Published January 31, 2011
Month: January 2011
Published January 31, 2011
Speculation and Arbitrage on Food Markets
Matt Collin over at Aid Thoughts has a really good post quoting Tim Worstall about arbitrage on food markets:
“OK, so there’s going to be a future shortage of food. That will mean that in the future some people will die from starvation. This is not a desirable outcome.
So, what do we want to happen? We want to pull those future high food prices into the present. Instead of finding out that we’re short 10 million tonnes of grain in 2012 (or 1 million in 2015, or 100 million, whatever and whenever) we’d like people to be aware of this future food shortage. And getting lots of people to do two things.
1) Among consumers, we want people to substitute away from the foods that will be in short supply. Eat potatoes, or polenta, instead of bread or pasta. Cassava instead of rice. We also want people to be a bit more careful about the food they buy: not waste so much of it. A high price now does this.
2) We want farmers to plant more land, also to farm more intensively so they get a larger crop from each acre they do plant. A bit more weeding, a tad more fertilser, this sort of thing. A high price now makes this happen.
So, we want high prices now to reduce consumption and increase production so that we don’t in fact run out of food in the future.
So that people don’t starve to death, right?”
Unfortunately, one of the commenters on the post linked above, who writes under the name Liam, is completely mistaken about the impact of food price volatility when he writes:
“A key question with speculation has to be its affect on volatility. In terms of food prices, volatility is I think the thing everyone can agree on is bad (since both high and low food prices are good for some people).”
I interpret this as a sign that policy makers and the general public are ready for our findings on food price volatility.
(HT: Ryan Briggs via Twitter.)
Published January 30, 2011
On My Nightstand: The Great Stagnation
The Great Stagnation, by Tyler Cowen. Having just read (a year late) John Cassidy’s account of the financial crisis, and having thoroughly enjoyed Cowen’s previous book, I thought I should check out this new book by one of the most interesting minds of our time. Cowen’s thesis is that the American economy has been built on low-hanging fruit — large amounts of good land given away for free by the government, cheap immigrant labor — of which we have now run out, with the result that median income has actually decreased over the past few decades and that, except for the Internet, everyday life is not sensibly different in 2010 than it was in 1985. In this short offering — I see this book more as a long paper than as an actual book — Cowen has the merit of offering possible solutions. One of those solutions is to give scientists more prestige and, in the avowed spirit of Ayn Rand, to encourage young Americans into becoming scientists rather than lawyers, doctors, or investment bankers. Another one is to not demonize those whom we disagree with politically so as to have an actual dialogue. Although The Great Stagnation is so far only available on Kindle at a very low price, I am not sure that this constitutes a paradigm shift in publishing.