Schizophrenic Public Policy on Dairy Products
On Sunday, the New York Times ran two articles about public policy for dairy products. One of the articles is about how an organization called Dairy Management, which was created by the United States Department of Agriculture, is pushing the sales of dairy products like cheese and milk. The other article is about New York City’s health commissioner, Dr. Thomas A. Farley, who leads initiatives to convince the public to consume less fat and sodium — nutrients that are plentiful in dairy products. The interesting thing about these two articles is their juxtaposition: While the government is encouraging consumers to consume more cheese (via Dairy Management), the government is also informing them to eat less of it (via the NYC health commission).
I find it interesting that Dairy Management is funded by levies imposed on farmers, while the federal government has paid hundreds billions of dollars in subsidies to farmers. Two market distortions do not a free market make; instead, they further distort the market. A simpler and more efficient way for the government to decrease dairy consumption would be to eliminate subsidies to the dairy industry. This would cause consumer prices to rise naturally, which would in turn lead individuals to consume less. There are many problems in public policy, and a great number of them are government-created. The solution is not more government, but less.
I also find it morally questionable interesting that Dairy Management focuses on exporting the very products that have been deemed too unhealthy for domestic consumers. Again from the article:
Dairy Management, which reported expenditures of $136 million last year, also received $5.3 million that year from the Agriculture Department to promote dairy sales overseas.
When the government subsidizes one thing and taxes another, individuals change their consumption as a consequence. No one knows the optimal mix of goods and services — your guess is as good as mine (or as good as a government official’s, for that matter). Individuals could achieve higher levels of welfare if they were allowed to choose for themselves the bundle of goods and services that they consume.
Incidentally, the Show-Me state has historically played an instrumental role in propping up dairy prices. From the first article (emphasis added):
For years, the federal government bought the industry’s excess cheese and butter, an outgrowth of a Depression-era commitment to use price supports and other tools to maintain the dairy industry as a vital national resource. This stockpile, packed away in cool caves in Missouri, grew to a value of more than $4 billion by 1983, when Washington switched gears.
