Dude. It happens all the time in mergers where they shut down factories and junk equipment because it's no longer 'necessary' for them. You are being obtuse because you're refusing to acknowledge this simple fact.
So... Sometimes factories and equipment are not used because they're inefficient yes. But i do not see what this has to do with the issue. We do not break up companies when they only run one factory. We tend to let more mergers happen if the merging party can show that the merger will lower consumer prices(I.E. because the factories are not producing at capacity and could meet the same production at lower costs by only running one). And we tend to be more skeptical of mergers when they modify the number of players in the market below 4. [The saying at the FTC at least used to be 4 to 3, we'll see. 3 to 2, we'll sue]. But this is a merger situation and we are not dealing with a merger.
It is now, thanks to Bork. Prior to our current Borked era, DOJ would challenge any merger in a highly concentrated market, a market with four firms controlling ~75% of market share, if that merger resulted in a combined 8% market share for the merging firms.
We are dealing with potentially breaking up a company that has one factory simply because it runs one factory and for no other reasons that that factory is "too large".
And we don't do that. And we shouldn't do that.
No, I am proposing breaking up multiple companies, and not because of the number of factories under their nameplate but because the four of them have combined control over nearly 90% of market share between them. Which is too highly concentrated to be accurately called a market.
Large company, small company, monopoly, duopoly, whatever, seems to me that if your factory producing critical goods kills some kids and causes a nationwide shortage because you wanted to do stock buybacks more than you wanted to ensure food safety the plain and just consequences are you go to prison and lose your business.
I would also point out that efficiency is not an unalloyed good to be strived for under every circumstance. It is inherently tied to increased fragility as well, as evidenced by the very circumstance we find ourselves in. Domestic Ag and Commerce policy should inherently weight those factors, since private firms won't, because if there's one place you absolutely want redundancy and resiliency it's in the goddamn food supply for newborns.
I feel that, to the degree possible, countries should establish a minimum of self-sufficiency, even if that creates a measure of waste. This safeguards us from a huge number of disaster scenarios, including letting countries help eachother if their own supplies fail.
Stock buybacks are almost certainly related to other things and not the structure of the baby food market. The baby formula market has been highly concentrated for about as long as it has existed. And if your number of 4 companies controlling 90% is correct is less concentrated than it was in the 80's.
On the SAME day, Republicans both held a press conference blaming Biden for the baby formula shortage *AND* voted against a bill that would ensure access to baby formula amid a shortage.
NEW: The House approves $28 million to respond to the baby formula shortage by a vote of 231-192.
Every NO vote was a Republican.
NEW: The House has voted 222-203 in favor of the Domestic Terrorism Prevention bill. Only one Republican, Adam Kinzinger, voted in favor. All other Republicans voted against it.
Pro-Life party my ass.
No one reads these bills do they. The "Baby Formula" bill had almost nothing to do with baby formula. It gave the FDA $28 million to hire more staff. Who will not be making/buying baby formula. And who had $100 million few weeks ago approved already. So basically they're throwing money around and saying they're doing something while not doing anything but spending money. The GOP did approve a bill to allow people on WIC to get baby formula, something that will actually help.
And the 'Domestic terrorism' bill, well, if you insist on calling trespassing an insurrection and destroying cities protests it's no wonder some people don't have much stock in the need or ability of a "domestic terrorism" anything.
The white guys who leave a manifesto about fears of the Great Replacement then drive three hours to shoot up a majoruty black establishment are the terrorists.
Plus people on WIC already get formula, the problem is there isn't any formula for them to get.
That would be why we are importing a whole bunch of it
Which was made more challenging thanks to NAFTA 2
At least to that, Biden had the right response by invoking the Defense Act so that duties could be waived on imported formula. The root problem that needs to be addressed is the lack of inspectors at the FDA that is caused by underfunding, which is also being addressed. Short of nationalizing baby food manufacture, I don't think there is a ton more that the government could be doing right now.
Plant leadership and executives should go to jail for this. Unfortunately I'm not confident they will.
Well, antitrust enforcement forcing some of the brands to be spun off as separate standalone companies to create an actually competitive market rather than an oligopoly. Same for input sources. But that's a long term solution to help prevent these conditions from recurring, not a way to get food on the shelves by Tuesday.
You can't use anti-trust to just transform one factory into two. And you should really consider if the across the board price increase would be worth it even if you could.
Price increase? What? Competition drives price down. That's like, the one central tenant of capitalism. And why enforcing anti-trust is important. Ideally anti-trust would be enforced before this became an issue. And if it is an issue of a single supplier monopoly, then it either needs a ton of regulation or needs to become a public good.
Efficiencies of scale also drive prices down. Two factories each producing half of what the single factory did but each paying the full amount of overhead for running a factory means the cost of production will be higher.
This sounds like a fundamental misunderstanding of how it would work. If those factories are in competition with each other, it would drive the price down. Each would be dealing with the same overhead and would not pass the buck along to the consumer in order to have the more competitive price. You are also throwing in a new assumption into the mix to try and gainstay my point, that you have two factories running at half capacity.
I literally just explained how this is wrong. You have a fundamental misunderstanding of how this works. If factories compete with each other it only drives the price down IF there is a difference between the sales price and the marginal production cost. If there are two factories producing the same total quantity of goods as compared to one factory and the one factory is the efficient number then "overhead" is higher and the "competitive price" is higher under two factories. This produces a monopoly situation but only insomuch as they can keep prices low enough to prevent entry into the market. And there are loads of easy ways... one of which we are currently doing, to efficiently curb that monopoly power.
The company did not build a big huge factory because it was a bad idea. One factory was built because one factory was more efficient than two factories. If two factories was as efficient or more efficient the company would have built two factories in order to make more money (or in this case to defray capital costs and allow more efficient spool up/spool down and also to prevent issues like the one we're seeing).
This is… not strictly true. The mechanism that drives price down in an efficient market is competition sure but this requires that the efficient factory size (or efficient number of factories) is sufficiently small as to allow multiple competing brands. Production over the whole must be constant returns to scale over a large enough segment of the market. *
The natural state of a market where the efficient number of factories is 1 is a monopoly. Competition here does not produce lower overall prices it simply produces a monopoly.
HamHamJ is entirely correct. Anti-trust is not going to turn 1 factory into 2. And making it so that will increase prices so long as prices were reasonably close to marginal production. And they probably were because while there is a potential oligopoly** in supply there was also a monopsony in purchasing (which pushes prices down). If we split 1 factory into 2 the monopsony “cannot” push prices under marginal production so if marginal production goes up (which it will) then so will prices. You might say that the govt monopsony power wasn’t so strong but this probably isn’t the case. The WIC purchase agreement basically determines the market.
*decreasing marginal returns is the mechanism that causes extra factories to be made, and is not a feature inherent in production with multiple factories. The decreasing marginal utility is a necessary assumption in the demand side not a necessity in production. There are lots of good reasons to expect that production functions are CES.
**worth nothing that is is pretty hard to sustain oligopoly with 3 or 4 producers rather than 2.
Antitrust enforcement means that we stop 4 factories from becoming 1. It's a preventative measure first.
Second, if the issue is a current monopoly/oligopoly of a necessary good (which baby formula undoubtedly is) with a limited amount of infrastructure then the government should just fucking take it over and transform it into a utility type service.
No. Anti-trust enforcement means we stop 4 factories being owned by 4 companies to be 4 factories owned by 1 company.
There isn't a large externality or informational issue with baby formula. There is no need for the government to make it into a utility.
Stop being obtuse. It's both.
I am not being obtuse. Anti-trust does not mean we enforce inefficient factories. It means we prevent mergers. If there is only one company in the market because the others went out of business because they could not compete we do not step in to help those companies. (unless the reason they could not compete was anti-competitive behavior but there does not appear to be anti-competitive behavior here AND the primary way in which can can mitigate monopoly is by price fixing... IE almost exactly the monopsony effect WIC purchasing has...)
Edit: We will step in when the situations are separable. In order to prevent vertical integration. And we will potentially step in if one company owns all the production through multiple factories. But we very much do not prevent monopoly as a result of efficient factory size
Goum I feel like part of the problem here is you approach this shit like it’s a textbook hypothetical, and only in the realm of perfectly behaved actors and perfect information as presented in a textbook hypothetical, instead of the messy reality of how capitalist structures actually work in practice today.
You’re arguing from the position of an ideal instead of the actual reality of a corrupt system where profit and power are placed at the forefront of corporate decision making (see for example the company using its profits on stock buybacks instead of replacing machinery that desperately needed replacing, which lead to the culturating of cronobacter that got into the finished formula, etc.).
That’s why Munkus is finding your argument obtuse; you seem to want to fall back on the idealized form of what an MBA course would teach you instead of the actual facts on the ground.
On the SAME day, Republicans both held a press conference blaming Biden for the baby formula shortage *AND* voted against a bill that would ensure access to baby formula amid a shortage.
NEW: The House approves $28 million to respond to the baby formula shortage by a vote of 231-192.
Every NO vote was a Republican.
NEW: The House has voted 222-203 in favor of the Domestic Terrorism Prevention bill. Only one Republican, Adam Kinzinger, voted in favor. All other Republicans voted against it.
Pro-Life party my ass.
No one reads these bills do they. The "Baby Formula" bill had almost nothing to do with baby formula. It gave the FDA $28 million to hire more staff. Who will not be making/buying baby formula. And who had $100 million few weeks ago approved already. So basically they're throwing money around and saying they're doing something while not doing anything but spending money. The GOP did approve a bill to allow people on WIC to get baby formula, something that will actually help.
And the 'Domestic terrorism' bill, well, if you insist on calling trespassing an insurrection and destroying cities protests it's no wonder some people don't have much stock in the need or ability of a "domestic terrorism" anything.
The white guys who leave a manifesto about fears of the Great Replacement then drive three hours to shoot up a majoruty black establishment are the terrorists.
Plus people on WIC already get formula, the problem is there isn't any formula for them to get.
That would be why we are importing a whole bunch of it
Which was made more challenging thanks to NAFTA 2
At least to that, Biden had the right response by invoking the Defense Act so that duties could be waived on imported formula. The root problem that needs to be addressed is the lack of inspectors at the FDA that is caused by underfunding, which is also being addressed. Short of nationalizing baby food manufacture, I don't think there is a ton more that the government could be doing right now.
Plant leadership and executives should go to jail for this. Unfortunately I'm not confident they will.
Well, antitrust enforcement forcing some of the brands to be spun off as separate standalone companies to create an actually competitive market rather than an oligopoly. Same for input sources. But that's a long term solution to help prevent these conditions from recurring, not a way to get food on the shelves by Tuesday.
You can't use anti-trust to just transform one factory into two. And you should really consider if the across the board price increase would be worth it even if you could.
Price increase? What? Competition drives price down. That's like, the one central tenant of capitalism. And why enforcing anti-trust is important. Ideally anti-trust would be enforced before this became an issue. And if it is an issue of a single supplier monopoly, then it either needs a ton of regulation or needs to become a public good.
Efficiencies of scale also drive prices down. Two factories each producing half of what the single factory did but each paying the full amount of overhead for running a factory means the cost of production will be higher.
This sounds like a fundamental misunderstanding of how it would work. If those factories are in competition with each other, it would drive the price down. Each would be dealing with the same overhead and would not pass the buck along to the consumer in order to have the more competitive price. You are also throwing in a new assumption into the mix to try and gainstay my point, that you have two factories running at half capacity.
I literally just explained how this is wrong. You have a fundamental misunderstanding of how this works. If factories compete with each other it only drives the price down IF there is a difference between the sales price and the marginal production cost. If there are two factories producing the same total quantity of goods as compared to one factory and the one factory is the efficient number then "overhead" is higher and the "competitive price" is higher under two factories. This produces a monopoly situation but only insomuch as they can keep prices low enough to prevent entry into the market. And there are loads of easy ways... one of which we are currently doing, to efficiently curb that monopoly power.
The company did not build a big huge factory because it was a bad idea. One factory was built because one factory was more efficient than two factories. If two factories was as efficient or more efficient the company would have built two factories in order to make more money (or in this case to defray capital costs and allow more efficient spool up/spool down and also to prevent issues like the one we're seeing).
This is… not strictly true. The mechanism that drives price down in an efficient market is competition sure but this requires that the efficient factory size (or efficient number of factories) is sufficiently small as to allow multiple competing brands. Production over the whole must be constant returns to scale over a large enough segment of the market. *
The natural state of a market where the efficient number of factories is 1 is a monopoly. Competition here does not produce lower overall prices it simply produces a monopoly.
HamHamJ is entirely correct. Anti-trust is not going to turn 1 factory into 2. And making it so that will increase prices so long as prices were reasonably close to marginal production. And they probably were because while there is a potential oligopoly** in supply there was also a monopsony in purchasing (which pushes prices down). If we split 1 factory into 2 the monopsony “cannot” push prices under marginal production so if marginal production goes up (which it will) then so will prices. You might say that the govt monopsony power wasn’t so strong but this probably isn’t the case. The WIC purchase agreement basically determines the market.
*decreasing marginal returns is the mechanism that causes extra factories to be made, and is not a feature inherent in production with multiple factories. The decreasing marginal utility is a necessary assumption in the demand side not a necessity in production. There are lots of good reasons to expect that production functions are CES.
**worth nothing that is is pretty hard to sustain oligopoly with 3 or 4 producers rather than 2.
Antitrust enforcement means that we stop 4 factories from becoming 1. It's a preventative measure first.
Second, if the issue is a current monopoly/oligopoly of a necessary good (which baby formula undoubtedly is) with a limited amount of infrastructure then the government should just fucking take it over and transform it into a utility type service.
No. Anti-trust enforcement means we stop 4 factories being owned by 4 companies to be 4 factories owned by 1 company.
There isn't a large externality or informational issue with baby formula. There is no need for the government to make it into a utility.
Stop being obtuse. It's both.
I am not being obtuse. Anti-trust does not mean we enforce inefficient factories. It means we prevent mergers. If there is only one company in the market because the others went out of business because they could not compete we do not step in to help those companies. (unless the reason they could not compete was anti-competitive behavior but there does not appear to be anti-competitive behavior here AND the primary way in which can can mitigate monopoly is by price fixing... IE almost exactly the monopsony effect WIC purchasing has...)
Edit: We will step in when the situations are separable. In order to prevent vertical integration. And we will potentially step in if one company owns all the production through multiple factories. But we very much do not prevent monopoly as a result of efficient factory size
Goum I feel like part of the problem here is you approach this shit like it’s a textbook hypothetical, and only in the realm of perfectly behaved actors and perfect information as presented in a textbook hypothetical, instead of the messy reality of how capitalist structures actually work in practice today.
You’re arguing from the position of an ideal instead of the actual reality of a corrupt system where profit and power are placed at the forefront of corporate decision making (see for example the company using its profits on stock buybacks instead of replacing machinery that desperately needed replacing, which lead to the culturating of cronobacter that got into the finished formula, etc.).
That’s why Munkus is finding your argument obtuse; you seem to want to fall back on the idealized form of what an MBA course would teach you instead of the actual facts on the ground.
But what if... bear with me now... the cows that produced the basics for the formula produced by these companies, were... spherical?
On the SAME day, Republicans both held a press conference blaming Biden for the baby formula shortage *AND* voted against a bill that would ensure access to baby formula amid a shortage.
NEW: The House approves $28 million to respond to the baby formula shortage by a vote of 231-192.
Every NO vote was a Republican.
NEW: The House has voted 222-203 in favor of the Domestic Terrorism Prevention bill. Only one Republican, Adam Kinzinger, voted in favor. All other Republicans voted against it.
Pro-Life party my ass.
No one reads these bills do they. The "Baby Formula" bill had almost nothing to do with baby formula. It gave the FDA $28 million to hire more staff. Who will not be making/buying baby formula. And who had $100 million few weeks ago approved already. So basically they're throwing money around and saying they're doing something while not doing anything but spending money. The GOP did approve a bill to allow people on WIC to get baby formula, something that will actually help.
And the 'Domestic terrorism' bill, well, if you insist on calling trespassing an insurrection and destroying cities protests it's no wonder some people don't have much stock in the need or ability of a "domestic terrorism" anything.
The white guys who leave a manifesto about fears of the Great Replacement then drive three hours to shoot up a majoruty black establishment are the terrorists.
Plus people on WIC already get formula, the problem is there isn't any formula for them to get.
That would be why we are importing a whole bunch of it
Which was made more challenging thanks to NAFTA 2
At least to that, Biden had the right response by invoking the Defense Act so that duties could be waived on imported formula. The root problem that needs to be addressed is the lack of inspectors at the FDA that is caused by underfunding, which is also being addressed. Short of nationalizing baby food manufacture, I don't think there is a ton more that the government could be doing right now.
Plant leadership and executives should go to jail for this. Unfortunately I'm not confident they will.
Well, antitrust enforcement forcing some of the brands to be spun off as separate standalone companies to create an actually competitive market rather than an oligopoly. Same for input sources. But that's a long term solution to help prevent these conditions from recurring, not a way to get food on the shelves by Tuesday.
You can't use anti-trust to just transform one factory into two. And you should really consider if the across the board price increase would be worth it even if you could.
Price increase? What? Competition drives price down. That's like, the one central tenant of capitalism. And why enforcing anti-trust is important. Ideally anti-trust would be enforced before this became an issue. And if it is an issue of a single supplier monopoly, then it either needs a ton of regulation or needs to become a public good.
Efficiencies of scale also drive prices down. Two factories each producing half of what the single factory did but each paying the full amount of overhead for running a factory means the cost of production will be higher.
This sounds like a fundamental misunderstanding of how it would work. If those factories are in competition with each other, it would drive the price down. Each would be dealing with the same overhead and would not pass the buck along to the consumer in order to have the more competitive price. You are also throwing in a new assumption into the mix to try and gainstay my point, that you have two factories running at half capacity.
I literally just explained how this is wrong. You have a fundamental misunderstanding of how this works. If factories compete with each other it only drives the price down IF there is a difference between the sales price and the marginal production cost. If there are two factories producing the same total quantity of goods as compared to one factory and the one factory is the efficient number then "overhead" is higher and the "competitive price" is higher under two factories. This produces a monopoly situation but only insomuch as they can keep prices low enough to prevent entry into the market. And there are loads of easy ways... one of which we are currently doing, to efficiently curb that monopoly power.
The company did not build a big huge factory because it was a bad idea. One factory was built because one factory was more efficient than two factories. If two factories was as efficient or more efficient the company would have built two factories in order to make more money (or in this case to defray capital costs and allow more efficient spool up/spool down and also to prevent issues like the one we're seeing).
This is… not strictly true. The mechanism that drives price down in an efficient market is competition sure but this requires that the efficient factory size (or efficient number of factories) is sufficiently small as to allow multiple competing brands. Production over the whole must be constant returns to scale over a large enough segment of the market. *
The natural state of a market where the efficient number of factories is 1 is a monopoly. Competition here does not produce lower overall prices it simply produces a monopoly.
HamHamJ is entirely correct. Anti-trust is not going to turn 1 factory into 2. And making it so that will increase prices so long as prices were reasonably close to marginal production. And they probably were because while there is a potential oligopoly** in supply there was also a monopsony in purchasing (which pushes prices down). If we split 1 factory into 2 the monopsony “cannot” push prices under marginal production so if marginal production goes up (which it will) then so will prices. You might say that the govt monopsony power wasn’t so strong but this probably isn’t the case. The WIC purchase agreement basically determines the market.
*decreasing marginal returns is the mechanism that causes extra factories to be made, and is not a feature inherent in production with multiple factories. The decreasing marginal utility is a necessary assumption in the demand side not a necessity in production. There are lots of good reasons to expect that production functions are CES.
**worth nothing that is is pretty hard to sustain oligopoly with 3 or 4 producers rather than 2.
Antitrust enforcement means that we stop 4 factories from becoming 1. It's a preventative measure first.
Second, if the issue is a current monopoly/oligopoly of a necessary good (which baby formula undoubtedly is) with a limited amount of infrastructure then the government should just fucking take it over and transform it into a utility type service.
No. Anti-trust enforcement means we stop 4 factories being owned by 4 companies to be 4 factories owned by 1 company.
There isn't a large externality or informational issue with baby formula. There is no need for the government to make it into a utility.
Stop being obtuse. It's both.
I am not being obtuse. Anti-trust does not mean we enforce inefficient factories. It means we prevent mergers. If there is only one company in the market because the others went out of business because they could not compete we do not step in to help those companies. (unless the reason they could not compete was anti-competitive behavior but there does not appear to be anti-competitive behavior here AND the primary way in which can can mitigate monopoly is by price fixing... IE almost exactly the monopsony effect WIC purchasing has...)
Edit: We will step in when the situations are separable. In order to prevent vertical integration. And we will potentially step in if one company owns all the production through multiple factories. But we very much do not prevent monopoly as a result of efficient factory size
Goum I feel like part of the problem here is you approach this shit like it’s a textbook hypothetical, and only in the realm of perfectly behaved actors and perfect information as presented in a textbook hypothetical, instead of the messy reality of how capitalist structures actually work in practice today.
You’re arguing from the position of an ideal instead of the actual reality of a corrupt system where profit and power are placed at the forefront of corporate decision making (see for example the company using its profits on stock buybacks instead of replacing machinery that desperately needed replacing, which lead to the culturating of cronobacter that got into the finished formula, etc.).
That’s why Munkus is finding your argument obtuse; you seem to want to fall back on the idealized form of what an MBA course would teach you instead of the actual facts on the ground.
But what if... bear with me now... the cows that produced the basics for the formula produced by these companies, were... spherical?
Also, frictionless, in a vaccum.
The podcast had to be months ago because I’m backlogged to hell and back but listening to Waypoint I think one of the hosts made the same point about a lot of economists flailing with everything happening in recent years because they’re being trained to work with the perfect information given to them in hypotheticals in class, and then going into the real world with the same level of confidence that they assuredly know everything there is to know about the economic situations they find themselves studying and that perfect information just ain’t actually there
On the SAME day, Republicans both held a press conference blaming Biden for the baby formula shortage *AND* voted against a bill that would ensure access to baby formula amid a shortage.
NEW: The House approves $28 million to respond to the baby formula shortage by a vote of 231-192.
Every NO vote was a Republican.
NEW: The House has voted 222-203 in favor of the Domestic Terrorism Prevention bill. Only one Republican, Adam Kinzinger, voted in favor. All other Republicans voted against it.
Pro-Life party my ass.
No one reads these bills do they. The "Baby Formula" bill had almost nothing to do with baby formula. It gave the FDA $28 million to hire more staff. Who will not be making/buying baby formula. And who had $100 million few weeks ago approved already. So basically they're throwing money around and saying they're doing something while not doing anything but spending money. The GOP did approve a bill to allow people on WIC to get baby formula, something that will actually help.
And the 'Domestic terrorism' bill, well, if you insist on calling trespassing an insurrection and destroying cities protests it's no wonder some people don't have much stock in the need or ability of a "domestic terrorism" anything.
The white guys who leave a manifesto about fears of the Great Replacement then drive three hours to shoot up a majoruty black establishment are the terrorists.
Plus people on WIC already get formula, the problem is there isn't any formula for them to get.
That would be why we are importing a whole bunch of it
Which was made more challenging thanks to NAFTA 2
At least to that, Biden had the right response by invoking the Defense Act so that duties could be waived on imported formula. The root problem that needs to be addressed is the lack of inspectors at the FDA that is caused by underfunding, which is also being addressed. Short of nationalizing baby food manufacture, I don't think there is a ton more that the government could be doing right now.
Plant leadership and executives should go to jail for this. Unfortunately I'm not confident they will.
Well, antitrust enforcement forcing some of the brands to be spun off as separate standalone companies to create an actually competitive market rather than an oligopoly. Same for input sources. But that's a long term solution to help prevent these conditions from recurring, not a way to get food on the shelves by Tuesday.
You can't use anti-trust to just transform one factory into two. And you should really consider if the across the board price increase would be worth it even if you could.
Price increase? What? Competition drives price down. That's like, the one central tenant of capitalism. And why enforcing anti-trust is important. Ideally anti-trust would be enforced before this became an issue. And if it is an issue of a single supplier monopoly, then it either needs a ton of regulation or needs to become a public good.
Efficiencies of scale also drive prices down. Two factories each producing half of what the single factory did but each paying the full amount of overhead for running a factory means the cost of production will be higher.
This sounds like a fundamental misunderstanding of how it would work. If those factories are in competition with each other, it would drive the price down. Each would be dealing with the same overhead and would not pass the buck along to the consumer in order to have the more competitive price. You are also throwing in a new assumption into the mix to try and gainstay my point, that you have two factories running at half capacity.
I literally just explained how this is wrong. You have a fundamental misunderstanding of how this works. If factories compete with each other it only drives the price down IF there is a difference between the sales price and the marginal production cost. If there are two factories producing the same total quantity of goods as compared to one factory and the one factory is the efficient number then "overhead" is higher and the "competitive price" is higher under two factories. This produces a monopoly situation but only insomuch as they can keep prices low enough to prevent entry into the market. And there are loads of easy ways... one of which we are currently doing, to efficiently curb that monopoly power.
The company did not build a big huge factory because it was a bad idea. One factory was built because one factory was more efficient than two factories. If two factories was as efficient or more efficient the company would have built two factories in order to make more money (or in this case to defray capital costs and allow more efficient spool up/spool down and also to prevent issues like the one we're seeing).
This is… not strictly true. The mechanism that drives price down in an efficient market is competition sure but this requires that the efficient factory size (or efficient number of factories) is sufficiently small as to allow multiple competing brands. Production over the whole must be constant returns to scale over a large enough segment of the market. *
The natural state of a market where the efficient number of factories is 1 is a monopoly. Competition here does not produce lower overall prices it simply produces a monopoly.
HamHamJ is entirely correct. Anti-trust is not going to turn 1 factory into 2. And making it so that will increase prices so long as prices were reasonably close to marginal production. And they probably were because while there is a potential oligopoly** in supply there was also a monopsony in purchasing (which pushes prices down). If we split 1 factory into 2 the monopsony “cannot” push prices under marginal production so if marginal production goes up (which it will) then so will prices. You might say that the govt monopsony power wasn’t so strong but this probably isn’t the case. The WIC purchase agreement basically determines the market.
*decreasing marginal returns is the mechanism that causes extra factories to be made, and is not a feature inherent in production with multiple factories. The decreasing marginal utility is a necessary assumption in the demand side not a necessity in production. There are lots of good reasons to expect that production functions are CES.
**worth nothing that is is pretty hard to sustain oligopoly with 3 or 4 producers rather than 2.
Antitrust enforcement means that we stop 4 factories from becoming 1. It's a preventative measure first.
Second, if the issue is a current monopoly/oligopoly of a necessary good (which baby formula undoubtedly is) with a limited amount of infrastructure then the government should just fucking take it over and transform it into a utility type service.
No. Anti-trust enforcement means we stop 4 factories being owned by 4 companies to be 4 factories owned by 1 company.
There isn't a large externality or informational issue with baby formula. There is no need for the government to make it into a utility.
Stop being obtuse. It's both.
I am not being obtuse. Anti-trust does not mean we enforce inefficient factories. It means we prevent mergers. If there is only one company in the market because the others went out of business because they could not compete we do not step in to help those companies. (unless the reason they could not compete was anti-competitive behavior but there does not appear to be anti-competitive behavior here AND the primary way in which can can mitigate monopoly is by price fixing... IE almost exactly the monopsony effect WIC purchasing has...)
Edit: We will step in when the situations are separable. In order to prevent vertical integration. And we will potentially step in if one company owns all the production through multiple factories. But we very much do not prevent monopoly as a result of efficient factory size
Goum I feel like part of the problem here is you approach this shit like it’s a textbook hypothetical, and only in the realm of perfectly behaved actors and perfect information as presented in a textbook hypothetical, instead of the messy reality of how capitalist structures actually work in practice today.
You’re arguing from the position of an ideal instead of the actual reality of a corrupt system where profit and power are placed at the forefront of corporate decision making (see for example the company using its profits on stock buybacks instead of replacing machinery that desperately needed replacing, which lead to the culturating of cronobacter that got into the finished formula, etc.).
That’s why Munkus is finding your argument obtuse; you seem to want to fall back on the idealized form of what an MBA course would teach you instead of the actual facts on the ground.
No. This is not hypothetical. We know all of this pretty well. We don't need "perfectly behaved actors" and perfect information. We have measured the price changes and not found significant effects as compared to the general food economy. The thing that is claimed to have happened and existed by munkus et al simply demonstrably not happen. And were not the result of the market structure.
The problem was that we did not fund the FDA well enough and that we made it significantly harder for other nations to fullfil our shortages when they happen. Not that there were not enough factories.
On the SAME day, Republicans both held a press conference blaming Biden for the baby formula shortage *AND* voted against a bill that would ensure access to baby formula amid a shortage.
NEW: The House approves $28 million to respond to the baby formula shortage by a vote of 231-192.
Every NO vote was a Republican.
NEW: The House has voted 222-203 in favor of the Domestic Terrorism Prevention bill. Only one Republican, Adam Kinzinger, voted in favor. All other Republicans voted against it.
Pro-Life party my ass.
No one reads these bills do they. The "Baby Formula" bill had almost nothing to do with baby formula. It gave the FDA $28 million to hire more staff. Who will not be making/buying baby formula. And who had $100 million few weeks ago approved already. So basically they're throwing money around and saying they're doing something while not doing anything but spending money. The GOP did approve a bill to allow people on WIC to get baby formula, something that will actually help.
And the 'Domestic terrorism' bill, well, if you insist on calling trespassing an insurrection and destroying cities protests it's no wonder some people don't have much stock in the need or ability of a "domestic terrorism" anything.
The white guys who leave a manifesto about fears of the Great Replacement then drive three hours to shoot up a majoruty black establishment are the terrorists.
Plus people on WIC already get formula, the problem is there isn't any formula for them to get.
That would be why we are importing a whole bunch of it
Which was made more challenging thanks to NAFTA 2
At least to that, Biden had the right response by invoking the Defense Act so that duties could be waived on imported formula. The root problem that needs to be addressed is the lack of inspectors at the FDA that is caused by underfunding, which is also being addressed. Short of nationalizing baby food manufacture, I don't think there is a ton more that the government could be doing right now.
Plant leadership and executives should go to jail for this. Unfortunately I'm not confident they will.
Well, antitrust enforcement forcing some of the brands to be spun off as separate standalone companies to create an actually competitive market rather than an oligopoly. Same for input sources. But that's a long term solution to help prevent these conditions from recurring, not a way to get food on the shelves by Tuesday.
You can't use anti-trust to just transform one factory into two. And you should really consider if the across the board price increase would be worth it even if you could.
Price increase? What? Competition drives price down. That's like, the one central tenant of capitalism. And why enforcing anti-trust is important. Ideally anti-trust would be enforced before this became an issue. And if it is an issue of a single supplier monopoly, then it either needs a ton of regulation or needs to become a public good.
Efficiencies of scale also drive prices down. Two factories each producing half of what the single factory did but each paying the full amount of overhead for running a factory means the cost of production will be higher.
This sounds like a fundamental misunderstanding of how it would work. If those factories are in competition with each other, it would drive the price down. Each would be dealing with the same overhead and would not pass the buck along to the consumer in order to have the more competitive price. You are also throwing in a new assumption into the mix to try and gainstay my point, that you have two factories running at half capacity.
I literally just explained how this is wrong. You have a fundamental misunderstanding of how this works. If factories compete with each other it only drives the price down IF there is a difference between the sales price and the marginal production cost. If there are two factories producing the same total quantity of goods as compared to one factory and the one factory is the efficient number then "overhead" is higher and the "competitive price" is higher under two factories. This produces a monopoly situation but only insomuch as they can keep prices low enough to prevent entry into the market. And there are loads of easy ways... one of which we are currently doing, to efficiently curb that monopoly power.
The company did not build a big huge factory because it was a bad idea. One factory was built because one factory was more efficient than two factories. If two factories was as efficient or more efficient the company would have built two factories in order to make more money (or in this case to defray capital costs and allow more efficient spool up/spool down and also to prevent issues like the one we're seeing).
This is… not strictly true. The mechanism that drives price down in an efficient market is competition sure but this requires that the efficient factory size (or efficient number of factories) is sufficiently small as to allow multiple competing brands. Production over the whole must be constant returns to scale over a large enough segment of the market. *
The natural state of a market where the efficient number of factories is 1 is a monopoly. Competition here does not produce lower overall prices it simply produces a monopoly.
HamHamJ is entirely correct. Anti-trust is not going to turn 1 factory into 2. And making it so that will increase prices so long as prices were reasonably close to marginal production. And they probably were because while there is a potential oligopoly** in supply there was also a monopsony in purchasing (which pushes prices down). If we split 1 factory into 2 the monopsony “cannot” push prices under marginal production so if marginal production goes up (which it will) then so will prices. You might say that the govt monopsony power wasn’t so strong but this probably isn’t the case. The WIC purchase agreement basically determines the market.
*decreasing marginal returns is the mechanism that causes extra factories to be made, and is not a feature inherent in production with multiple factories. The decreasing marginal utility is a necessary assumption in the demand side not a necessity in production. There are lots of good reasons to expect that production functions are CES.
**worth nothing that is is pretty hard to sustain oligopoly with 3 or 4 producers rather than 2.
Antitrust enforcement means that we stop 4 factories from becoming 1. It's a preventative measure first.
Second, if the issue is a current monopoly/oligopoly of a necessary good (which baby formula undoubtedly is) with a limited amount of infrastructure then the government should just fucking take it over and transform it into a utility type service.
No. Anti-trust enforcement means we stop 4 factories being owned by 4 companies to be 4 factories owned by 1 company.
There isn't a large externality or informational issue with baby formula. There is no need for the government to make it into a utility.
Stop being obtuse. It's both.
I am not being obtuse. Anti-trust does not mean we enforce inefficient factories. It means we prevent mergers. If there is only one company in the market because the others went out of business because they could not compete we do not step in to help those companies. (unless the reason they could not compete was anti-competitive behavior but there does not appear to be anti-competitive behavior here AND the primary way in which can can mitigate monopoly is by price fixing... IE almost exactly the monopsony effect WIC purchasing has...)
Edit: We will step in when the situations are separable. In order to prevent vertical integration. And we will potentially step in if one company owns all the production through multiple factories. But we very much do not prevent monopoly as a result of efficient factory size
Goum I feel like part of the problem here is you approach this shit like it’s a textbook hypothetical, and only in the realm of perfectly behaved actors and perfect information as presented in a textbook hypothetical, instead of the messy reality of how capitalist structures actually work in practice today.
You’re arguing from the position of an ideal instead of the actual reality of a corrupt system where profit and power are placed at the forefront of corporate decision making (see for example the company using its profits on stock buybacks instead of replacing machinery that desperately needed replacing, which lead to the culturating of cronobacter that got into the finished formula, etc.).
That’s why Munkus is finding your argument obtuse; you seem to want to fall back on the idealized form of what an MBA course would teach you instead of the actual facts on the ground.
No. This is not hypothetical. We know all of this pretty well. We don't need "perfectly behaved actors" and perfect information. We have measured the price changes and not found significant effects as compared to the general food economy. The thing that is claimed to have happened and existed by munkus et al simply demonstrably not happen. And were not the result of the market structure.
The problem was that we did not fund the FDA well enough and that we made it significantly harder for other nations to fullfil our shortages when they happen. Not that there were not enough factories.
Given one factory went under and we have not enough supply now, no I would say that there weren’t enough factories.
Like your argument is “our one, single, sort-of redundancy failed, that doesn’t mean that we should have had more factories in case one of them though! We should have just been able to rely on our notoriously crippled regulatory state and imports!”
It’s not a good argument! It’s just looking for ways to excuse the failures of American capitalism and it’s endless drive towards monopolization and shareholder enrichment over societal responsibility
I get that you're saying the FDA was underfunded, but saying it's the FDA's fault that a private company produced contaminated goods when producing uncontaminated goods is kind of what they're supposed to do is some misallocated blame. It's 100% on the company and its CEO and whoever else made the call to not replace equipment and bought back stock instead.
I get that you're saying the FDA was underfunded, but saying it's the FDA's fault that a private company produced contaminated goods when producing uncontaminated goods is kind of what they're supposed to do is some misallocated blame. It's 100% on the company and its CEO and whoever else made the call to not replace equipment and bought back stock instead.
The main purpose of the regulator is to regulate the behavior of the companies. Failing to do so is a failure on the regulators part. It's also a failure by the company and there's plenty of blame to do around but the failure on the companies part is expected and why regulators are needed.
I get that you're saying the FDA was underfunded, but saying it's the FDA's fault that a private company produced contaminated goods when producing uncontaminated goods is kind of what they're supposed to do is some misallocated blame. It's 100% on the company and its CEO and whoever else made the call to not replace equipment and bought back stock instead.
The main purpose of the regulator is to regulate the behavior of the companies. Failing to do so is a failure on the regulators part. It's also a failure by the company and there's plenty of blame to do around but the failure on the companies part is expected and why regulators are needed.
No, I don't generally expect my food to be poison when I buy it. Same way I expect chefs to have washed their hands when dining at a restaurant regardless of whether I'm there with a health inspector. Companies employ their own quality control and quality assurance all the time. Noncompliance is supposed to be an aberration from the norm, not standard operating procedure except when somebody's looking.
I get that you're saying the FDA was underfunded, but saying it's the FDA's fault that a private company produced contaminated goods when producing uncontaminated goods is kind of what they're supposed to do is some misallocated blame. It's 100% on the company and its CEO and whoever else made the call to not replace equipment and bought back stock instead.
Its a failure of the FDA in the sense that it should have been funded enough. But it is not their fault for failing. Its our fault for not funding them.
The point isn't "damn the FDA" the point is that "adding more factories" isn't going to solve the issue. That will just make baby formula more expensive in normal operation. Adding more funding for the FDA is going to solve the issue. (and yes punishment for companies that fail to meet standards as is the mechanism the FDA has to ensure compliance). As well as funding for border inspections (so that other countries can ship baby formula here that meets our standards in the case of local shortages)
I get that you're saying the FDA was underfunded, but saying it's the FDA's fault that a private company produced contaminated goods when producing uncontaminated goods is kind of what they're supposed to do is some misallocated blame. It's 100% on the company and its CEO and whoever else made the call to not replace equipment and bought back stock instead.
The main purpose of the regulator is to regulate the behavior of the companies. Failing to do so is a failure on the regulators part. It's also a failure by the company and there's plenty of blame to do around but the failure on the companies part is expected and why regulators are needed.
I would agree if we were talking about, say, some obscure financial transaction. We're talking about a company that produced contaminated formula.
Edit: like, I sell and truck frozen foods. My customers expect me to arrive with
A. Food;
B. Food that is still frozen
It is not on the FDA or DOT if I show up with thawed, spoiled food because the compressor on my truck needed replaced but I went to Tahiti instead.
On the SAME day, Republicans both held a press conference blaming Biden for the baby formula shortage *AND* voted against a bill that would ensure access to baby formula amid a shortage.
NEW: The House approves $28 million to respond to the baby formula shortage by a vote of 231-192.
Every NO vote was a Republican.
NEW: The House has voted 222-203 in favor of the Domestic Terrorism Prevention bill. Only one Republican, Adam Kinzinger, voted in favor. All other Republicans voted against it.
Pro-Life party my ass.
No one reads these bills do they. The "Baby Formula" bill had almost nothing to do with baby formula. It gave the FDA $28 million to hire more staff. Who will not be making/buying baby formula. And who had $100 million few weeks ago approved already. So basically they're throwing money around and saying they're doing something while not doing anything but spending money. The GOP did approve a bill to allow people on WIC to get baby formula, something that will actually help.
And the 'Domestic terrorism' bill, well, if you insist on calling trespassing an insurrection and destroying cities protests it's no wonder some people don't have much stock in the need or ability of a "domestic terrorism" anything.
The white guys who leave a manifesto about fears of the Great Replacement then drive three hours to shoot up a majoruty black establishment are the terrorists.
Plus people on WIC already get formula, the problem is there isn't any formula for them to get.
That would be why we are importing a whole bunch of it
Which was made more challenging thanks to NAFTA 2
At least to that, Biden had the right response by invoking the Defense Act so that duties could be waived on imported formula. The root problem that needs to be addressed is the lack of inspectors at the FDA that is caused by underfunding, which is also being addressed. Short of nationalizing baby food manufacture, I don't think there is a ton more that the government could be doing right now.
Plant leadership and executives should go to jail for this. Unfortunately I'm not confident they will.
Well, antitrust enforcement forcing some of the brands to be spun off as separate standalone companies to create an actually competitive market rather than an oligopoly. Same for input sources. But that's a long term solution to help prevent these conditions from recurring, not a way to get food on the shelves by Tuesday.
You can't use anti-trust to just transform one factory into two. And you should really consider if the across the board price increase would be worth it even if you could.
Price increase? What? Competition drives price down. That's like, the one central tenant of capitalism. And why enforcing anti-trust is important. Ideally anti-trust would be enforced before this became an issue. And if it is an issue of a single supplier monopoly, then it either needs a ton of regulation or needs to become a public good.
Efficiencies of scale also drive prices down. Two factories each producing half of what the single factory did but each paying the full amount of overhead for running a factory means the cost of production will be higher.
This sounds like a fundamental misunderstanding of how it would work. If those factories are in competition with each other, it would drive the price down. Each would be dealing with the same overhead and would not pass the buck along to the consumer in order to have the more competitive price. You are also throwing in a new assumption into the mix to try and gainstay my point, that you have two factories running at half capacity.
I literally just explained how this is wrong. You have a fundamental misunderstanding of how this works. If factories compete with each other it only drives the price down IF there is a difference between the sales price and the marginal production cost. If there are two factories producing the same total quantity of goods as compared to one factory and the one factory is the efficient number then "overhead" is higher and the "competitive price" is higher under two factories. This produces a monopoly situation but only insomuch as they can keep prices low enough to prevent entry into the market. And there are loads of easy ways... one of which we are currently doing, to efficiently curb that monopoly power.
The company did not build a big huge factory because it was a bad idea. One factory was built because one factory was more efficient than two factories. If two factories was as efficient or more efficient the company would have built two factories in order to make more money (or in this case to defray capital costs and allow more efficient spool up/spool down and also to prevent issues like the one we're seeing).
This is… not strictly true. The mechanism that drives price down in an efficient market is competition sure but this requires that the efficient factory size (or efficient number of factories) is sufficiently small as to allow multiple competing brands. Production over the whole must be constant returns to scale over a large enough segment of the market. *
The natural state of a market where the efficient number of factories is 1 is a monopoly. Competition here does not produce lower overall prices it simply produces a monopoly.
HamHamJ is entirely correct. Anti-trust is not going to turn 1 factory into 2. And making it so that will increase prices so long as prices were reasonably close to marginal production. And they probably were because while there is a potential oligopoly** in supply there was also a monopsony in purchasing (which pushes prices down). If we split 1 factory into 2 the monopsony “cannot” push prices under marginal production so if marginal production goes up (which it will) then so will prices. You might say that the govt monopsony power wasn’t so strong but this probably isn’t the case. The WIC purchase agreement basically determines the market.
*decreasing marginal returns is the mechanism that causes extra factories to be made, and is not a feature inherent in production with multiple factories. The decreasing marginal utility is a necessary assumption in the demand side not a necessity in production. There are lots of good reasons to expect that production functions are CES.
**worth nothing that is is pretty hard to sustain oligopoly with 3 or 4 producers rather than 2.
Antitrust enforcement means that we stop 4 factories from becoming 1. It's a preventative measure first.
Second, if the issue is a current monopoly/oligopoly of a necessary good (which baby formula undoubtedly is) with a limited amount of infrastructure then the government should just fucking take it over and transform it into a utility type service.
No. Anti-trust enforcement means we stop 4 factories being owned by 4 companies to be 4 factories owned by 1 company.
There isn't a large externality or informational issue with baby formula. There is no need for the government to make it into a utility.
Stop being obtuse. It's both.
I am not being obtuse. Anti-trust does not mean we enforce inefficient factories. It means we prevent mergers. If there is only one company in the market because the others went out of business because they could not compete we do not step in to help those companies. (unless the reason they could not compete was anti-competitive behavior but there does not appear to be anti-competitive behavior here AND the primary way in which can can mitigate monopoly is by price fixing... IE almost exactly the monopsony effect WIC purchasing has...)
Edit: We will step in when the situations are separable. In order to prevent vertical integration. And we will potentially step in if one company owns all the production through multiple factories. But we very much do not prevent monopoly as a result of efficient factory size
Goum I feel like part of the problem here is you approach this shit like it’s a textbook hypothetical, and only in the realm of perfectly behaved actors and perfect information as presented in a textbook hypothetical, instead of the messy reality of how capitalist structures actually work in practice today.
You’re arguing from the position of an ideal instead of the actual reality of a corrupt system where profit and power are placed at the forefront of corporate decision making (see for example the company using its profits on stock buybacks instead of replacing machinery that desperately needed replacing, which lead to the culturating of cronobacter that got into the finished formula, etc.).
That’s why Munkus is finding your argument obtuse; you seem to want to fall back on the idealized form of what an MBA course would teach you instead of the actual facts on the ground.
No. This is not hypothetical. We know all of this pretty well. We don't need "perfectly behaved actors" and perfect information. We have measured the price changes and not found significant effects as compared to the general food economy. The thing that is claimed to have happened and existed by munkus et al simply demonstrably not happen. And were not the result of the market structure.
The problem was that we did not fund the FDA well enough and that we made it significantly harder for other nations to fullfil our shortages when they happen. Not that there were not enough factories.
Given one factory went under and we have not enough supply now, no I would say that there weren’t enough factories.
Like your argument is “our one, single, sort-of redundancy failed, that doesn’t mean that we should have had more factories in case one of them though! We should have just been able to rely on our notoriously crippled regulatory state and imports!”
It’s not a good argument! It’s just looking for ways to excuse the failures of American capitalism and it’s endless drive towards monopolization and shareholder enrichment over societal responsibility
Michigan gets ~15 tornadoes per year. Most normal natural disasters, like a blizzard, would be something resolved within a week, but it's not like the plant is safe from any eventuality. If all your eggs are in one basket you better not need eggs every day.
I would also point out that efficiency is not an unalloyed good to be strived for under every circumstance. It is inherently tied to increased fragility as well, as evidenced by the very circumstance we find ourselves in. Domestic Ag and Commerce policy should inherently weight those factors, since private firms won't, because if there's one place you absolutely want redundancy and resiliency it's in the goddamn food supply for newborns.
For the last few decades, what corporations called "waste" is in actuality what everyone else calls competition. There is no such thing as a perfectly efficient market. There never has been.
It was back under Clinton that this buzzword was used to cover up all the real problems that came with market consolidation with the notion that somehow it made everything work smoother. Smokescreen after smokescreen after smokescreen used to knowingly hide that it was all about divvying up different corners so no one had to compete with anyone else. Micro-monopolies if you will. Where the US went, so went the world. Look at telecom and cable if you need an example. None of those things need be a natural monopoly anymore, we have the technology for it all to be a dumb pipe into the home. But has that happened?
Such has not happened for the same reasons we're staring at the abyss in so many market areas right now. The EU is trying to see what 21st century pro-competition laws look like but they've had no regulatory backup from the US that would help breakdown and breakup Amazon, Google, or Meta in the way they need to be. It would take a legal revolution, like back in the 20s to see the kinds of trust-busting and monopoly/duopoly/oligopoly smashing that needs to happen to stave off the economic stagnation we're staring at.
All opinions are my own and in no way reflect that of my employer.
+11
Options
OrcaAlso known as EspressosaurusWrexRegistered Userregular
Waste is also called "margin", as in "for error" or "for unforseen events".
Not much you can do when a company decides billions in stock buybacks is more important than not killing babies
Well... you could make it harder to do, as one of the big issues with the concept is it is using company funds to directly inflate corporate directors compensation.
But putting any kind of financial responsibility on corporations is sacrilege in our modern capitalism utopia.
Same with political spending. If it's approved at a full shareholder meeting, I might not be as pissy about it as when the board, or some C-class starts using company funds to back specific ponies.
Yes, the board is confirmed by the shareholders, but the lack of transparency from them through the board, to the C-class is pretty opaque.
I get that you're saying the FDA was underfunded, but saying it's the FDA's fault that a private company produced contaminated goods when producing uncontaminated goods is kind of what they're supposed to do is some misallocated blame. It's 100% on the company and its CEO and whoever else made the call to not replace equipment and bought back stock instead.
The main purpose of the regulator is to regulate the behavior of the companies. Failing to do so is a failure on the regulators part. It's also a failure by the company and there's plenty of blame to do around but the failure on the companies part is expected and why regulators are needed.
I would agree if we were talking about, say, some obscure financial transaction. We're talking about a company that produced contaminated formula.
Edit: like, I sell and truck frozen foods. My customers expect me to arrive with
A. Food;
B. Food that is still frozen
It is not on the FDA or DOT if I show up with thawed, spoiled food because the compressor on my truck needed replaced but I went to Tahiti instead.
Like no, literally it is. This is what regulatory environments prevent.
If I came back from Tahiti after three months I would check off a regulatory list and probably need an inspection signed off because my truck was parked. It would have its bi-annual DOT food safe inspections, and have the paperwork that shows my freezer was checked and certified within the past six months.
Now if someone was fraudulently filling out paperwork and checklists, and the inspectors and people responsible for making sure they are doing things right mess up or arent doing their job and just rubber stamp things there might be a failure state, but it should not get far enough people die.
It is on the FDA or DOT or whomever if you are fraudulently and flagrantly not following regulations and people die. It might just be straight up unpreventable one-off situations where shit happens, but systemic neglect should never happen like this in an empowered regulatory environment.
I get that you're saying the FDA was underfunded, but saying it's the FDA's fault that a private company produced contaminated goods when producing uncontaminated goods is kind of what they're supposed to do is some misallocated blame. It's 100% on the company and its CEO and whoever else made the call to not replace equipment and bought back stock instead.
The main purpose of the regulator is to regulate the behavior of the companies. Failing to do so is a failure on the regulators part. It's also a failure by the company and there's plenty of blame to do around but the failure on the companies part is expected and why regulators are needed.
I would agree if we were talking about, say, some obscure financial transaction. We're talking about a company that produced contaminated formula.
Edit: like, I sell and truck frozen foods. My customers expect me to arrive with
A. Food;
B. Food that is still frozen
It is not on the FDA or DOT if I show up with thawed, spoiled food because the compressor on my truck needed replaced but I went to Tahiti instead.
Like no, literally it is. This is what regulatory environments prevent.
If I came back from Tahiti after three months I would check off a regulatory list and probably need an inspection signed off because my truck was parked. It would have its bi-annual DOT food safe inspections, and have the paperwork that shows my freezer was checked and certified within the past six months.
Now if someone was fraudulently filling out paperwork and checklists, and the inspectors and people responsible for making sure they are doing things right mess up or arent doing their job and just rubber stamp things there might be a failure state, but it should not get far enough people die.
It is on the FDA or DOT or whomever if you are fraudulently and flagrantly not following regulations and people die. It might just be straight up unpreventable one-off situations where shit happens, but systemic neglect should never happen like this in an empowered regulatory environment.
Curious, would you therefor say it's on the Police if violent crime happens, or is it on the perpetrator of the crime? Since you can look at all laws as a way of regulating people instead of corporations, I'm genuinely wondering what your viewpoint is here.
Myself I view it as a failure on the part of the company to follow regulations, not on regulators being able to catch them before shit hit the fan. Yes, it's a symptom that those regulating agencies need more resources, but the blame is on the company for breaking the regulations in the first place. Just like crime is (and this is arguable, but for the sake of this metaphor I'll ignore that ACAB and DTP and our society's ills) to blame on those who commit them, not the police.
And while it may seem like an unimportant distinction, blaming the FDA for a private entity's failures does a lot to absolve the private entity, the entity with any real agency in the situation. It lets them off the hook. The lack of resources we've given the FDA is something that needs to be solved, but the blame for breaking the regulations belong with the company.
Death of Rats on
No I don't.
+9
Options
jungleroomxIt's never too many graves, it's always not enough shovelsRegistered Userregular
Large company, small company, monopoly, duopoly, whatever, seems to me that if your factory producing critical goods kills some kids and causes a nationwide shortage because you wanted to do stock buybacks more than you wanted to ensure food safety the plain and just consequences are you go to prison and lose your business.
I think we're in agreement but for different reasons, but I also agree with everything you said.
Baby formula is one of those things that's damn near essential for a nation to continue to survive, and if companies can't get these products out to the people at a reasonable price then the market should be nationalized and run with the intent of baby formula equalling essential care.
Basic human services thrown in with the profit motive always end with those services either being restricted and overpriced for the rich or stripped and made worthless while a few fucking asshole capitalists get rich off of it. Education, medicine, corrections/rehabilitation, all do. And these companies are so worried about their fucking stock prices they're willing to let kids starve to death in order to maintain their shareholder value, then remove their ability to do it.
0
Options
jungleroomxIt's never too many graves, it's always not enough shovelsRegistered Userregular
Or you know make the penalty for running a dangerously unsanitary plant enough that the shareholders notice
Is this even possible in America? Can't they just lobby for a tax writeoff and get it, or raise prices (forcing parents to just pay for it)?
With the shortage markets we've had since COVID, we've seen that competition does not drive down price in highly competitive markets, and instead the way forward to maximize profit is to play chicken with prices as they continue to go up and up, and then establish a new norm. Companies don't want to undercut their competition, because demand is so high their competition can't meet all of it. So they're content with keeping prices inflated.
I get that you're saying the FDA was underfunded, but saying it's the FDA's fault that a private company produced contaminated goods when producing uncontaminated goods is kind of what they're supposed to do is some misallocated blame. It's 100% on the company and its CEO and whoever else made the call to not replace equipment and bought back stock instead.
The main purpose of the regulator is to regulate the behavior of the companies. Failing to do so is a failure on the regulators part. It's also a failure by the company and there's plenty of blame to do around but the failure on the companies part is expected and why regulators are needed.
I would agree if we were talking about, say, some obscure financial transaction. We're talking about a company that produced contaminated formula.
Edit: like, I sell and truck frozen foods. My customers expect me to arrive with
A. Food;
B. Food that is still frozen
It is not on the FDA or DOT if I show up with thawed, spoiled food because the compressor on my truck needed replaced but I went to Tahiti instead.
Like no, literally it is. This is what regulatory environments prevent.
If I came back from Tahiti after three months I would check off a regulatory list and probably need an inspection signed off because my truck was parked. It would have its bi-annual DOT food safe inspections, and have the paperwork that shows my freezer was checked and certified within the past six months.
Now if someone was fraudulently filling out paperwork and checklists, and the inspectors and people responsible for making sure they are doing things right mess up or arent doing their job and just rubber stamp things there might be a failure state, but it should not get far enough people die.
It is on the FDA or DOT or whomever if you are fraudulently and flagrantly not following regulations and people die. It might just be straight up unpreventable one-off situations where shit happens, but systemic neglect should never happen like this in an empowered regulatory environment.
Curious, would you therefor say it's on the Police if violent crime happens, or is it on the perpetrator of the crime? Since you can look at all laws as a way of regulating people instead of corporations, I'm genuinely wondering what your viewpoint is here.
Myself I view it as a failure on the part of the company to follow regulations, not on regulators being able to catch them before shit hit the fan. Yes, it's a symptom that those regulating agencies need more resources, but the blame is on the company for breaking the regulations in the first place. Just like crime is (and this is arguable, but for the sake of this metaphor I'll ignore that ACAB and DTP and our society's ills) to blame on those who commit them, not the police.
And while it may seem like an unimportant distinction, blaming the FDA for a private entity's failures does a lot to absolve the private entity, the entity with any real agency in the situation. It lets them off the hook. The lack of resources we've given the FDA is something that needs to be solved, but the blame for breaking the regulations belong with the company.
Regulatory environments are very different than criminal enforcement. Criminal enforcement is necessarily reactive as people are criminals and them committing crimes is outside any regulatory framework. It's more complex than that but let's simplify you cant regulate some rando from assaulting or robbing someone.
A regulated industry is one where certain standards have to be met to participate and do business. You need inspections, licensing, certifications and documentation. If an auditor shows up- even if they might never actually show up - they have the power to shut you down right now if you arent following regulations.
If other businesses or groups in that regulated space are doing business with you, it is in a framework where you arent some random nobody and you have been certified and met their standards and comply with their certifications.
Now if someone is just doing all the fraud all the time and paying off the people whose job it is to catch the fraud, well it happens sometimes. But usually a good regulatory framework makes getting caught so punishing and the benefits of cheating that badly so bad it's just not worth it.
Making regulatory bodies more powerful works because (most) businesses want to do business, and doing a quick smash and grab in a properly regulated industry just isnt worth the hassle.
Edit - just to be clear, the private entity should be ground to dust and destroyed in this. The FDA absolutely should have the power to make this happen and it's a failure they dont.
I get that you're saying the FDA was underfunded, but saying it's the FDA's fault that a private company produced contaminated goods when producing uncontaminated goods is kind of what they're supposed to do is some misallocated blame. It's 100% on the company and its CEO and whoever else made the call to not replace equipment and bought back stock instead.
The main purpose of the regulator is to regulate the behavior of the companies. Failing to do so is a failure on the regulators part. It's also a failure by the company and there's plenty of blame to do around but the failure on the companies part is expected and why regulators are needed.
I would agree if we were talking about, say, some obscure financial transaction. We're talking about a company that produced contaminated formula.
Edit: like, I sell and truck frozen foods. My customers expect me to arrive with
A. Food;
B. Food that is still frozen
It is not on the FDA or DOT if I show up with thawed, spoiled food because the compressor on my truck needed replaced but I went to Tahiti instead.
Like no, literally it is. This is what regulatory environments prevent.
If I came back from Tahiti after three months I would check off a regulatory list and probably need an inspection signed off because my truck was parked. It would have its bi-annual DOT food safe inspections, and have the paperwork that shows my freezer was checked and certified within the past six months.
Now if someone was fraudulently filling out paperwork and checklists, and the inspectors and people responsible for making sure they are doing things right mess up or arent doing their job and just rubber stamp things there might be a failure state, but it should not get far enough people die.
It is on the FDA or DOT or whomever if you are fraudulently and flagrantly not following regulations and people die. It might just be straight up unpreventable one-off situations where shit happens, but systemic neglect should never happen like this in an empowered regulatory environment.
Curious, would you therefor say it's on the Police if violent crime happens, or is it on the perpetrator of the crime? Since you can look at all laws as a way of regulating people instead of corporations, I'm genuinely wondering what your viewpoint is here.
Myself I view it as a failure on the part of the company to follow regulations, not on regulators being able to catch them before shit hit the fan. Yes, it's a symptom that those regulating agencies need more resources, but the blame is on the company for breaking the regulations in the first place. Just like crime is (and this is arguable, but for the sake of this metaphor I'll ignore that ACAB and DTP and our society's ills) to blame on those who commit them, not the police.
And while it may seem like an unimportant distinction, blaming the FDA for a private entity's failures does a lot to absolve the private entity, the entity with any real agency in the situation. It lets them off the hook. The lack of resources we've given the FDA is something that needs to be solved, but the blame for breaking the regulations belong with the company.
Regulatory environments are very different than criminal enforcement. Criminal enforcement is necessarily reactive as people are criminals and them committing crimes is outside any regulatory framework. It's more complex than that but let's simplify you cant regulate some rando from assaulting or robbing someone.
A regulated industry is one where certain standards have to be met to participate and do business. You need inspections, licensing, certifications and documentation. If an auditor shows up- even if they might never actually show up - they have the power to shut you down right now if you arent following regulations.
If other businesses or groups in that regulated space are doing business with you, it is in a framework where you arent some random nobody and you have been certified and met their standards and comply with their certifications.
Now if someone is just doing all the fraud all the time and paying off the people whose job it is to catch the fraud, well it happens sometimes. But usually a good regulatory framework makes getting caught so punishing and the benefits of cheating that badly so bad it's just not worth it.
Making regulatory bodies more powerful works because (most) businesses want to do business, and doing a quick smash and grab in a properly regulated industry just isnt worth the hassle.
Edit - just to be clear, the private entity should be ground to dust and destroyed in this. The FDA absolutely should have the power to make this happen and it's a failure they dont.
Fair answer. It was a fairly poorly thought out question considering the structural difference between regulators and law enforcement, as regulators are tasked with entities we are to assume will do the wrong thing for profit if not kept in check, and police are tasked with dealing with people who we are to assume are innocent of crimes. They function differently.
I think the regulatory framework is more 'the minimum they are required to do and can get away with' than the wrong thing for profit. But splitting hairs there. I think most - not all of course - but most people want to follow the rules mostly.
You won't find me disagreeing that we need more regulations and people enforcing them on businesses and cracking down on rich folk trying to skirt them though.
Waste is also called "margin", as in "for error" or "for unforseen events".
The thing is, you don't have to make up that gap with domestic overproduction. You can just use imports. Which is exactly what they are gonna do about the situation. The only reason this didn't happen in the first place like it would for anything else is, at least afaik, because the new Trump-admin-negotiated NAFTA prevented it.
I get that you're saying the FDA was underfunded, but saying it's the FDA's fault that a private company produced contaminated goods when producing uncontaminated goods is kind of what they're supposed to do is some misallocated blame. It's 100% on the company and its CEO and whoever else made the call to not replace equipment and bought back stock instead.
The main purpose of the regulator is to regulate the behavior of the companies. Failing to do so is a failure on the regulators part. It's also a failure by the company and there's plenty of blame to do around but the failure on the companies part is expected and why regulators are needed.
I would agree if we were talking about, say, some obscure financial transaction. We're talking about a company that produced contaminated formula.
Edit: like, I sell and truck frozen foods. My customers expect me to arrive with
A. Food;
B. Food that is still frozen
It is not on the FDA or DOT if I show up with thawed, spoiled food because the compressor on my truck needed replaced but I went to Tahiti instead.
Like no, literally it is. This is what regulatory environments prevent.
If I came back from Tahiti after three months I would check off a regulatory list and probably need an inspection signed off because my truck was parked. It would have its bi-annual DOT food safe inspections, and have the paperwork that shows my freezer was checked and certified within the past six months.
Now if someone was fraudulently filling out paperwork and checklists, and the inspectors and people responsible for making sure they are doing things right mess up or arent doing their job and just rubber stamp things there might be a failure state, but it should not get far enough people die.
It is on the FDA or DOT or whomever if you are fraudulently and flagrantly not following regulations and people die. It might just be straight up unpreventable one-off situations where shit happens, but systemic neglect should never happen like this in an empowered regulatory environment.
Curious, would you therefor say it's on the Police if violent crime happens, or is it on the perpetrator of the crime? Since you can look at all laws as a way of regulating people instead of corporations, I'm genuinely wondering what your viewpoint is here.
Myself I view it as a failure on the part of the company to follow regulations, not on regulators being able to catch them before shit hit the fan. Yes, it's a symptom that those regulating agencies need more resources, but the blame is on the company for breaking the regulations in the first place. Just like crime is (and this is arguable, but for the sake of this metaphor I'll ignore that ACAB and DTP and our society's ills) to blame on those who commit them, not the police.
And while it may seem like an unimportant distinction, blaming the FDA for a private entity's failures does a lot to absolve the private entity, the entity with any real agency in the situation. It lets them off the hook. The lack of resources we've given the FDA is something that needs to be solved, but the blame for breaking the regulations belong with the company.
The problem I think is that you are conflating different kinds of failure. The company is at fault for violating regulations/breaking the law/etc. But from a "where did the failure in the system occur that allowed this violation to happen so we can prevent it from happening again" framework, it can be a failure of the regulations or the regulating entities. And so the solution is to make the regulatory framework better. Through better regulation or more scrutiny or harsher punishments for violations or what not.
It's not about blaming the FDA in the sense that they are morally responsible or something, it's about saying the failure in the system was a lack of FDA inspections and so that's the thing that should be fixed.
I prefer Shryke's version of blame the inspectors because it points to the actual root cause: our inspectors are underfunded.
But, no, I'm still not willing to give big corporate businesses a pass on being shady as shit and producing sub-par or even deadly product through neglect and pursuit of the almighty dollar just because "The government should have caught them!"
When I think about this problem, the main thing that I see is this: the efficient state of the market is such that formula is produced in One Big Facility, and when you have One Big Facility then that facility is also a Single Point of Failure, and the risks inherent in a SPOF need to be mitigated or addressed. In the past, this risk was mitigated in two ways: 1) FDA inspects the SPOF regularly and has the power to compel the people running it to fix their shit. 2) We can always just buy some from overseas to cover any shutdown periods.
Somehow, our stable genius 4-D chess master of a former POTUS or more likely the thin gruel of nepotism and upward failure that comprised his “staff” gave us a plan that starved the agency responsible for 1) while simultaneously making 2) much harder to do? And then before a functioning adult who knows what “externality” means could get far enough down their list of inherited crises to fix it, the SPOF failed.
My kid needed formula when she was born. It was a medical necessity, not a matter of convenience.
Lots of people need to be headed for prison over this. Just, lots and lots of people. Maybe they can spend their days in backbreaking labor building a mothball-able backup production line for us to use when this happens again.
When I think about this problem, the main thing that I see is this: the efficient state of the market is such that formula is produced in One Big Facility, and when you have One Big Facility then that facility is also a Single Point of Failure, and the risks inherent in a SPOF need to be mitigated or addressed. In the past, this risk was mitigated in two ways: 1) FDA inspects the SPOF regularly and has the power to compel the people running it to fix their shit. 2) We can always just buy some from overseas to cover any shutdown periods.
Somehow, our stable genius 4-D chess master of a former POTUS or more likely the thin gruel of nepotism and upward failure that comprised his “staff” gave us a plan that starved the agency responsible for 1) while simultaneously making 2) much harder to do? And then before a functioning adult who knows what “externality” means could get far enough down their list of inherited crises to fix it, the SPOF failed.
My kid needed formula when she was born. It was a medical necessity, not a matter of convenience.
Lots of people need to be headed for prison over this. Just, lots and lots of people. Maybe they can spend their days in backbreaking labor building a mothball-able backup production line for us to use when this happens again.
I'd argue that running more facilities and just not having a single point of failure is important. I suspect a large part of the costs are up-front costs - it's more efficient to build a single big facility, but not necessarily to run it (that is, having 10 lines in one building or 10 split between 2 has similar operating costs. And also may actually save money due to distribution costs if they're on opposite sides of the country).
Which isn't to say the other things aren't also critical issues. Just that a single point of failure is a bad idea and I don't think it's actually saving money anyways. Concentration of production lines is parallel to the general issues with unchecked mergers I think, related but not quite the same? Or maybe just less visible mergers with how food production works and plants may produce for multiple companies.
I prefer Shryke's version of blame the inspectors because it points to the actual root cause: our inspectors are underfunded.
But, no, I'm still not willing to give big corporate businesses a pass on being shady as shit and producing sub-par or even deadly product through neglect and pursuit of the almighty dollar just because "The government should have caught them!"
No one is giving them a pass though. I don't know where the hell this idea is coming from. No one has ever said give the company a pass.
The whole point is that the way you stop businesses from being shitty is by regulating them. That's how you catch them being shitty and punish them so they stop behaving shitty. From what I've read, the FDA needs more money to better do their job to stop this shit from happening again.
I'm honestly mystified why people are suddenly having such a hard time with this pretty common point that has gone completely unremarked upon in a thousand discussions exactly like this that we've had before.
When I think about this problem, the main thing that I see is this: the efficient state of the market is such that formula is produced in One Big Facility, and when you have One Big Facility then that facility is also a Single Point of Failure, and the risks inherent in a SPOF need to be mitigated or addressed. In the past, this risk was mitigated in two ways: 1) FDA inspects the SPOF regularly and has the power to compel the people running it to fix their shit. 2) We can always just buy some from overseas to cover any shutdown periods.
Somehow, our stable genius 4-D chess master of a former POTUS or more likely the thin gruel of nepotism and upward failure that comprised his “staff” gave us a plan that starved the agency responsible for 1) while simultaneously making 2) much harder to do? And then before a functioning adult who knows what “externality” means could get far enough down their list of inherited crises to fix it, the SPOF failed.
My kid needed formula when she was born. It was a medical necessity, not a matter of convenience.
Lots of people need to be headed for prison over this. Just, lots and lots of people. Maybe they can spend their days in backbreaking labor building a mothball-able backup production line for us to use when this happens again.
The problem here is that a large portion of the people responsible are political actors engaged in political actions that aren't actually illegal in any way.
The people at the company clearly should be punished for this stuff more but in the end the root causes of a lot of this are just bad policy by republicans and conservatives.
I'd argue that running more facilities and just not having a single point of failure is important. I suspect a large part of the costs are up-front costs - it's more efficient to build a single big facility, but not necessarily to run it (that is, having 10 lines in one building or 10 split between 2 has similar operating costs. And also may actually save money due to distribution costs if they're on opposite sides of the country).
Which isn't to say the other things aren't also critical issues. Just that a single point of failure is a bad idea and I don't think it's actually saving money anyways. Concentration of production lines is parallel to the general issues with unchecked mergers I think, related but not quite the same? Or maybe just less visible mergers with how food production works and plants may produce for multiple companies.
It's probably saving money. There's not much reason to think that running two separate facilities is the cheaper option here.
It's not really related to mergers either because this same kind of thing could happen even if more companies were in the market. You could still end up with each of those companies running only one facility because it's cheaper then each company having multiple facilities and producing less at each.
shryke on
0
Options
FencingsaxIt is difficult to get a man to understand, when his salary depends upon his not understandingGNU Terry PratchettRegistered Userregular
For those advocating that the FDA should have the power to compel the factory owners to follow regulations, they do. Hence the recall and closure.
I'd argue that running more facilities and just not having a single point of failure is important. I suspect a large part of the costs are up-front costs - it's more efficient to build a single big facility, but not necessarily to run it (that is, having 10 lines in one building or 10 split between 2 has similar operating costs. And also may actually save money due to distribution costs if they're on opposite sides of the country).
Which isn't to say the other things aren't also critical issues. Just that a single point of failure is a bad idea and I don't think it's actually saving money anyways. Concentration of production lines is parallel to the general issues with unchecked mergers I think, related but not quite the same? Or maybe just less visible mergers with how food production works and plants may produce for multiple companies.
It's probably saving money. There's not much reason to think that running two separate facilities is the cheaper option here.
It's not really related to mergers either because this same kind of thing could happen even if more companies were in the market. You could still end up with each of those companies running only one facility because it's cheaper then each company having multiple facilities and producing less at each.
The likelihood that all of them would simultaneously contaminate their product, or get hit by some black swan outage at the same time is vanishingly smaller than something going wrong in a single place, though. If you have more providers the overall market/ system is better able to absorb shocks (like gross negligence) by ramping up production in the other, unaffected facilities. One plant getting shutdown just should not be capable of resulting in ~40% of formula being out of stock. That it does is a systems design failure that needs more than just extra inspections to address.
Again, what if this wasn't something as relatively easily fixable as a bacterial contamination that requires disinfecting the whole place but keeps the production capacity otherwise viable? What if a fire burned the place down?
I prefer Shryke's version of blame the inspectors because it points to the actual root cause: our inspectors are underfunded.
But, no, I'm still not willing to give big corporate businesses a pass on being shady as shit and producing sub-par or even deadly product through neglect and pursuit of the almighty dollar just because "The government should have caught them!"
No one is giving them a pass though. I don't know where the hell this idea is coming from. No one has ever said give the company a pass.
Agree to disagree. The past page and a half was a lot of carrying water and well yes but.
At the risk of introducing thread drift in the process of trying to correct perceived thread drift:
It seems to me that there’s room to say “in the system under which these decisions were made, it’s logical (or even, it’s the inevitable mathematical conclusion) that if One Big Facility is the most cost-efficient way to serve this market, that’s what we will get” without saying that’s Good, Actually or that the people entrusted with running that One Big Facility should not be prosecuted and jailed for running it so ineptly and so on the cheap that it had to be shut down before more kids’ lives were endangered by the entirely preventable bacterial infestation therein.
However (and here comes the triple-axel into Ice Lambada where I try to wrench the thread back onto the tracks, get your popcorn ready) whether you think that “market capitalism exists as the organizing principle of American industry and this is one of the many consequences thereof” counts as carrying water for the rich man or not, undoing market capitalism is not within the remit of the 117th Congress.
What is in their remit is dealing with the unfolding catastrophe in front of us, and the choices on offer in that regard are the bill which passed, seeking to address the issue by re-funding the FDA to regulate the capitalists (alongside action from the Executive to speed up sourcing non-cronobacter’d formula from elsewhere to cover the shortage), or a bunch of other bills that, at the sort of glance you might give the underside of a rock to confirm that yes, things wriggle down there, seem to be mostly concerned with making sure that The Poors don’t accidentally get to have their children not starve now that we have a famine going.
Of those two choices, I definitely prefer the one we got. I wonder if Congress is up to anything else, now that they’ve done what they’ve given themselves leave to do about this shitshow?
Posts
It is now, thanks to Bork. Prior to our current Borked era, DOJ would challenge any merger in a highly concentrated market, a market with four firms controlling ~75% of market share, if that merger resulted in a combined 8% market share for the merging firms.
https://www.justice.gov/archives/atr/1968-merger-guidelines
No, I am proposing breaking up multiple companies, and not because of the number of factories under their nameplate but because the four of them have combined control over nearly 90% of market share between them. Which is too highly concentrated to be accurately called a market.
Baby food formula inflation is almost exactly the same as all food inflation (minus this year but as we know things have happened this year)
Stock buybacks are almost certainly related to other things and not the structure of the baby food market. The baby formula market has been highly concentrated for about as long as it has existed. And if your number of 4 companies controlling 90% is correct is less concentrated than it was in the 80's.
Goum I feel like part of the problem here is you approach this shit like it’s a textbook hypothetical, and only in the realm of perfectly behaved actors and perfect information as presented in a textbook hypothetical, instead of the messy reality of how capitalist structures actually work in practice today.
You’re arguing from the position of an ideal instead of the actual reality of a corrupt system where profit and power are placed at the forefront of corporate decision making (see for example the company using its profits on stock buybacks instead of replacing machinery that desperately needed replacing, which lead to the culturating of cronobacter that got into the finished formula, etc.).
That’s why Munkus is finding your argument obtuse; you seem to want to fall back on the idealized form of what an MBA course would teach you instead of the actual facts on the ground.
But what if... bear with me now... the cows that produced the basics for the formula produced by these companies, were... spherical?
Also, frictionless, in a vaccum.
The podcast had to be months ago because I’m backlogged to hell and back but listening to Waypoint I think one of the hosts made the same point about a lot of economists flailing with everything happening in recent years because they’re being trained to work with the perfect information given to them in hypotheticals in class, and then going into the real world with the same level of confidence that they assuredly know everything there is to know about the economic situations they find themselves studying and that perfect information just ain’t actually there
No. This is not hypothetical. We know all of this pretty well. We don't need "perfectly behaved actors" and perfect information. We have measured the price changes and not found significant effects as compared to the general food economy. The thing that is claimed to have happened and existed by munkus et al simply demonstrably not happen. And were not the result of the market structure.
The problem was that we did not fund the FDA well enough and that we made it significantly harder for other nations to fullfil our shortages when they happen. Not that there were not enough factories.
Given one factory went under and we have not enough supply now, no I would say that there weren’t enough factories.
Like your argument is “our one, single, sort-of redundancy failed, that doesn’t mean that we should have had more factories in case one of them though! We should have just been able to rely on our notoriously crippled regulatory state and imports!”
It’s not a good argument! It’s just looking for ways to excuse the failures of American capitalism and it’s endless drive towards monopolization and shareholder enrichment over societal responsibility
The main purpose of the regulator is to regulate the behavior of the companies. Failing to do so is a failure on the regulators part. It's also a failure by the company and there's plenty of blame to do around but the failure on the companies part is expected and why regulators are needed.
No, I don't generally expect my food to be poison when I buy it. Same way I expect chefs to have washed their hands when dining at a restaurant regardless of whether I'm there with a health inspector. Companies employ their own quality control and quality assurance all the time. Noncompliance is supposed to be an aberration from the norm, not standard operating procedure except when somebody's looking.
Its a failure of the FDA in the sense that it should have been funded enough. But it is not their fault for failing. Its our fault for not funding them.
The point isn't "damn the FDA" the point is that "adding more factories" isn't going to solve the issue. That will just make baby formula more expensive in normal operation. Adding more funding for the FDA is going to solve the issue. (and yes punishment for companies that fail to meet standards as is the mechanism the FDA has to ensure compliance). As well as funding for border inspections (so that other countries can ship baby formula here that meets our standards in the case of local shortages)
I would agree if we were talking about, say, some obscure financial transaction. We're talking about a company that produced contaminated formula.
Edit: like, I sell and truck frozen foods. My customers expect me to arrive with
A. Food;
B. Food that is still frozen
It is not on the FDA or DOT if I show up with thawed, spoiled food because the compressor on my truck needed replaced but I went to Tahiti instead.
Michigan gets ~15 tornadoes per year. Most normal natural disasters, like a blizzard, would be something resolved within a week, but it's not like the plant is safe from any eventuality. If all your eggs are in one basket you better not need eggs every day.
For the last few decades, what corporations called "waste" is in actuality what everyone else calls competition. There is no such thing as a perfectly efficient market. There never has been.
It was back under Clinton that this buzzword was used to cover up all the real problems that came with market consolidation with the notion that somehow it made everything work smoother. Smokescreen after smokescreen after smokescreen used to knowingly hide that it was all about divvying up different corners so no one had to compete with anyone else. Micro-monopolies if you will. Where the US went, so went the world. Look at telecom and cable if you need an example. None of those things need be a natural monopoly anymore, we have the technology for it all to be a dumb pipe into the home. But has that happened?
Such has not happened for the same reasons we're staring at the abyss in so many market areas right now. The EU is trying to see what 21st century pro-competition laws look like but they've had no regulatory backup from the US that would help breakdown and breakup Amazon, Google, or Meta in the way they need to be. It would take a legal revolution, like back in the 20s to see the kinds of trust-busting and monopoly/duopoly/oligopoly smashing that needs to happen to stave off the economic stagnation we're staring at.
Well... you could make it harder to do, as one of the big issues with the concept is it is using company funds to directly inflate corporate directors compensation.
But putting any kind of financial responsibility on corporations is sacrilege in our modern capitalism utopia.
Same with political spending. If it's approved at a full shareholder meeting, I might not be as pissy about it as when the board, or some C-class starts using company funds to back specific ponies.
Yes, the board is confirmed by the shareholders, but the lack of transparency from them through the board, to the C-class is pretty opaque.
Like no, literally it is. This is what regulatory environments prevent.
If I came back from Tahiti after three months I would check off a regulatory list and probably need an inspection signed off because my truck was parked. It would have its bi-annual DOT food safe inspections, and have the paperwork that shows my freezer was checked and certified within the past six months.
Now if someone was fraudulently filling out paperwork and checklists, and the inspectors and people responsible for making sure they are doing things right mess up or arent doing their job and just rubber stamp things there might be a failure state, but it should not get far enough people die.
It is on the FDA or DOT or whomever if you are fraudulently and flagrantly not following regulations and people die. It might just be straight up unpreventable one-off situations where shit happens, but systemic neglect should never happen like this in an empowered regulatory environment.
Curious, would you therefor say it's on the Police if violent crime happens, or is it on the perpetrator of the crime? Since you can look at all laws as a way of regulating people instead of corporations, I'm genuinely wondering what your viewpoint is here.
Myself I view it as a failure on the part of the company to follow regulations, not on regulators being able to catch them before shit hit the fan. Yes, it's a symptom that those regulating agencies need more resources, but the blame is on the company for breaking the regulations in the first place. Just like crime is (and this is arguable, but for the sake of this metaphor I'll ignore that ACAB and DTP and our society's ills) to blame on those who commit them, not the police.
And while it may seem like an unimportant distinction, blaming the FDA for a private entity's failures does a lot to absolve the private entity, the entity with any real agency in the situation. It lets them off the hook. The lack of resources we've given the FDA is something that needs to be solved, but the blame for breaking the regulations belong with the company.
I think we're in agreement but for different reasons, but I also agree with everything you said.
Baby formula is one of those things that's damn near essential for a nation to continue to survive, and if companies can't get these products out to the people at a reasonable price then the market should be nationalized and run with the intent of baby formula equalling essential care.
Basic human services thrown in with the profit motive always end with those services either being restricted and overpriced for the rich or stripped and made worthless while a few fucking asshole capitalists get rich off of it. Education, medicine, corrections/rehabilitation, all do. And these companies are so worried about their fucking stock prices they're willing to let kids starve to death in order to maintain their shareholder value, then remove their ability to do it.
Is this even possible in America? Can't they just lobby for a tax writeoff and get it, or raise prices (forcing parents to just pay for it)?
With the shortage markets we've had since COVID, we've seen that competition does not drive down price in highly competitive markets, and instead the way forward to maximize profit is to play chicken with prices as they continue to go up and up, and then establish a new norm. Companies don't want to undercut their competition, because demand is so high their competition can't meet all of it. So they're content with keeping prices inflated.
Regulatory environments are very different than criminal enforcement. Criminal enforcement is necessarily reactive as people are criminals and them committing crimes is outside any regulatory framework. It's more complex than that but let's simplify you cant regulate some rando from assaulting or robbing someone.
A regulated industry is one where certain standards have to be met to participate and do business. You need inspections, licensing, certifications and documentation. If an auditor shows up- even if they might never actually show up - they have the power to shut you down right now if you arent following regulations.
If other businesses or groups in that regulated space are doing business with you, it is in a framework where you arent some random nobody and you have been certified and met their standards and comply with their certifications.
Now if someone is just doing all the fraud all the time and paying off the people whose job it is to catch the fraud, well it happens sometimes. But usually a good regulatory framework makes getting caught so punishing and the benefits of cheating that badly so bad it's just not worth it.
Making regulatory bodies more powerful works because (most) businesses want to do business, and doing a quick smash and grab in a properly regulated industry just isnt worth the hassle.
Edit - just to be clear, the private entity should be ground to dust and destroyed in this. The FDA absolutely should have the power to make this happen and it's a failure they dont.
Fair answer. It was a fairly poorly thought out question considering the structural difference between regulators and law enforcement, as regulators are tasked with entities we are to assume will do the wrong thing for profit if not kept in check, and police are tasked with dealing with people who we are to assume are innocent of crimes. They function differently.
Makes you wonder why police and correction budgets for 2020 total around $180 billion while total regulatory agencies budgets are close to a third of that at $70 billion. Maybe we should take some of column A and put that towards column B.
You won't find me disagreeing that we need more regulations and people enforcing them on businesses and cracking down on rich folk trying to skirt them though.
The thing is, you don't have to make up that gap with domestic overproduction. You can just use imports. Which is exactly what they are gonna do about the situation. The only reason this didn't happen in the first place like it would for anything else is, at least afaik, because the new Trump-admin-negotiated NAFTA prevented it.
The problem I think is that you are conflating different kinds of failure. The company is at fault for violating regulations/breaking the law/etc. But from a "where did the failure in the system occur that allowed this violation to happen so we can prevent it from happening again" framework, it can be a failure of the regulations or the regulating entities. And so the solution is to make the regulatory framework better. Through better regulation or more scrutiny or harsher punishments for violations or what not.
It's not about blaming the FDA in the sense that they are morally responsible or something, it's about saying the failure in the system was a lack of FDA inspections and so that's the thing that should be fixed.
But, no, I'm still not willing to give big corporate businesses a pass on being shady as shit and producing sub-par or even deadly product through neglect and pursuit of the almighty dollar just because "The government should have caught them!"
Somehow, our stable genius 4-D chess master of a former POTUS or more likely the thin gruel of nepotism and upward failure that comprised his “staff” gave us a plan that starved the agency responsible for 1) while simultaneously making 2) much harder to do? And then before a functioning adult who knows what “externality” means could get far enough down their list of inherited crises to fix it, the SPOF failed.
My kid needed formula when she was born. It was a medical necessity, not a matter of convenience.
Lots of people need to be headed for prison over this. Just, lots and lots of people. Maybe they can spend their days in backbreaking labor building a mothball-able backup production line for us to use when this happens again.
Your Ad Here! Reasonable Rates!
I'd argue that running more facilities and just not having a single point of failure is important. I suspect a large part of the costs are up-front costs - it's more efficient to build a single big facility, but not necessarily to run it (that is, having 10 lines in one building or 10 split between 2 has similar operating costs. And also may actually save money due to distribution costs if they're on opposite sides of the country).
Which isn't to say the other things aren't also critical issues. Just that a single point of failure is a bad idea and I don't think it's actually saving money anyways. Concentration of production lines is parallel to the general issues with unchecked mergers I think, related but not quite the same? Or maybe just less visible mergers with how food production works and plants may produce for multiple companies.
3DS: 0473-8507-2652
Switch: SW-5185-4991-5118
PSN: AbEntropy
No one is giving them a pass though. I don't know where the hell this idea is coming from. No one has ever said give the company a pass.
The whole point is that the way you stop businesses from being shitty is by regulating them. That's how you catch them being shitty and punish them so they stop behaving shitty. From what I've read, the FDA needs more money to better do their job to stop this shit from happening again.
I'm honestly mystified why people are suddenly having such a hard time with this pretty common point that has gone completely unremarked upon in a thousand discussions exactly like this that we've had before.
The problem here is that a large portion of the people responsible are political actors engaged in political actions that aren't actually illegal in any way.
The people at the company clearly should be punished for this stuff more but in the end the root causes of a lot of this are just bad policy by republicans and conservatives.
It's probably saving money. There's not much reason to think that running two separate facilities is the cheaper option here.
It's not really related to mergers either because this same kind of thing could happen even if more companies were in the market. You could still end up with each of those companies running only one facility because it's cheaper then each company having multiple facilities and producing less at each.
The likelihood that all of them would simultaneously contaminate their product, or get hit by some black swan outage at the same time is vanishingly smaller than something going wrong in a single place, though. If you have more providers the overall market/ system is better able to absorb shocks (like gross negligence) by ramping up production in the other, unaffected facilities. One plant getting shutdown just should not be capable of resulting in ~40% of formula being out of stock. That it does is a systems design failure that needs more than just extra inspections to address.
Again, what if this wasn't something as relatively easily fixable as a bacterial contamination that requires disinfecting the whole place but keeps the production capacity otherwise viable? What if a fire burned the place down?
Agree to disagree. The past page and a half was a lot of carrying water and well yes but.
It seems to me that there’s room to say “in the system under which these decisions were made, it’s logical (or even, it’s the inevitable mathematical conclusion) that if One Big Facility is the most cost-efficient way to serve this market, that’s what we will get” without saying that’s Good, Actually or that the people entrusted with running that One Big Facility should not be prosecuted and jailed for running it so ineptly and so on the cheap that it had to be shut down before more kids’ lives were endangered by the entirely preventable bacterial infestation therein.
However (and here comes the triple-axel into Ice Lambada where I try to wrench the thread back onto the tracks, get your popcorn ready) whether you think that “market capitalism exists as the organizing principle of American industry and this is one of the many consequences thereof” counts as carrying water for the rich man or not, undoing market capitalism is not within the remit of the 117th Congress.
What is in their remit is dealing with the unfolding catastrophe in front of us, and the choices on offer in that regard are the bill which passed, seeking to address the issue by re-funding the FDA to regulate the capitalists (alongside action from the Executive to speed up sourcing non-cronobacter’d formula from elsewhere to cover the shortage), or a bunch of other bills that, at the sort of glance you might give the underside of a rock to confirm that yes, things wriggle down there, seem to be mostly concerned with making sure that The Poors don’t accidentally get to have their children not starve now that we have a famine going.
Of those two choices, I definitely prefer the one we got. I wonder if Congress is up to anything else, now that they’ve done what they’ve given themselves leave to do about this shitshow?
Your Ad Here! Reasonable Rates!