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(Steve Jenkinson For The Globe and Mail)
(Steve Jenkinson For The Globe and Mail)

MP’s dairy theories long past best-before date Add to ...

In what has to be considered this year’s strongest contender for the most ill-informed comment on economics by a Canadian MP, Conservative Brent Rathgeber, in the context of Supply Management, wrote:

“[T]he reality of the dairy sector, for example, does not fit well into microeconomic theory. For one thing, the input costs of a dairy farmer do not always conform to perfectly functioning markets. But the bigger problem is the highly perishable nature of milk and milk products, [which are u]nlike the notional widgets that economists are fond of.”

This is a strange comment, given how common these topics are in microeconomics texts. Imperfect markets appear in every microeconomic principles textbook that a first year undergraduate student would use.

The issue of perishability comes later in the curriculum, but it is quite compatible with microeconomic theory. There is an entire subfield of microeconomics, called yield management, which considers the issue of maximizing profits of a perishable product. Students in business oriented programs often take an entire course on the subject.

Very few real-world markets contain both non-perishable products and have perfect competition in every portion of the supply chain. If microeconomics had nothing to say on these issues it would be of very little use.

If Mr. Rathgeber wishes to know more about what is and is not included in microeconomic theory, all he needs to do is consult a microeconomist. As a microeconomist I would be happy to help, as my Ph.D. thesis is on the issue of pricing perishable products in imperfect markets.

 

Mike Moffatt is an Assistant Professor in the Business, Economics and Public Policy (BEPP) group at the Richard Ivey School of Business.

 

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