Let’s Look at the Statute. Surprise! It’s Not About Efficiency!

Written on:February 1, 2011
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By C. Robert Taylor and David Domina

Many academic economists have blinders on: All they see is efficiency, efficiency, efficiency. This is true of recent comments about GIPSA proposed regulations and the Packers & Stockyards Act of 1921. It is also true of numerous economic analyses by government and academic economists.

Generations of economists have recognized that economic efficiency is necessarily a value-laden concept, and a particularly narrow view of economic affairs at that. Nevertheless, economists responsible for numerous government studies of livestock and poultry markets can’t seem to see anything but “efficiency.”

Attorneys, unlike economists, often deal with issues involving equity, fairness, and justice. So it is surprising that two academic lawyers, Ferrell and Rumley, are seemingly blind to equity and fairness issues in a recent article titled The Role of Economic and Legal Analysis in the GIPSA Debate published by the American Agricultural Economics Association. (see http://www.aaea.org/publications/policy-issues/)

After carefully laying out the proposed GIPSA Rules, Ferrell and Rumley implicitly wear economists’ blinders. They state, “While some believe that the need for the rules is self-evident and requires no further study, other believe that the proposed rules ignore what current scholarship suggests for improving the livestock industry … Notably absent from the proposed rules’ economic analysis section are any significant discussions of a number of GIPSA-funded studies on concentration in the livestock and poultry industries … The omission of these studies (from proposed Rules) surprised many scholars, as they were regarded as the most comprehensive studies on the topic of market concentration and the impacts of alternative marketing arrangements (AMA). … Sound, objective research on the effects of industry structure changes in the livestock and poultry sector is already available.”

The so-called objective studies Ferrell and Rumley refer to focus on efficiency. Yet the word “efficiency” is not to be found in the PSA. Not once.

Prevalent words in the PSA are unfair, unjustly discriminatory, undue or unreasonable preference, deceptive practice, and manipulating prices.

Yet the numerous studies addressed only efficiency. Equity and fairness were not considered. The price a poultry grower—a serf with a mortgage–pays for being at the mercy of an integrator was not mentioned. Loss of economic freedom was not mentioned. Preferential treatment was considered in the government studies, but quickly dismissed by the blinded economists.

Ferrell and Rumley go on to state that, “Producer-proponents of the rule hold that it will bring balance, transparency, and fairness to the livestock and poultry markets …”

True. Key words are “balance”, “transparency,” and “fairness.” What they refer to as “sound, objective research” did not consider these aspects of the debate. Ferrell and Rumley fail, however, to note a recent study of the subject published in mid-2010 and coauthored by us. We made an effort deemed worthy of publication after peer review in a leading ag law journal. We focused on the actual words of the Packers & Stockyards Act, not some absent ephemeral and non-statutory “efficiency”. See, Domina & Taylor, “The Debilitating Effects of Concentration Markets Affecting Agriculture,” 15 DRAKE J. AGRICULTURAL L. 61-108 2010.

While we hesitate to commend our own work, surely there is something to be said for both lawyers and economists to stick to the language of a governing statute when commenting or Rules or Regulations to be issued under the statute’s authority! We think this is good policy. We invite others who write in this area to give the same a try!

Economic efficiency is important, but it is not the only consideration, and may not be the main consideration in debate over the structure of livestock and poultry markets. The key issues are fairness, preferential treatment of the “chosen ones,” economic freedom and economic liberty. Economists, take your blinders off! CRT|DAD

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