The Efficiency of the Milk Business

The most striking thing to me about this article on 75-year old milk industry regulations is that they turn standard economics on its head. In most industries, "vertical integration" is on the outs. Rather than trying to control the entire stack of production from raw materials to end-consumer delivery, most businesses these days focus on a particular slice of the production process and rely on vendors/partners to do the rest. A machine manufacturer rarely smelts his own iron nor has a fleet of trucks delivering the finish product to hardware stores. They purchase parts from suppliers and rely on distributors to get the products into stores.

In the world of perverse regulatory incentives, though, the vertical approach works, but only because it allows an end run around the stifling regulations.

Thanks to The Stalwart for the link.