Why No Beef Lines? J. Ball

And saying that, our professor again smiles warmly at the class, picks up his scattered notes, and walks slowly out through the open door. @ Jayne B. Ball WHY NO BEEF LINES? OVERALL supplies of gasoline have been about 5%-7% below year-ago levels on a monthly basis. Beef supplies on the other hand, have been running approximately 15% below a year ago. So why are there no beef lines? Jayne Ball is vice president and director of research at the New York Mercantile Exchange where petro leum product futures are traded. This article is reprinted by permission from the September 1979 issue of Commodifies magazine, Cedar Falls, Iowa. The answer is simple: 1. Beef prices are not controlled by the government and were able to rise to a level which effectively re duced demand for beef to balance with the smaller supply. 2. The government does not allo cate supplies of beef so members of the trade in the many states and localities individually were able to secure supplies by raising their bids when necessary to draw beef to even 10 THE FREEMAN January the most inaccessible corner of America.

Higher prices contributed to re duce beef consumption. Some people could not afford beef cuts, while others judged that eating beef was not worth the extra cost relative to alternative meats and poultry. But for those willing to pay the price, beef was and is available. In fact, the only times that beef is dif ficult to obtain is when super markets feature it as a sale item, drawing customers to pick up bar gains. There is a' joke about a woman complaining to a grocer that he charges 10 cents more for his bananas than a competitor down the street. ~~So why don't you buy your bananas there?" asks the grocer. ~~He doesn't have any," answers the woman. To which the grocer replies, ~~When I don't have any, I'll sell them for 10 cents less than he will." The point of this rather unfunny story is that a low price is meaning less if you can't get the goods. Of course, beef is only one kind of meat and some will argue that al ternati ves to petroleum are neither so varied nor so quickly generated as extra broilers or hogs. But that is just a time factor and not a con tradiction to the law of supply and demand.

It's a very elementary fact that low prices stimulate consumption and high prices encourage conserva tion. This is true for every commodi ty, both essential and luxury items. Very few Americans are in the envious position of not having to ask the price of goods or services before making a purchase. Most of us have to budget our money to obtain necessities of life and to, hopefully, have something left for luxuries. As a result of higher gas prices, lower income families may not be able to buy as much, but those that must have gas will budget their resources to get it. If prices rise to a point that makes it difficult for the shopper to justify an extra trip to the super market to buy one or two items forgotten, the trip won't be made. Carpooling will increase substan tially for business, shopping and pleasure. Use of mass transporta tion, where available, will also be greater. In short, conservation would be promoted without,coercive government measures, such as odd!

even gas sales, rationing or other equally ineffective actions. No Instant Solutions Decontrol of oil prices and the abolition of the government alloca tion system will obviously not bring an overnight increase in available supplies of petroleum. There is con siderable lead time necessary to find and develop new sources of energy. The near-term benefits of allow1980 WHY NO BEEF LINES? 11 ing prices to rise to··levels which reflect the balance of supply and demand are the end of gas lines, the voluntary cutbacks in consumption for non-essential purposes and the assurance that gasoline will be avail able for those who must have it, al beit at a higher price. Long-term, decontrol will enhance investment in energy. Downside risks in this industry are great and limits on prices or profits can only discourage the inflow of capital into this vital area. The answer to our energy prob lems may not be oil. The profit mo tive has been responsible for discov ery of many new sources and the better application of known re sources. Some presently known sources of energy could become economically feasible in a free mar ket, and competition would likely Efficient and Voluntary result in improved and cheaper means of refining.

Higher prices for beef increased cattle ranchers' profits. As a result, ranchers are once again building herds, and the outlook for supplies for 1980 is improving. Likewise, the potential for profit can draw capital into the quest to produce more energy in America. But whether the source is oil or some alternative, the answer to our energy problem does not lie in in creased government involvement nor in confiscatory taxation of oil companies. Just as the market adjusts to changing supplies of beef-higher prices in times of scarcity and lower prices in periods of heavier produc tion-so, too, can the free market assure the orderly distribution of energy supplies. i IDEAS ON LIBERTY THE price system has two outstanding features. First, it is by all odds the most efficient system of social organization ever conceived. It makes it possible for huge multitudes to cooperate effectively, multitudes who may hardly know of each other's existence, or whose personal attitudes toward one another may be indifference or hostility. Second, it affords a maximum of individual freedom and a minimum of coercion. And since people can cooperate effectively in production even when their attitudes on other issues are hostile, there is no need for unity and conformity in religion, politics, recreation, and language-or even in patriotism and good will except in the very broadest sense.

W. ALLEN WALLIS, "The Price System"