Drowned Chickens and Price Controls

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Originally posted on December 4, 2009.


In The Price System we show how even a product as simple as a rose requires the international coordination of flower growers, truck drivers, airlines, Dutch auctioneers and many thousands of others.  In our chapter on Price Ceilings we show what happens when a price ceiling prevents the necessary coordination from occurring.  You can find lots of interesting stories in the chapter of shortages, shrinking quality, misallocation and production chaos.

The second half of the except, The Specter of Stagflation, from The Commanding Heights has a short introduction to the politics and economics of wage and price controls under Nixon.  Students may be amused that it features Ben Stein talking about his father Herb Stein and also has many figures from later administrations such as Dick Cheney and George Schultz.


The video makes several important points.  First, wage and price controls were initially popular with the public.  Second, the law created shortages and ultimately did not solve the problem of inflation.  Most interesting, there is a rather horrifying section showing farmers drowning baby chicks.  In fact, farmers gassed, drowned, or suffocated a million baby chicks at this time.


The video, however, is not clear on exactly why the farmers behaved in this way and this is a good opportunity to see if your class can figure out the answer.  The answer is that the price of chickens was controlled but the price of grain used to feed chicks was not.  A rising feed price and a fixed chicken price meant that feeding chicks to sell chickens was no longer profitable.  Thus, farmers drowned their chicks and shortages of chicken become common.


An article from 1973 in Time magazine notes the same process worked in other areas, “Other farmers sent pregnant sows to the slaughterhouse and dispatched old milk cows to hamburger heaven.”

The article from Time also illustrates how one intervention in the price system often snowballs into further interventions.  In this case, “To buck up the supply and bring down the price of feed, the Administration clamped a temporary embargo on exports of soybeans and cottonseed.”

About the Author
Alex Tabarrok is Bartley J. Madden Chair in Economics at the Mercatus Center at George Mason University and director of research for The Independent Institute. Tabarrok is co-author with Tyler Cowen of the popular economics blog, Marginal Revolution. His recent research looks at bounty hunters, judicial incentives and elections, crime control, patent reform, methods to increase the supply of human organs for transplant, and the regulation of pharmaceuticals. He is the editor of the books, Entrepreneurial Economics: Bright Ideas from the Dismal Science; The Voluntary City: Choice, Community, and Civil Society; and Changing the Guard: Private Prisons and The Control of Crime. His papers have appeared in the Journal of Law and Economics, Public Choice, Economic Inquiry, Journal of Health Economics, Journal of Theoretical Politics, The American Law and Economics Review, Kyklos and many other journals. His popular articles have appeared in The New York Times, The Wall Street Journal, and many other magazines and newspapers.