The American Journal of Agricultural Economics just released an interesting new paper entitled “Piecemeal Farm Regulation and the U.S. Commerce Clause” by Colin Carter, Aleks Schaefer, and Daniel Scheitrum. The paper builds off some previous work I’d published with Conner Mullally and Trey Malone about the impacts of California’s animal welfare laws, which require more space for hens, on egg prices. The new paper by Carter, Schaefer, and Scheitrum goes further in answering some important questions. Namely, what impacts have California laws had on consumers and producers in other states?
They write:
“The balance between a state’s power to regulate food production within its borders and the impacts of such governance initiatives on consumers and producers in other states is the subject of intense policy debate. The food movement in America has generated piecemeal state laws that—in effect (and possibly by design)—influence how farms in other states operate. ”
Here’s a summary of their findings.
“Our results indicate that the policy had widespread effects across the U.S. In the months following implementation of AB 1437, wholesale egg prices in the Midwest, Northeast, Southeast, and South Central U.S. experienced a dramatic increase. Since then, prices have continued to trade at a 7¢–10¢ premium over their former long‐term equilibrium. AB 1437 has also increased the share of laying hens housed in California‐compliant enclosures across the U.S and led to increased concentration of out‐of‐state firms shipping eggs to California. Between January 2015–December 2017, California hen housing requirements cost U.S. consumers almost $2.7 billion. The majority of these costs ($1.98 billion) were borne out of state.”
They also found that California’s laws:
“shut many small producers out of the California market and led to more concentrated interstate trade. ”
Of course, some people really value improvements in animal welfare, and there may be “external benefits” that aren’t captured in market prices and transactions. Another externalities, that this paper reveals is that that Californians are imposing higher egg costs on consumers in other states who didn’t vote in their animal welfare referendum. The authors calculate:
“if we evaluate the policy from a U.S.‐wide perspective, the annual per‐capita external value would need to range between $35.61 and $108.57 per capita to be cost effective”
On a couple different occasions attorney generals from other states have tried to sue California over these laws based on arguments that they violated the U.S. Interstate Commerce Clause. The suits have failed, as I understand it, not necessarily on the merits of the case per se but because the courts have decided the attorney generals don’t have “standing” to bring the case because they aren’t egg producers. These issues are unlikely to go away. California recently passed new animal welfare standards that go beyond the space requirements for hens and will ultimately require all hens be cage free. California isn’t alone in passing cage free standards, and other states such as Massachusetts and Washington have similar measures being implemented. Moreover, these issues are unlikely to only relate to eggs. GMO labeling standards were going down the same route until a federal policy was ultimately passed. Might we see similar state-by-state regulations on pesticides, labor standards, or preservatives?