Profits are a last resort

The article Robert Reich Is Wrong: ‘Corporate Greed’ Isn’t To Blame for Egg Prices by Joe Lancaster (Reason) lays out all of its information, then comes to the wrong conclusion. Once again, people, revenue != profits. A corporation only very grudgingly declares profits. It must pay taxes on profits. Therefore, it looks for every single possible way to squirrel away profits into different parts of the ledger.

The article is about an over 100% increase in the price of eggs from January to December of 2022. My anecdotal source says that it’s more like over 300% in central NY, where people barely have two nickels to rub together in the first place.

Where Robert Reich blames corporate greed, the author says that the explanation is simpler: the avian flu. It’s very clever and good to remember events that are directly related to the production of eggs. Since so many hens had to be killed, there are, necessarily, fewer eggs around. A decrease in supply leads to an increase in price, right? Well, yes, of course, but that’s also corporate greed. It can be both unfettered market forces and corporate greed.

Reich points out that the largest egg-producer in the U.S. declared a 65% year-on-year increase in profits. That profit comes after they’ve set back money to account for their lost hens, and for building up their business again in the coming year. Lancaster acts as if the company would be paying taxes on its profits and then it would reserve money out of those profits in order to make sure that it stays in business, despite having lost a lot of its hens.

That’s not how this works, I’m quite sure. They raised their prices to gouge their customers, who could hardly choose not to buy a staple food. That’s why their profits grew so much. If they’d not gouged their customers, they’d have had about the same profit as in other years. Instead, they took advantage of their monopoly position and the absolute windfall of a devastating avian flu that would have put a smaller company out of business.

Reich’s explanation fits the facts better.