It’s no surprise egg prices are soaring. In October 2024, UMASS – Amherst economist Isabella Weber argued that price controls are needed to keep prices under control and, further, that the controls would not have the negative effects we usually predict, such as shortages, deadweight loss, etc. I responded to her claims here. One of the points I raised was:
Furthermore, since the price being kept artificially low disincentivizes the supply curve from becoming elastic and/or growing, the costs of price ceilings persist longer than they would otherwise.
Four months later, we see this in action. The high prices of eggs are causing people to consider turning to backyard chicken coops or even renting chickens. This is an example of the Second Law of Demand: “Elasticities of demand with respect to price are greater the longer the time after a price change” (Universal Economics by Armen Alchian and William Allen, p 116). In other words, the longer prices remain relatively high, the more people will search out or develop substitutes, making the demand curve more elastic. The same holds true for supply: the longer prices remain relatively high, the more creative people will be to bring supply to the market. When eggs were $0.99 a dozen, it made little sense to have a backyard chicken coop, which has start up costs of thousands of dollars. But, with egg prices pushing the double-digits (a dozen large eggs are selling for $9 at my local store), now the relative price of backyard coops has fallen and people are turning to that alternative. The demand for eggs is becoming more elastic. Same with supply, as we see people with coops selling or giving eggs to their neighbors.
With price controls in place, this process would be much harder. The market is moving toward a solution. Price controls would have slowed this process. Rather than ending shortages and controlling inflation, Weber’s proposal would have just turned the visible costs invisible.
Update: The price of eggs has fallen since I originally wrote this piece. The price of a dozen eggs at my local store is now (as of 3 April) $5.79. However, I will not change the original post because the drop supports the point I am making here.
READER COMMENTS
David Seltzer
Apr 3 2025 at 10:02am
Jon: I’m rather surprised Ms Weber, an economist, would advocate price controls when their deleterious effects have been well documented. Rent controls for example. The principles and properties of supply and demand are drilled into the serious student of economics. To wit. Elasticity and inelasticity of quantity demanded and quantity supplied. You reference DWL. Isn’t that the result the supply curve moving up and to the left? It seems people are pretty good at finding substitutes. Renting chickens…pretty inventive.
Knut P. Heen
Apr 3 2025 at 10:43am
Neither backyard chicken coops nor renting chickens increase the supply of eggs. The problem is too few chickens, not the ownership of the chickens.
I don’t think meat chickens are any good for laying eggs. Otherwise, you could just keep more of those alive.
You have to let the eggs hatch to chickens to increase the future supply of eggs. This implies reducing the supply of eggs now. A high price of eggs now makes it more costly to let the eggs hatch though.
Jon Murphy
Apr 3 2025 at 10:46am
Yes they do. They create additions to storebought eggs, meaning more supply comes to the market, shifting the curve out and to the right
nobody.really
Apr 3 2025 at 12:12pm
Perhaps this is a temporal matter, illustrating that Second Law.
I understand Heen to observe that neither creating backyard chicken coops nor renting chickens causes the supply of egg-laying chickens to increase NOW; it merely re-distributes the existing supply of egg-laying chickens.
Moreover, a drive to increase egg production FOR THE FUTURE would likely result in reducing the supply of eggs available for consumption NOW, as more eggs would be diverted from consumption to the purpose of producing more egg-laying chickens.
Does this suggest a kind of market failure? What if government agents are persuaded that the drop in supply will be brief and that prices will return to normal soon, except that the efforts to develop alternative supplies will prolong the supply drop? In short, is there a role for government agents to try to smooth over panics in the egg market, much as they try to smooth over panics in the banking market?
Jon Murphy
Apr 4 2025 at 6:04am
Yes. Anything dealing with the 2d Law of Demand or Supply is temporal in nature.
Craig
Apr 3 2025 at 12:46pm
In TN happen to have an unused chicken coop in my backyard. Personally I’m not chasing those dollars, but since the surge in prices many have been selling their eggs on the local FB page. Typically I’ve been seeing $3-$4 per dozen and the seller will typically meet you at the well known parking lot of the local IGA. Many of the posts really aren’t for that many either, ie ‘I have two dozen farm fresh eggs’ so I suppose its just a supplemental ‘tax free’ income because I doubt they’re declaring the egg sales on their 1040s.
Warren Platts
Apr 3 2025 at 2:07pm
I built a really cool chicken coop out of maybe 3 pieces of OSB slapped onto a 4×4 shipping pallet. The expensive part was the $25 dollar plexiglass windows I put in there so we could watch each other. Easily put out enough eggs to supply the household. You have to buy the baby chickens from Tractor Supply, yes, but the whole operation can be put into place for perhaps a couple hundred USD.
But of course the real story here isn’t price controls, it was the Biden-era hysterical freak-out over bird flu when the government ordered the killing of most of USA’s chickens. (Notice how the price of chicken meat is actually rather cheap?)
steve
Apr 3 2025 at 10:08pm
Bird flu is highly contagious and death rate for the highly pathogenic form is close to 100%. So if one of your birds gets that flu they are all going to die anyway. The few survivors wont be productive egg layers. If one tests positive you might as well kill them all to prevent spread. Cant see an advantage to just watching them all die. Killing them all right away means the virus can clear out of the environment and you can start back to work. Management of the less pathogenic forms is done state by state but in mine that usually means quarantine.
Steve
Mactoul
Apr 4 2025 at 12:42am
Kennedy Jr is more right than the generality of medical profession that the right way to deal with bird flu is not to cull the birds but to let the flu run through. The birds that survive the infection are, by definition, resistant to the flu and the future stocks can be bred from them and which will be resistant to the flu as well.
The American medical profession has not covered itself in glory in last few decades. Its record is worse than American military’s.
Craig
Apr 4 2025 at 12:10pm
“The few survivors wont be productive egg layers.”
Is that true?
“Management of the less pathogenic forms is done state by state but in mine that usually means quarantine.”
But aren’t the survivors potentially resistant?
Obviously if they don’t produce eggs it doesn’t matter, I suppose?
Ahmed Fares
Apr 3 2025 at 4:07pm
The US needs to limit the size of its egg farms.
This is why Canada has plenty of eggs — and the U.S. doesn’t
Incidentally, the smaller size of Canadian egg farms is due to supply management, which I don’t support. It just turned out to have worked out well in this case.
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