Administered prices for exported farm produce; an examination of the conceptual basis of pricing schemes for primary produce, with particular reference to the dairy industry

Abstract

1.1 EXTERNAL INSTABILITY AND REMEDIES 1.11 Market Fluctuations During the last thirty years many countries have found it necessary to protect their primary producers against income fluctuations arising from market instabilities, partly for the sake of the individual producers and partly in order to prevent these income fluctuations from inducing instability in the economy as a whole. The administrative measures by which this protection has been provided have suffered in the past, in New Zealand as elsewhere, from some confusion of objectives and from varying degrees of neglect of the long run economic effects of such schemes. In what follows we shall be concerned with the conceptual basis of pricing schemes, with particular reference to the New Zealand dairy industry, in an attempt to disentangle the various objectives and to determine some system of priorities, and hence to formulate some criteria which it is believed pricing schemes for primary exports should satisfy. In our preoccupation with the internal pricing mechanism it is not to be supposed that we are attempting to provide a complete solution to New Zealand's trade problems, still less to provide a substitute for direct negotiations or other efforts to maintain and develop overseas markets: we are instead concerned to show that the internal pricing mechanism has a function to perform that is complementary to such efforts; that this function is an indispensable one, whatever the arrangements we are able to make overseas; and that if this function is to be efficiently performed we shall need to be rather more careful about how we tinker with the pricing mechanism than we have been in the past.