“Shortage” of Dijon Mustard and Supply Chains
When one studies a reported “shortage,” one usually discovers that there is no shortage at all. This is to be expected in a free economy with no price controls and no widespread misguided altruism. Take the case of Dijon mustard (“real mustard,” as I tell my wife), which requires a special kind of brown mustard seeds. A French producer of the mustard, Luc Vandermaesen, is quoted in the Financial Times (“France’s Great Dijon Mustard Crisis,” July 12, 2022):
We didn’t think we would have such a shortage.
Except in this quote, the Financial Times does not use the word “shortage.” There is indeed no shortage. The price of the special seeds have doubled and the price of the mustard has increased by 10% or more but, at these prices, a buyer can find as much as he is willing to pay. Many other newspapers, less economically literate, fell (again!) in the trap of confusing shortage and high prices, including the New York Times, USA Today, et cetera. It’s like if they said “plethora” to describe a price decrease!
Reminder: a shortage in the economic sense is a situation where something is unavailable at any price on the (legal) market.
Temporary local shortages (if we want to call them “shortages”) can happen, usually signaled by longer delivery delays, but freedom to trade should rapidly arbitrage the disequilibrium. Looking at Amazon.fr (the French Amazon) yesterday, I found that many brands are indeed out of stock, but some are available for delivery in about two weeks. On Amazon.com, from which anybody in the world can order if one pays transportation and possibly local customs tariff, many brands of Dijon mustard are available now, but the price of well-known French brand Maille is more than 25% higher than two and a half months ago. (Note that “antitrust” threats and government bullying are often more intense in Europe, as a Wall Street Journal article on Amazon suggests this morning.)
Price adjustments, when they are not forbidden by government (and perhaps sometimes by misplaced altruism or commercial virtue-signaling), is why shortages don’t happen. More generally, so-called problems of the “supply chain,” the current buzzword, cannot be seriously analyzed without factoring in prices.
The most famous (real) shortage in recent history is probably the one that affected cars for ordinary individuals in the Soviet Union (apparatchiks had privileges). A peek at my article:
An oft‐cited example concerns the former Soviet Union and its Eastern European satellites, where not enough cars were produced given demand at the state‐determined prices. Like for most goods, the car shortage was endemic: it took about 10 years for an ordinary citizen to get the car he ordered, with a deposit that could reach 50%.
I note that on free markets,
supply chain problems are solved if consumers are ready to pay for solving them. Otherwise, if consumers are unwilling, there is no supply chain problem.