“While prices of many agricultural commodities have soared, farmers received just 7.49 cents for a pound of onions in April, down from 29.9 cents a year ago, in part due to a big harvest. Futures trading in onions — unlike other farm goods — is banned, which prevents the pungent bulb from being used as an investment vehicle.”
The syllogism apparently goes:
- The price of staple crops has risen sharply while the price of onions has plummeted over the past 12 months; and
- Speculation is allowed for staple crops, but not for onions; so
- The link from speculation to rising prices has got to be causal, right?
Now hold on there, Aristotle.
Not only is the author of the above quoted paragraph wrong to mistake correlation for causation, I wonder if it has ever occurred to him to look up the definition of “complementary good.”
Onions are complements to food staples, which means that they are typically consumed along with — and not instead of — staples. Ultimately, this means that the price of onions will typically move in a direction that is opposite to that of staples. And that is a much credible explanation than the absence of speculation on onion markets.