The Real Cost of Industry Regulations

In class, we discussed how industries actually benefit from government regulations, because the regulations can serves as barriers to entry, allowing firms to charge a higher price and obtain a larger profit.  We also looked at two common examples of regulated industries, sugar and corn.  

In the article, “Cattle Now Being Fed Cookies and Candies Instead of Real Food,” Anthony Gucciardi shows real effects that market regulations can have on society.  Gucciardi states that “livestock corporations have now begun feeding their cattle super cheap processed foods like cookies, gummy worms, chocolate, fruit loops and a whole list of candies.”

As we discussed in class, sugar prices in the US are twice as much as the world sugar price, due to regulations in the sugar market such as import tariffs, buy-back programs, and many other regulations.  However, even more recently, the corn market is becoming more and more regulated, driving up the price of corn as well.  In addition, there has been increased use of Genetically Modified Organisms (GMOs) or “fake corn” in order to lower the cost of corn production.  Even after studies have shown that consumption of GMOs actually kills livestock, 88% of the corn produced in the United States is a GMO.  However, since the corn market is regulated, firms in the corn industry are able to produce fake corn at a very cheap price, and sell it at a high price.  Many farmers are no longer able to afford to feed their cattle using (fake) corn at this highly regulated price, and therefore have an incentive to turn to other feeding means, including a diet of candy and sugar.  Even with the regulated sugar industry, the cost of using corn for feed is still greater than the cost of using sugar.  By consuming meat that was fed on a diet of not only GMOs but sugar and candy, humans will have to deal with the consequences and deterioration of our health. 

In conclusion, when the government is deciding on industry regulations, they should take the welfare of society into consideration, not just a single industry that is lobbying for the economic rent.  As Gucciardi states “many such individuals are purely looking to increase profits, utilizing ‘anything’ that keeps costs down regardless of the price.”