Do You Have Economic Egg-spectations?

Do you know any friends, neighbors, or relatives that are upset or angry about the price of eggs; perhaps you yourself are. The price of eggs has been in the news for a while starting back at least since April of 2022. The news media has not only reported specifically on the price of eggs as an individual news item, but they have included it in discussing and explaining the impacts that the US’s inflation has had on America. There is no doubt that the price of eggs has risen and it is a factor in the US’s inflation. Even politicians are angry about the cost of eggs and are demanding answers.

That the politicians don’t know and need someone to explain it to them is more informative about our politicians than their hearing on egg prices is likely to be. Could there be a test here?

Let’s see.

Question 1: Did the price of eggs go up because of inflation? A. Yes B. No C. It’s complicated

Question 2: Are the high costs of eggs because of bad national policies? A. Yes B. No C. It’s complicated

Question 3: Who is to blame for the high cost of eggs? A. Democrats B. Republicans C. Both Ds and Rs D. Producers E. Bird Flu F. Consumers G. Food Industry users of eggs H. It’s complicated

Question 4: What public policy needs to change to return egg prices to normal? A. Interest rates B. Farm subsidies C. Petroleum production D. None E. It’s complicated

Question 5: Which economic principles are related to the cost of eggs? A. Profitability B. Supply and Demand C. Production Costs D. Supply-chain E. Inflation F. It’s complicated

Now, the answers may not be what you’ve heard, but that’s egg-actly why we did this test. It it rattles you a little don’t fall off the wall. It could cause some broken eggs.

Answer to Question 1: C. It’s complicated is the best response. The cost of something going up is what causes inflation, so the cost of eggs going up isn’t caused by itself. Simple right?

Well, no. If the cause of the cost of eggs going up is due to something else besides the eggs directly than that is inflation. Thus, the answer to Question 1 depends upon other information. This is why C. It’s complicated is correct.

Answer to Question 2: Once again it’s C. It’s complicated. Generally speaking, there aren’t national policies that cause the price of eggs to increases, more often any governmental policy would be directed at maintaining or decreasing the price of eggs.

Of course, nothing is simple remember. Any national policy which would increase any underlying cost of egg production, distribution, or sale would produce an inflationary impact on eggs; or any national policy which increased the consumption of eggs. What we are left with is more of the it’s complicated because it depends.

Answer to Question 3: If we knew who to blame that might give us the answer we are looking for; and it is easier to answer the blame question. Easier because “it’s complicated”. The complication here comes from the fact that there are so many to blame and lots of it to go around. Let’s just go down the list. C. Both Democrats and Republicans (covers A and B) are contributors to the price of eggs. Their collective blame originates mostly from their inactions or worse their actions related to the their jobs of serving the nation’s interests (or actually failing to do so). Regrettably, while our politicians haven’t or can’t act to the nation’s interests generally, you can only lay indirect responsibility for egg prices at their feet of clay. Incompetence and ineptitude are more a hinderance to our economy and to other factors that impact the price of eggs. D. Producers have played their part. The industry concentration of egg production has contributed to the increased price of eggs; but then it is also a factor in contributing to the “economy of scale” effect that keeps the cost of eggs down. This doesn’t mean that every producer has the same level of impact but it’s an American type of competitive market; that’s where a few dominate and the majority compete. E. Bird Flu is the key factor in the increased cost of eggs on the supply side. The Bird Flu has reduced the number of hens so far by around 16%. Think of it this way, about two eggs in every dozen are not there anymore when you buy them. This should be an easy to understand example of how “supply and demand” affects price. If that affect isn’t clear then just wait. F. Consumers are also causing the price to increase. See, you didn’t have to wait long. When you went to the store to buy that dozen eggs and found that there were only 10 in the carton, what did you do? You and that other consumer wanted two eggs from another carton and had to bid up the price to get them. OK, that’s not how it happened, but it is how it happened. The eggs produced get sold to the highest bidder, who passes the cost on to you. They can only pass it on, if you are willing to pay it. This behavior is the ‘demand’ side of economics. It’s not a bad thing, it is an important factor in making the free markets efficient. Note: how free the market is, is a separate issue. G. Food industry users of eggs. Just like us parochial buyers of eggs, there are businesses that need eggs for their products (that consumers buy). These businesses are just a hidden version of ourselves as consumers ‘demanding’ more eggs which leads to more competition in bidding up the price. H. It’s complicated. You didn’t think that these are all the factors that go into increasing the cost of eggs did you? Is it any wonder why politicians don’t know what to do. They can’t even deal with simple problems, like tying their own shoes.

Answer to Question 4: So, on the public policy front what’s the answer? E. It’s complicated. D. None is not an unreasonable answer. Since the Bird Flu had a major role in the increased price, producers will and have been replenishing their flocks. This takes a little time and so the ”supply and demand” economic cycle responds accordingly. It just takes time. Of course, there are other factors besides the Bird Flu. Public policy (or national policy) can exert impacts on the cost of eggs. A. Interest rates can add some cost to the degree it affects producers. B. Farm subsidies could be a factor, but it is unclear if politicians could change them intelligently to do more good than harm. It’s a puzzlement. This doesn’t mean that Farm subsidy policies could not help, but you’d need to overcome those obstacles that get in the way. If you were wondering about C. Petroleum production; yes, it’s a national / public policy area that could have an impact. There are many businesses that contribute to the cost of production, even the cost of production of eggs. Petroleum is just one. If the cost of gas or other petroleum-based products used by egg producers increases, those costs go into the carton of eggs like all the others. Should public policy around the petroleum industry be changed? Well, if the changes were done based on well-understood, well-informed, and rationally based approaches to addressing clearly defined objectives and requirements then it would be worth changing our policies. But someone needs to be responsible and accountable for delivering the objectives and the benefits; so, not politicians.

Answer to Question 5: This answer is not complicated. Well, actually it is. It’s F. It’s complicated. Every economic principle is related to the cost of eggs. All the options would affect the price of eggs depending upon how each principle alters the conditions which exist in the market for eggs.

In Summary:

So how does this help us with the price of eggs? If you are just an average consumer, you have to decide if the cost of eggs are worth the price. You control your own “demand”, as least most of it. As long as the price is higher than you can tolerate, don’t buy them. The market will find a way to reach a “fair market price” for eggs. It may not ever return to what it was, but that isn’t required by any principle of economics, by any law of physics, or by any human condition. It is possible that eggs well become less expensive than before, or the same prices as before, or that a new “normal” price will be reached. What determines that future price are all the factors at play across the entire process of the economic of eggs. The only constants here are ‘change’ and ‘decisions’.