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« Dr. Dan D'Amico | Main | Rushing to War, Part Two »


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One important aspect of the problem's source was demonstrated on NPR’s Diane Rehm’s April 16th show. When the topic of Haiti’s current food shortages was discussed none of the guest took note of the irony of the Haitian governments refusal to reduce the tariff on food imports (they need the money), while calling for local business to reduce prices. While there are some temporary local shortages in food, the drought in Australia has had some impact, the primary problem is one of a distribution and price system disrupted by governments, not overall world food shortages.

Good post, I commented on a similar story here yesterday:

A German minister blamed the food enterprises ( I think he especially means the US-American ones) for thinking just about profit and not about the wellbeing of the people around. And as a solution he proposed a Renaissances of traditional small farmer businesses. When reading the message I thought: Ok, the strive for profit is actually nothing bad, and this is what brings the food on the shelves (just as the above mentioned quote of Smith suggests). But maybe I am just too brainwashed by my Economics study :)

For more Information for German speakers:

On the economic literacy of the populace, what about monitoring the content of high school and junior college texts - not just in economics but history courses as well? Not just to monitor of course but to make a fuss if the content does not meet reasonable standards. Cyberspace has provided the medium to get maximum exposure of bad texts and misleading course contents.

I saw Jeff Sachs on CNN while buying coffee and then couldn't find the interview on He's been talking to the anchor about the food crisis and what stuck with me was that they said that the prices of African farmers were too low and so they couldn't produce enough. I kept wondering why they couldn't raise them!

I have a feeling that price controls - and not just tariffs but straight up controls - have something to do with the worst bits of this crisis.

But, maybe I misunderstood the discussion, since I could not track down the details.

Sean Corrigan addresses this issue over at Mises:

There is usually something useful going on under the umbrella of the Mercatus Centre, havn't had time to check lately

The Economist ran an article about the current situation, and while parts of the article are the same calls for equality its the end of the analysis that hits the nail right on the head: trade liberalization.


Organizations reviewing textbooks for their market friendliness existed once upon a time during the 50's and 60's One most notable reviewers was Rose Wilder Lane. There were also a coalition of professors from Yale at the time that were part of it with loose ties to the Republican Party. I did some research on these groups last year but it's all very fuzzy info and hard to find. I have no idea why this stopped.

The food price crisis is a very serious situation that has many ramifications.

First, it should be noted that not only food staples such as rice or corn, but practically all commodities have experienced massive price increases in the last four years (oil, gold, copper). This is recognized by the last IMF WEO (chapter 5). That alone should discard any "supply crisis" hypothesis -as supply crisis are almost always sector-specific, except in wartime.

Then we have demand explanations. Demand from emerging Asia is a plausible explanation for part of the increases, but not for the massive and correlated spikes in most commodities -particularly since last year. Asian growth has been strong, but has not overshot last year -other factors, however, have changed over the last two years -I'll turn to them later.

So much for 'natural' market factors.

The first major government factor is recent US biofuel mandatory quotas and subsidies, combined with import restrictions for foreign biofuels, that have dragged up food prices. Worse still, the EU has announced that it will copy this absurd scheme. But that cannot explain the surge in oil or metals prices.

The final and most plausible factor is the overabundance of 'liquidity' (i.e. money and credit). Liquidity has migrated from other formerly exuberant markets (especially the financial market and housing) to commodities markets as they gathered momentum -using them also as an inflation hedge, as there are negative real interest rates and heightened inflation expectations at present.

All in all, it is very likely all a question of the monetary transmission mechanism. Hayek explained that inflation is not linear -in all sectors at the same time-. Inflation is transmitted from one sector to the other (with some sectors temporarily overshooting and the relative price structure altered), depending on where the newly created money or credit is spent (something that is very unpredictable). At present, even Chinese and Asian demand is a part of this mechanism -as the Chinese and others are importing US expansionary monetary policies through their exchange rate regimes.

Some Austrians are pointing some of this out, but, surprisingly, not that many.

Vedran, the monitoring of textbooks probably stopped in the 50s and 60s because there was no cheap and effective way to keep the information on public record and disseminate it widely like we can do now with websites and the blogosphere. The exercise was done for the two major school texts in economics in each state of Australia circa 1988 but was not repeated probably for that reason. The survey found that Keynes was still billed as a genius of 20th century, the Soviet economy was growing nicely etc. Not uniformly bad across all the texts, but you get the idea!

PS Conservative political parties are not interested in that kind of information because their time frames are too short and they don't understand the battle of ideas. That is why Labor (left liberals) are in office in all the states of Australia (by wide margins) and the Commonweath (central) govt as well.

For what it is worth, the conservative/liberal side of politics in Australia was gutted of talent in the 1970s when almost all the young political activists turned resolutely away from the Liberals (conservatives) on account of the draft for Vietnam. Just to show the damage that one bad policy can do! Adding to the rhetoric of the situation, the draft was for 20 year olds who were not even eligible to vote at that time. "Old enough to die but not to vote".

Didn't Adam Smith tell us in The Wealth of Nations that the butcher, the baker and the brewer provides us with our daily meals not due to benevolence but self-interest directed toward mutually beneficial exchange?

Are you insinuating that the world gives a hoot about what Adam Smith has ever said?

What remedy do you have to rectify that situation?

Do nothing. Well, that's a command to the governments of the world. The best way to improve food production is to get government mostly out of genetic alterations to food. This jab is more directed at Europe than anywhere else, and it's also a call for people to wake up and realize that the benefits of genetically altered food exceed the costs. Gosh, I'm not dead yet. "Rather not dead than dying from starvation." That's my motto, and I think that it's pretty much true for everybody.

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