Scale Economies, Scale Externalities: Hog Farming and the Changing American Agricultural Industry
36 Pages Posted: 25 Mar 2015 Last revised: 26 Sep 2015
Date Written: March 23, 2015
Abstract
American agriculture is inexorably concentrating into the hands of a small number of large conglomerates. Expanding farms pursuing scale economies would also normally have to abide by a system of environmental and other laws that would, in theory, require farms to account for negative externalities. If those laws were observed and enforced, they would help strike a balance between the greater profitability and the larger externalities of larger farms. But these laws are not widely observed and not rigorously enforced, upsetting this balance and giving large-scale farms a cost advantage while insulating them from corresponding responsibilities.
Perhaps nowhere in agriculture is this more visible than in the hog industry, which has dramatically transformed itself from one based on small-scale, localized production to one based on large-scale and far-flung production. Ninety-six percent of all hogs raised in the United States are now raised on farms of 1,000 or more hogs. Lax enforcement of environmental laws against large hog farms has allowed them to grow and realize scale economies without accounting for their exponential increase in water and air pollution. The same can be said for state Right-to-Farm laws, which insulate many large hog farms from nuisance lawsuits. Reckless practices in concentrated animal feeding operations contribute to the development of dangerously antibiotic-resistant bacteria and heighten the risk of a transfer of zoonotic diseases to humans, potentially helping to set the stage for next pandemic. Finally, the concentration of hog farming imposes economic costs by reducing competition and by marginalizing small farmers. Large conglomerates should be held to account for these enormous costs, not only because these costs vastly outweigh the productivity benefits, but also because it is important to preserve an industrial capacity to produce food in an alternative manner that generates far fewer and lower costs.
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