Get your filthy government hands off my milk! Yeah, we’ve got to say that now, and I’m not even talking about the raw milk debate.
In Louisiana, there is a law that states: “retailers must mark up milk products by at least six percent above the invoice cost after adding freight charges, all according to the Dairy Stabilization Board which oversees milk prices across the state.”
What’s the justification for the law? According to state agriculture and forestry commissioner Mike Strain:
In the long run the law keeps the price of milk low. Strain provided The Advocate with a hypothetical scenario in which large supermarkets could offer cheap milk temporarily, driving much smaller competitors out of business only to later increase the price of milk when there was no more competition.
So the idea is that they keep milk prices high to keep them low? It’s unfortunate that Mr. Strain, whose government is making these rules, doesn’t seem to understand basic economics. If larger companies were able to drive smaller competitors out of business only to raise the price, then there would be incentive for smaller competitors to reenter the market and sell at the lower price again. Furthermore, the larger supermarkets would still have to compete with each other, keeping prices at a reasonable level.
But with today’s federal, state, and local laws, can you just open up a store and sell milk? No, you can’t. There are numerous rules and regulations needed to be waded through (including licensing) before you can open your doors and start selling. The artificial costs of opening a business create barriers for people without too much money from entering into the market and offering competitive prices. We can thank the state for cartel-style markets (in just about all of them).
Anyway, I’ve never owned a supermarket, but it seems to me that it’s quite a stretch to say that not being able to sell milk would put one out of business. Sure, it could lure customers into the store to buy other items, but why stop at putting a price floor on just milk? Why not put price floors on all products? That way, mom and pop shops can continue to operate without having to worry about competition from big business. (Note: Many big businesses have market power because of favors and beneficial laws from the government, so if there were an actual free market, the push to keep these smaller businesses open wouldn’t likely need to exist.)
It’s just another government solution to a government problem…