Baby Chicks, Gas Lines, and the War on Prices
The 1970s were a strange time, to put it mildly.
Chicken farmers gassed, drowned, and suffocated roughly a million baby chicks. “It’s cheaper to drown ’em than to put ’em down and raise ’em,” one Texas farmer explained. Dairy farmers slaughtered cows. Hog farmers culled breeding stock.
Why did any of this happen? Good old price controls.
This isn’t another “price controls are bad” post. (They are.) But a new paper of mine with Alex Tabarrok and Mark Whitmeyer adds something genuinely new: a theorem explaining why price controls generate exactly this kind of “chaos,” as we call it, and a new way to measure the costs without assuming a demand curve.
Most people, of course, think first about gasoline lines associated with 1970s price controls. I’ve written before about the 1970s gas crisis—odd-even rationing, fights at filling stations, and lines that vanished almost overnight when controls ended. In Maryland and Connecticut, lines stretched for miles. More than 90% of stations in Connecticut and Massachusetts rationed fuel. Some ran out entirely.
What gets less attention is the other side. In Idaho, Montana, Utah, and Wyoming, not a single surveyed station reported any problem, according to AAA survey data presented to President Ford during the crisis. Zero. Texas, the Deep South, and the Great Plains were, as Time magazine put it, “virtually awash with gasoline.”
So why would a 9% national gasoline shortfall produce more than 90% of stations rationing in Connecticut and no shortages in Idaho?
The answer points to the same mechanism that leads farmers to destroy livestock, rather than gradually scale back output. The key to understanding it, as always, is price theory.