Economist Writing Every Day

Have you heard the hubbub about eggs? People say that they’re expensive. My wife told me that if she’s going to pay an arm and a leg, then she may as well get the organic, pasture raised eggs. Absolutely. That’s what the substitution effect predicts. As the price ratio of low-quality to high-quality eggs rises, we’re incentivized to consume more of the high-quality version. It has to do with opportunity costs.

Consider a world in which the low-quality eggs cost $2 and the high-quality eggs cost $6 per dozen. Every high-quality egg costs 3 low-quality eggs. You might still choose the high-quality option, but you know that you’re giving up a lot by doing so. Consider the current world where low-quality eggs are priced on par with high-quality eggs. Now, the opportunity cost of consuming the fancy, pasture-raised eggs has fallen. When consuming one high-quality egg costs you one low-quality egg, it’s much easier to opt for the high-quality version. You’re not giving up as much when you purchase it.

For vegetarians, the recent price swing has probably been rough. Not eating meat, they’re facing the price squeeze more so than their omnivorous counterparts. Through the magic of math, median wages, and average retail prices, the figure below charts the affordability of eggs and dairy products.* The median person has been facing falling egg affordability for two decades. Indeed, it’s only been the past few years, punctuated by the Covid crisis, that consumers experienced more affordable eggs.

Dairy products, however, have become much more affordable. The median American can now afford 50% more of their namesake cheese. Further, we can afford 20-25% more whole milk and cheddar cheese. So, the vegetarians are not so poorly off after all.

But how do meatier sources of protein compare?

Above is the comparable figure for a variety of meats purchased at the retail counter. Throughout most of the past two decades, chicken has been about 10% more affordable, ham has varied around a constant affordability, and porkchops have become 40% more affordable. Not all pork is more affordable, however. Bacon is about 25% less affordable than it was twenty years ago. Beef especially is less affordable. Beef roast, steak, and ground beef are 20%, 25%, and 40% less affordable than they were historically. Meat-eaters with diverse diets should find themselves eating more porkchops and chicken than they used to.

Consumers should take some solace, however. The increasing affordability of dairy products, porkchops, and chicken is a secular trend that far precedes the 2020 pandemic. However, the galloping inflation of beef and bacon has also been a long-term pattern. These trends reflect underlying differences in productivity and probably won’t reverse soon.

And then there’s eggs. Egg prices have been the most volatile over the entire twenty-year period. Prices were rising fast from 2000-2015, but there was a substantial reprieve until 2022 when affordability cratered. The current egg affordability is on trend with the long run price increases. What was the cause of the falling prices of the past six years? I don’t know. But the low prices were exceptional in contrast to the prior 15 years of rising prices. 2015 is the last time that eggs were similarly unaffordable, also due to a spat of avian flu. So, we’ll probably see some relief later this year, but don’t be surprised if prices remain much more elevated than they were a year ago.

*The percent change in national median weekly wages divided by the retail prices.