Bert Kelly, 18 June 1971. Economics Made Easy (Adelaide: Brolga Books, 1982), pp. 5-7, as “Supply and Demand (1).”
With so many of our rural products experiencing market difficulties it has become the conventional wisdom to say that someone ought to make a realistic estimate of the future demand for a product and then the supply should be adjusted to meet this demand.
This sounds so sensible and so simple that you can’t help wondering why it hasn’t been done that way ever since Adam started farming. Let’s take pigs, for example. The market for pigs is fairly good now; there is plenty of surplus feed grain around, and many farmers are anxiously looking round for profitable sidelines. And pigs have the happy knack of being able to rapidly increase in numbers. So things look all set for a rapid increase in the supply of pig meat.
Now sensible people in the industry, seeing this position looming, say to themselves, “It is silly to allow supply to rise quicker than demand, with the result that the pig industry will get into the same mess as other rural industries. For everyone’s sake we will make an estimate of demand and limit production accordingly.”
When I first heard this responsible doctrine expounded I realised that here was an opportunity to not only do good for my farming electors, but also to pick up a few votes in the process. It is not often, since Eccles came on the scene, that I have been able to do both things at once, so I was eager to begin.
It was only after Eccles had made me really think about what was involved that I started to have second thoughts. The first part of the problem, and the easiest, is estimating demand. It is true that the consumption of pig meat fluctuates from year to year. For instance, the figures for each year between 1966 and 1969 are 107,000; 112,000; 119,000; and 130,000 tons respectively. So there is considerable fluctuation in the demand because there has been no limit to the supply of pig meat during this period. The demand for pig meat will fluctuate with the prices of other meats and these will fluctuate with seasonal conditions and these cannot be foretold.
Still, demand can be correctly estimated sometimes, in a rough kind of way. And, after all, if we have more pig meat than we need, we can export it. If we have less than we need, we can eat other meats, so no one will starve. So let’s accept that you can estimate demand.
The next step is to limit production to the demand and this is where your troubles start. From now on, you are dealing not with an industry, but with a lot of farmers who breed or fatten pigs. Your task is to make them produce the estimated quantity of pig meat. So you find out, somehow, what these farmers produced last year. You then look at neat year’s target and allot each farmer an increased or decreased quota. That sounds simple!
But which farmers? Fred used to keep pigs a year or two ago, but not now, so he wouldn’t get a quota, I suppose. He wouldn’t like that and would take it out on me. There would have to be some legal way of stopping him selling pigs. Each farm would have to be registered and the registration would be withdrawn if more than the quota was sold. They couldn’t very well stop Fred producing pigs — after all, he could say that was a decision made by the pigs. But they could stop him selling pigs.
Or could they? I have said before that Fred seems simple but has a way of finding his own way of doing things that people try to stop him doing. If he is anywhere near a State border I suppose he could sell his pigs with impunity. He would have to find someone to buy them but that should not be too hard if the price of pigs was reasonably high. And, after all, I thought that was the idea of the exercise; i.e., to keep the price reasonably high (or even a little higher).
However, let us suppose that Fred is a good boy and doesn’t try to beat the government, though I wouldn’t count on it. But next year let’s say we need more pig meat, because the population has increased. Who gets the increased quota? The people in the industry, of course, they are traditional growers.
This surely means that from now until some time in the indefinite future it is an industry closed to outsiders. But in the pig industry there have been some remarkable technical changes recently. Many of them have been brought about by new people bringing new ideas into the industry. Is this process to stop now? Are there no more technical advances to be made?
Maybe you could overcome part of the last problem by making quotas saleable. This must surely mean that the government would be giving a saleable quota to present growers. This wouldn’t be exactly popular with Fred who would find himself with no quota to sell, and no pigs either. He wouldn’t like that.
So it is not going to be as easy and as popular as I thought. Blast Eccles! I’ll have to think of something else.
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