Food Storage and Welfare

A new article by Karna Basu and Maisy Wong in the latest issue of the Journal of Development Economics offers some interesting results on the effect of storage technology on food consumption:

Predictable annual lean seasons occur in many rural areas, including West Timor in Indonesia. Imperfections in savings and credit markets make it difficult for staple farmers to convert harvest season output into lean season consumption. We conduct a randomized evaluation of a seasonal food storage program and a food credit program. By providing improved ways to transfer assets across seasons, each program functions as a subsidy on lean season consumption. We find that neither program had effects on staple food consumption. The storage program increased non-food consumption. The credit program increased reported income and reduced seasonal gaps in consumption. Our results are consistent with positive income effects through the expansion of budget sets, but suggest that the average household could be close to staple food satiation.

The effects of storage–or lack thereof–can be pretty important to welfare outcomes, and the most important work on the topic has been done by Brian Wright and Jeff Williams. See here for their 2005 magnum opus on the topic; see here and here for their seminal articles which led to the 2005 book–the former deals with the role of storage, the latter with its potential welfare effects.

Is College Worth It? Job Market Hysteresis and Lumpiness in Educational Investments

On a recent Minneapolis-Saint Paul to London-Heathrow flight, I watched the 2014 documentary Ivory Tower. The movie is about the rising cost of attending college in the US,* and what might have caused it. The movie spends some time showing the viewer a number of borderline white-elephant large-scale infrastructure projects (e.g., a new football stadium here, a new climbing wall there, etc.) and speculates that such investments as well as admin bloat (i.e., increases in the number of university staff who are neither faculty nor support staff) have caused the cost of college to rise at a much faster rate than the income of the average US household. Unfortunately, the documentary spends way too much time on Cooper Union’s transition from being tuition-free to charging tuition, and to the occupation of the office of the president of Cooper Union by students who were opposed to the transition.

Because I have an obvious stake in those issues, the documentary made me reflect a great deal about the state of university education in the US. While it is certainly true that in my last job, I often felt more like a GO at a four-year Club Med than as a college professor (something I no longer feel in my current job, thank God), the rising costs of college made me think about a question often posed in the media these days (almost always accompanied with some crappy stock photo of young college graduates in full academic regalia on the day of their graduation), namely “Is college still worth it?” Answers tend to range from a more liberal “Yes, but …” usually followed with “you have to major in something that will be in demand in four years” to a more conservative “No, college is useless, you have to make your own way,” followed by vague mentions of Mark Zuckerberg, Steve Jobs, and Bill Gates (all college dropouts, all billionaires). Continue reading

Food Prices At Their Lowest Level Since 2010

From an article in the Des Moines Register:

World food prices in March fell to their lowest level since 2010 as consumers benefited from a glut of commodities, the United Nations said this week.

The UN Food and Agriculture Organization (FAO) said the food price index, which measures monthly price changes in cereal, dairy, meat, sugar and oilseeds, fell 2.6 points in March to 173.8 points–the lowest since June 2010.

“Overall, except for a pause in October 2014, the index has been falling steadily since April 2014, on account of large global supplies for most commodities included in the index,” the UN said in its monthly report.

There is more here on the FAO’s  webpage dedicated to the food price index:

The FAO Food Price Index averaged 173.8 points in March 2015, down 2.6 points (1.5 percent) from its revised February value and nearly 40 points (18.7 percent) below its level in March 2014. Sugar prices dipped particularly strongly in March, with more modest declines recorded by vegetable oils, cereals and meat. By contrast, dairy values rose for the second consecutive month, departing from the general negative trend that dominated the other commodity markets. Overall, except for a pause in October 2014, the Index has been falling steadily since April 2014, on account of large global supplies for most commodities included in the Index.

As far as I’m concerned, this is good news, because it means more of the world’s poor people are able to afford food, and it also means that the world should see fewer instances of social unrest and food riots.

When I started working on food prices four years ago, everyone was worried about high food prices. Never mind the fact that low food prices are good for consumers and that every single individual in the world is a consumer of food, I give it about six months before the media turns this nonstory into a story and goes nuts about low prices, and how those are a harbinger of doom because some the most inefficient food producers might go out of business.

ht: Janet.