Tuesday, June 23, 2015

The Raisin Decision and Government Supported Cartels

Supreme Court handed down the decision on the raisin reserve case.  As expected, they ruled in favor of the plaintiffs. 

Megan McArdle  and Eugene Volokh fully approve and David Bernstein mostly approves.

Me, I go back Prof. Robin Williams in his survey of American society in 1962.  Then he observed and wrote that there was a growing trend for American government, particularly federal, to do what today we would call "out-sourcing".  At that time he was referring to the quasi-public, quasi-private setups like the Federal Reserve and a bunch of USDA arrangements dating to and before the New Deal.  They'd specifically include the marketing orders and the farmer-elected county committees which at that time had much power in the predecessor agencies of FSA (i.e., Agricultural Stabilization and Conservation Service and Farmers Home Administration). 

The point was that the Feds were delegating some governmental authority to bodies which were privately elected, whether by bankers in the case of the Federal Reserve, or the various USDA committees.  Because it was a sociology course, his was a mostly descriptive description.  The reliance on elections he viewed as a part of the country's general commitment to democracy, both in government and in NGO's (to use today's term again). 

I suspect in the past I've expressed reservations about the case.  It seems to me in this case the Hornes, the plaintiffs, are attempting to free ride.  I go back to the early history, pre-New Deal, in which there were repeated attempts by farmers voluntarily to cut production in order to drive up prices.  Because of "free riding", those attempts always failed, usually rather quickly.

My impression in the case of peanuts is the issue is a bit moot: the "raisin reserve" hasn't been used for 12 years or more and the supply/demand situation seems to have fundamentally changed.  ("This time it's different"). So killing the raisin reserve may be simply a case of weeding an obsolescent idea.   But does the logic of the case stop there?

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