State Egg Battles

The New York Times ran an article yesterday about the egg battle going on in California.

Here's the issue:

California voters set new standards for hen housing in 2008 when they approved a ballot measure that imposed more generous living conditions for egg layers in their state. When producers complained that the measure created a competitive disadvantage, the Legislature tacked on a law that mandated imported eggs be produced under the same standards.

It's the second action - the legislative prohibition against certain types of eggs coming into California - that has the attorney general of Missouri complaining about an interstate commerce clause violation.  California imports a little less than half the eggs it consumes from other states.  Missouri, in particular, supplies about 540 million eggs a year to California. Thus:

The Missouri attorney general has filed a lawsuit to block the California egg rules, and at least three other states are considering doing the same. The beef and pork lobbies are also lining up against the California rules in an effort to prevent any new restrictions on raising livestock.

The attorney general says: 

“I recognize that the California district courts and the Ninth Circuit have not been particularly friendly to this sort of assertion we’re making here, but I also have confidence that will not be the last word on this analysis,” he said. “The U.S. Supreme Court is unlikely to allow a state to put this type of trade barrier in place in the agricultural arena or any other arena.” 

The briefly article discussed the potential price impacts of the new standards for California citizens.  I wished it would have spend a bit more time talking about consumer demand for "cage free" eggs and the interplay between market outcomes and regulated outcomes.  

The market share for cage free eggs in California was only about 10% and yet Prop 2 (which essentially banned the cages) passed with 63% of the vote.  If the population of shoppers is the same as the population of voters (which it isn't), this would mean about 53% of Californians voted to ban a product they regularly buy.  This "vote-buy" gap is not well understood, and we're working on research now to get a better handle on why and under what conditions it emerges.