"[Reader question]: 'I just bought a used car from a dealership and it was pretty miserable experience. Why do you think there hasn't been more of a push to allow car manufacturers to sell directly to consumers? It doesn't seem like the car dealership lobby could be thaaat strong (especially compared to home owners associations or other areas of regulatory capture)'
No, it really is that strong.
There’s a very widespread misperception that the biggest companies have the most clout in politics, when actually highly fragmented industries like auto dealers have more clout as a collective. Just a small example is that when congress was putting the Dodd-Frank financial regulation overhaul together, Elizabeth Warren rolled the entire financial services industry and got her Consumer Financial Protection Bureau created. But to round up the votes in congress, she had to swallow an exemption from CFPB oversight for auto loans because the car dealerships had the clout to demand that.
The key to dealership strength is that there’s a dealership owner (or several) in every district, and they are rooted in the local community — often involved in sponsoring sports teams, visible on local television news, and generally playing a major role as a local influencer. People feel sentimental about local businesses. Republicans like free markets but they *love* businessmen, so if businessmen want to back an anti-market policy, Republicans are inclined to agree. Democrats are more skeptical of businessmen but less enthusiastic about markets, so it lands in the same place."
Maybe the political economy around mid-size factory farms is different from that around car dealerships, such that these dynamics don't apply or apply differently. But I would want to better understand the differences. (Is it just that factory farms don't sell directly to consumers? But my hometown had a membrane filter manufacturing plant when I was growing up, and I think it was similarly locally influential.)
Interesting point. In theory, when an industry has many companies there’s an incentive to free ride on the lobbying efforts of others and overall there’s less lobbying. Whereas if an industry has only one company it captures all the benefits of lobbying, so does more of it.
I don’t know much about US auto dealers, but the paper below seems to find that even within that industry, consolidation leads to increased lobbying (if it's within the same state). But what your example may point to is that industry concentration is not the only variable that influences lobbying power (and therefore the returns to effort). It may be that auto dealer lobbying has a free-riding problem, but because they are well placed otherwise to lobby have more incentive to solve the free-rider problem (I’d guess history and the culture of the industry matter a lot).
The animal agriculture industry may have more lobbying advantages than auto dealers – there are many farmers but they are geographically dispersed (and often located in geographies overrepresented in political systems) and there are few ‘integrators’ (these are the chicken companies etc.) so they can better coordinate lobbying efforts. The economic interests of farmers and ‘integrators’ aren’t perfectly aligned, but perhaps the ‘integrators’ partially solve the free-rider problem of having many farmers.
Yeah, I don't know for sure, but my guess is that Yglesias thinks there are diminishing returns to lobbying, so how much of it you can afford to do matters less than how hard it is for legislators to blow you off. And for the latter, "there's one in every district and they're usually one of the most locally influential people" is something like the worst-case scenario.
1. Doesn't seem correct. Any obstruction to a factory farm raises the cost to the company, which raises the cost to society, which decreases consumption.
If consumption falls, but also production moves from more-regulated to less-regulated jurisdictions, that can be bad on net if the latter effect is greater. Why doesn't this follow?
The animal torture isn't done for fun, it's done because it's cheaper. If they wanted to be in the more regulated jurisdiction in the first place, there must have been some profit motive that overrides the downside of the regulation.
That could be something unrelated to welfare regulations, like tariffs or transportation costs. Depending on how the numbers work out, eating the cost of the welfare regulations could be cheaper than eating those costs. If that option goes away, then production moves overseas, prices go up, consumption goes down, but the absence of welfare regulations could still make this net bad.
This is a great post, Martin, with many really important points I hope more advocates consider.
Regarding this:
>a recent paper argues that a broad carbon tax would reduce all meat production
I am extremely doubtful. For years, a decrease in per-capita meat consumption in Germany corresponded to an *increase* in per-capita animal consumption. Actual real-world data to point to, as opposed to theory.
Thanks Matt, I'm a big fan of yours (incl. One Step for Animals and your book with Bruce)
I have a similar sense to you that a broad carbon tax would increase chicken consumption, but I wanted to share a counterpoint. The trends in countries like Germany and the UK are indeed worrying
Looking at animal welfare, agriculture and food systems shift through economics seems like such a massive opportunity. Wondering if the Open Philanthropy team is in touch with/aware of what Andrew Watson of Rethinking Capital is doing re: normative accounting / accounting for reality? Seems like there's alignment to incentivize wiser, more humane farm business. So much more change and climate influence is possible as we boil it down to economics and accounting.
We must strike down the ag-gag laws so that the realities of factory farming are brought to light on a daily basis, which will reduce consumption as people learn of the horrors associated with their meat meal.
Great post, Martin! Decreasing antibiotics may also be bad for animals due to increasing mortality, and therefore the animal-years needed to produce a given quantity of animal-based products. Robert Yaman notes broilers' mortality in the United States (US) has increased since 2012, when "the FDA [Food and Drug Administration] heavily restricted the use of antibiotics in animal agriculture" (https://optimistsbarn.substack.com/p/why-is-the-us-chicken-meat-industry).
I generally agree with this, though Perdue Farms claims their mortality rate is below industry average despite having eliminating antibiotics (they say they compensate with various vaccines, feed additives, and better management practices).
„And consolidation may also make corporate welfare reforms harder to secure — in the US, change has been slower in the heavily concentrated chicken industry than in the more fragmented egg sector.“
Isn’t it possible that other factors are at play that make it harder to implement welfare reforms in the chicken industry?
On a theoretical level, I can only think of arguments suggesting that it should actually be easier to implement welfare reforms in a concentrated industry (unless there’s a monopoly that is completely unresponsive to outside pressure):
1) Just in terms of logistics, it’s easier to put pressure on a few companies than on 10,000 small ones.
2) The more companies there are, the greater the likelihood that one of them will 'specialize' in not implementing any welfare reforms, offering cheaper products and catering to consumers who don’t care about animal welfare. If there are only a few major players, then a significant share of their customer base will care about animal welfare.
So what would be the (theoretical) arguments for why it should be easier to implement welfare reforms in a fragmented industry?
"When an industry is fragmented, it will struggle to coordinate lobbying efforts against legislative welfare reforms."
How sure are we that this is the case? Matt Yglesias argues (https://www.slowboring.com/p/memorial-day-mailbag-070):
"[Reader question]: 'I just bought a used car from a dealership and it was pretty miserable experience. Why do you think there hasn't been more of a push to allow car manufacturers to sell directly to consumers? It doesn't seem like the car dealership lobby could be thaaat strong (especially compared to home owners associations or other areas of regulatory capture)'
No, it really is that strong.
There’s a very widespread misperception that the biggest companies have the most clout in politics, when actually highly fragmented industries like auto dealers have more clout as a collective. Just a small example is that when congress was putting the Dodd-Frank financial regulation overhaul together, Elizabeth Warren rolled the entire financial services industry and got her Consumer Financial Protection Bureau created. But to round up the votes in congress, she had to swallow an exemption from CFPB oversight for auto loans because the car dealerships had the clout to demand that.
The key to dealership strength is that there’s a dealership owner (or several) in every district, and they are rooted in the local community — often involved in sponsoring sports teams, visible on local television news, and generally playing a major role as a local influencer. People feel sentimental about local businesses. Republicans like free markets but they *love* businessmen, so if businessmen want to back an anti-market policy, Republicans are inclined to agree. Democrats are more skeptical of businessmen but less enthusiastic about markets, so it lands in the same place."
Maybe the political economy around mid-size factory farms is different from that around car dealerships, such that these dynamics don't apply or apply differently. But I would want to better understand the differences. (Is it just that factory farms don't sell directly to consumers? But my hometown had a membrane filter manufacturing plant when I was growing up, and I think it was similarly locally influential.)
Interesting point. In theory, when an industry has many companies there’s an incentive to free ride on the lobbying efforts of others and overall there’s less lobbying. Whereas if an industry has only one company it captures all the benefits of lobbying, so does more of it.
I don’t know much about US auto dealers, but the paper below seems to find that even within that industry, consolidation leads to increased lobbying (if it's within the same state). But what your example may point to is that industry concentration is not the only variable that influences lobbying power (and therefore the returns to effort). It may be that auto dealer lobbying has a free-riding problem, but because they are well placed otherwise to lobby have more incentive to solve the free-rider problem (I’d guess history and the culture of the industry matter a lot).
The animal agriculture industry may have more lobbying advantages than auto dealers – there are many farmers but they are geographically dispersed (and often located in geographies overrepresented in political systems) and there are few ‘integrators’ (these are the chicken companies etc.) so they can better coordinate lobbying efforts. The economic interests of farmers and ‘integrators’ aren’t perfectly aligned, but perhaps the ‘integrators’ partially solve the free-rider problem of having many farmers.
https://economics.sas.upenn.edu/system/files/2024-08/Empirical%20Micro%2011142024.pdf
Yeah, I don't know for sure, but my guess is that Yglesias thinks there are diminishing returns to lobbying, so how much of it you can afford to do matters less than how hard it is for legislators to blow you off. And for the latter, "there's one in every district and they're usually one of the most locally influential people" is something like the worst-case scenario.
Made me questions my assumptions on these topics - great article, thank you! 🙌
1. Doesn't seem correct. Any obstruction to a factory farm raises the cost to the company, which raises the cost to society, which decreases consumption.
If consumption falls, but also production moves from more-regulated to less-regulated jurisdictions, that can be bad on net if the latter effect is greater. Why doesn't this follow?
The animal torture isn't done for fun, it's done because it's cheaper. If they wanted to be in the more regulated jurisdiction in the first place, there must have been some profit motive that overrides the downside of the regulation.
That could be something unrelated to welfare regulations, like tariffs or transportation costs. Depending on how the numbers work out, eating the cost of the welfare regulations could be cheaper than eating those costs. If that option goes away, then production moves overseas, prices go up, consumption goes down, but the absence of welfare regulations could still make this net bad.
This is a great post, Martin, with many really important points I hope more advocates consider.
Regarding this:
>a recent paper argues that a broad carbon tax would reduce all meat production
I am extremely doubtful. For years, a decrease in per-capita meat consumption in Germany corresponded to an *increase* in per-capita animal consumption. Actual real-world data to point to, as opposed to theory.
Thanks Matt, I'm a big fan of yours (incl. One Step for Animals and your book with Bruce)
I have a similar sense to you that a broad carbon tax would increase chicken consumption, but I wanted to share a counterpoint. The trends in countries like Germany and the UK are indeed worrying
Thanks for the discussion, Matt and Martin!
Poultry meat supply per capita in Germany decreased 8.80 % (= 1 - 16.37/17.95) from 2010 to 2022, and in the United Kingdom (UK) increased 22.2 % (= 35.15/28.77 - 1) during the same period (https://ourworldindata.org/explorers/global-food?tab=chart&Food=Meat%2C+poultry&Metric=Food+available+for+consumption&Per+Capita=true&Unit=Kilograms+per+year&country=DEU~GBR). I am using 2010 as the baseline because Our World in Data (OWID) says "The FAO apply a methodological change from the year 2010 onwards".
I am not sure I trust FAO's data. The poultry meat supply per capita in the Netherlands is all over the place (even from 2010 on), with increases and decreases of around 50 % over periods of a few years (https://ourworldindata.org/explorers/global-food?tab=chart&country=~NLD&Food=Meat%2C+poultry&Metric=Food+available+for+consumption&Per+Capita=true&Unit=Kilograms+per+year). I will share this with OWID.
Looking at animal welfare, agriculture and food systems shift through economics seems like such a massive opportunity. Wondering if the Open Philanthropy team is in touch with/aware of what Andrew Watson of Rethinking Capital is doing re: normative accounting / accounting for reality? Seems like there's alignment to incentivize wiser, more humane farm business. So much more change and climate influence is possible as we boil it down to economics and accounting.
Here' s a great explainer video via @via lucent / Laurie McGinley just this past week at SXSW. https://www.youtube.com/watch?v=CYlEj0aooJ8&ab_channel=LaurieMcGinley
Thanks for sharing and reminding me how much I love economist Mr. Lusk
Great post. Counter-intuitive that allowing the monopoly could reduce animal suffering.
We must strike down the ag-gag laws so that the realities of factory farming are brought to light on a daily basis, which will reduce consumption as people learn of the horrors associated with their meat meal.
Sorry, a little of track.
https://open.substack.com/pub/abforbes/p/has-our-cruelty-gone-too-far?r=yn8c0&utm_campaign=post&utm_medium=web&showWelcomeOnShare=false
Great post, Martin! Decreasing antibiotics may also be bad for animals due to increasing mortality, and therefore the animal-years needed to produce a given quantity of animal-based products. Robert Yaman notes broilers' mortality in the United States (US) has increased since 2012, when "the FDA [Food and Drug Administration] heavily restricted the use of antibiotics in animal agriculture" (https://optimistsbarn.substack.com/p/why-is-the-us-chicken-meat-industry).
I generally agree with this, though Perdue Farms claims their mortality rate is below industry average despite having eliminating antibiotics (they say they compensate with various vaccines, feed additives, and better management practices).
„And consolidation may also make corporate welfare reforms harder to secure — in the US, change has been slower in the heavily concentrated chicken industry than in the more fragmented egg sector.“
Isn’t it possible that other factors are at play that make it harder to implement welfare reforms in the chicken industry?
On a theoretical level, I can only think of arguments suggesting that it should actually be easier to implement welfare reforms in a concentrated industry (unless there’s a monopoly that is completely unresponsive to outside pressure):
1) Just in terms of logistics, it’s easier to put pressure on a few companies than on 10,000 small ones.
2) The more companies there are, the greater the likelihood that one of them will 'specialize' in not implementing any welfare reforms, offering cheaper products and catering to consumers who don’t care about animal welfare. If there are only a few major players, then a significant share of their customer base will care about animal welfare.
So what would be the (theoretical) arguments for why it should be easier to implement welfare reforms in a fragmented industry?