Free Range or Free Markets?

I received the following excellent question from a student:

I like to shop at the farm's market because I buy meat and eggs from local farmers who I've researched and know that they are treating their animals humanely (I really have researched them, I'm not just being sucker or trying to act like I'm a good person because I buy cage free eggs :-). It only costs a little bit more and as a consumer its something that I highly value.

However I find myself conflicted because I do support having a free market (As someone who studies the USSR I'm especially nauseated by the slightest hint of socialism. Also I don't hate corporations, complain about big oil or think that Haliburton is a dirty word), but if I go along with the free market then it is more efficient to stack 10 chickens in a small wire cage where they can't even turn around then treat them humanely. Is there any way to reconcile the free market with factory farming?

To which I respond:

Actually, there is no conflict between wanting a free market and your desire for humane animal treatment. Demand for goods and services is inherently subjective to us all, and your desire for food or products with humane animal treatment is no different from any other consumer's desire for more cupholders in a car, different flavors of ice cream, etc. Suppliers strive to satisfy their consumers preferences, and stacking chickens in tens is only "efficient" because the cost savings outweighs consumer resentment (in the form of reduced sales or lower willingness to pay). If you and others change your preferences enough, then the market "efficient" move will be to add the cost of humane treatment because of the higher willingness to pay for it.

The animal rights issue is an interesting one to think about. I consider it a glorious achievement of capitalism that 1) obesity, not starvation, is correlated with low incomes, a complete about-face from all other times in history; and 2) our wealth and prosperity is so high we would be willing to sacrifice a little bit of it for a improvement in the standard of living for animals.

Anyway, enjoy your free range food without fear that you are interfering with free markets. Free markets allow suppliers to cater to your wants, not to force you to accept society's norms.

Fortunately for me, she asked the easy question with animal rights. There is a lot of interesting positive analysis under different assumptions in this issue. Should animals be counted in the social welfare function? Even those that say yes often disagree on the weights animals should receive relative to humans. Much of the world that is not so well off benefits from the cost-efficient factory farming, and greater preferences for "humane" treatment of animals may translate into very real human suffering if there are significant economies of scale in production. However, that argument is rendered invalid if animals and humans receive equal weight in the social welfare function.