The Regulation Fuels the Inflation

Why are eggs more expensive? Not just bird flu.

“Government regulations play a part in lifting egg prices,” even the Associated Press concedes.

The Consumer Price Index for March 2024 came in hotter than expected at 3.5 percent for 12 months, all items, 3.8 percent for 12 months “all items less food and energy,” sending the stock market down by lowering expectations for a Fed rate cut.

It sent me digging into the CPI. One of my main realizations was how crude a measure it is. It includes prices of a lot of things I don’t ever buy. Pork? I don’t eat it. Tobacco? I don’t use it. Pet services? I don’t have a dog or a cat or a gerbil or fish.

Housing? We bought our house a more than decade ago and refinanced the mortgage at a fixed rate when interest rates were low, though the CPI says my “owners’ equivalent rent of primary residence” has soared 5.9 percent over the past year.

What our household does buy a lot of, though, are eggs. We have a couple of pescetarians in the family, and Passover is coming, which means eggs on the seder plate and cooked with matzo in a variety of other dishes. Christians may deploy Easter eggs for their own springtime religious holiday. And egg-flation is a thing, so much so that it was a topic in the weekly conversation between Gail Collins and Bret Stephens on the New York Times editorial page.

Said Collins, “you can’t expect the average shopper to be cheery when the price of eggs keeps going up. (Thank you, bird flu.)”

Stephens replied, “It isn’t just avian flu and the price of eggs.”

The latest CPI print shows egg prices down 6.8 percent from a year ago, but prices remain at levels considerably above where they were for years. The Associated Press has a fairly thorough look at some of the reasons. “Chicken feed represents up to 70% of a farmer’s costs, and feed prices doubled between 2020 and 2022, Mulder said. Weather, COVID-related disruptions and the war in Ukraine — which drove up the price of wheat and other crops — were all contributors,” the article says.

“Elsewhere, government regulations play a part in lifting egg prices. Multiple states, including California and Massachusetts, have passed cage bans for egg-laying hens since 2018; this year, bans are set to take effect in Washington, Oregon and Michigan. Converting to cage-free facilities is a big investment for farmers, and consumers may not always realize that’s a factor in the higher prices they see at the grocery store, Metz said,” the AP story says.

I’m all for humane treatment of egg-laying chickens, but part of thinking economically is realizing that there’s nearly always some kind of tradeoff.

From 2004 to 2008 there was what a federal jury in 2023 found was an egg-pricing conspiracy to limit supply.

So much of the inflation story is shaped by political narratives—Biden’s spending, the Fed’s Zero Interest Rate Policy, or ZIRP. The left would have you believe it’s all price-gouging corporations fattening their profits. But eggs are an egg-cellent and not so egg-ceptional (forgive the dad jokes, please) example of how the regulations fuel the inflation. You don’t need to be a free-market true-believer to recognize that; even the Associated Press acknowledges it.

So maybe part of a successful solution to the inflation problem might involve tackling not only the monetary policy (Fed) and fiscal policy (spending) piece of it but also taking a look at the regulation piece of it and realizing that those costs get passed along, too?