In the 1930s and 40s the Government began regulating a number of agricultural products, including raisins. They began as price stabilization programs, but have ended up being price support programs. Chapter 8W in Colander’s Economics and Microeconomics discusses the history of these programs. As the Economist reports (insert link) the Supreme Court is currently reviewing the raisin program. Raisins were regulated with the 1937 Marketing Agreement in when domestic supply of raisins exceeded world demand. The program is a classic “buy up and store” option shown in Figure 8W-3, except that the government doesn’t buy the raisins. It confiscates them and disposes them by either giving them away in government food programs, through exports, or disposal. Essentially, the government establishes a minimum price. Depending on the elasticity of demand, that confiscation can actually make the raisin producers better off, which I suspect is why the program has lasted as long as it has.
First Published : April 23, 2013