Orderly Marketing in Agriculture Revisited

This paper presents a model of economic behavior that explicates the phenomenon known as“orderly marketing,” which was a main objective of the Marketing Orders agricultural programintroduced early in the New Deal. Recent analyses of marketing orders start with an implicitassumption that there is no market failure—thus, that price regulation can cause only deviationsfrom the first-best market solution. However, historical evidence suggests that disorderlymarketing might refer to a kind of market imperfection. In the model presented here, amonopsonist processor sets a price to be paid, and an aggregate quantity to be purchased. Insome states of the world, some farmers are excluded from the market. In other words, nonpricerationing can occur, and changes in consumer expenditure for the final product are absorbedby the processor rather than passed along to the farmer. The classified price and poolingprovisions of federal orders can lead to a Pareto improvement in welfare.