. And when you taste higher quality milk in European countries, and notice the lack of quality milk at reasonable prices on Canadian grocery store shelves, it starts to be a bit more frustrating.
Quality here is not a function of the market being more free.
It's a function of a better food production chain
Instead of competing on prices many food products in Europe compete on quality and locality (small areas that produce some unique product of extremely high and renowned quality: Champagne in France, Parmigiano Reggiano in Italy, jamon serrano in Spain, etc. etc.)
That USD$2.80 would result in PPP $4.20
It's not though. "The support granted to U.S dairy producers represented approximately [...] 73% of the farmers' marketplace revenue. USDA data also reveals that US dairy farmers operate at a loss, and have a cost of production that is higher than what they earn from the marketplace."[1]
We're subsidizing the low cost of milk via taxes because the marketplace failed to provide both affordable milk and the ability for dairy farmers to make a living.
[1] https://markets.businessinsider.com/news/stocks/american-dai...