Wednesday, June 17, 2015

NY Times Causes Head of Mungowitz to Explode

With thanks to Greg Barkimer, who saw this and knew it was gold. An actual headline, seriously, in the New York Times:

Bird Flu Sends Egg Prices Up, but Slowing Demand Prevents Shortages 

Um....yes.  How economically illiterate would you have to be to write that headline?  Answer:  illiterate enough to work for the New York Times.  

Because this is on the order of "Water:  Still Wet!" or "That Crazy Sun:  Rising in the East Again This Morning."

There can never, NEVER be a shortage if prices are free to adjust.  Because a shortage is insufficient supply at current prices.  Lagniappe:  This was in the "Science" section.  Yes, it was.

(updated to correct typos)

(Update 2:  Ya know.... I'm not so sure. Maybe it's a dumb headline. But maybe it was clever clickbait. The whole thing is a little too pat. If so, well played, NYTimes. You used me like an old toilet seat.)


robert said...

you know that old Sumner saying, never reason from a Bird Flu ...

Angry Alex said...

You gotta realize you're dealing a group of people that spent 4 years in school to learn how to write at a fifth grade level.

MK said...

Huh, what about Peak Whalebone? Didn't you know about the Great Whalebone Crisis of 1903? Uncorseted damsels spilling into the streets!

Anonymous said...

Ironically, outside of elementary economic models, markets can spend some time in disequilibrium. There's lots of junk in the NyTimes article and it would be a good piece to criticize in a college level intro to econ class. But there is some good stuff that Mungowitz seems to have missed. Namely, in the real world, prices are slow to adjust.

Here's the same NYTimes piece and their quote from USDA: "The Agriculture Department also said that there was often a lag between an increase in wholesale prices and one in retail prices, and that retailers may not be passing higher prices on to their customers yet."

If the USDA is correct about the lag in price changes, we should anticipate a shortage.

Limits on the quantity people can buy, like at the texas grocery, are exactly what you would expect to see when prices don't freely adjust, so the USDA appears to be onto something.

Unless there is also a decrease in demand. Maybe egg buyers are worried they can get sick from the eggs that are on supermarket shelves.

I think the article's title can make sense, but I don't think the title's author (probably not the article's author) knows the difference.

Anonymous said...

The headline is a bit remedial but save the article for use in class. There's not much to criticize - credit to the reporter for sticking to facts and observations without applying any strange analysis. It's a great case study in how price signals work.

The store that's limiting sales is making a market based choice. They are not set up to be a high volume distributor and they are choosing the loyalty of their core customer base over a chance at short term higher profits.