The Guardian had a really good article yesterday about the relationship between food prices and political instability, essentially concluding that rising food prices caused by crop shortages could lead to political instability.
So far, so good. I really commend The Guardian on not confusing the impacts of rising food prices with those of food price volatility, as so many are wont to do when discussing food prices. In fact, The Guardian offers the only accurate take on this topic (if only because the phrase “food price volatility” goes unmentioned in the article, but much like one can sin by omission as much as by commission, one can be right by omission as much as by commission), along with NPR senior business editor Marilyn Geewax.
Given recent events on world markets and my interest in in rising food prices and food price volatility, my thoughts have recently led me to think about the political economy implications of rising food prices and food price volatility. I briefly touched upon this at the end of my post on the impact of rising food prices and price volatility on urban households, which I wrote as part of a continuing exchange with my friend Ed Carr.
Based on both theoretical speculation and empirical extrapolation, I believe urban households and poor rural households (i.e., net buyers of food) have the same preferences when it comes to food prices. These households favor low but volatile food prices whereas wealthier rural households (i.e., net sellers of food) favor high but stable food prices. The uprisings in North Africa having started in urban areas, it is definitely likely that food prices may have played a role in fomenting political unrest in Tunisia and in Egypt.
It is much less obvious, however, that the political unrest in Tunisia and Egypt has been caused by food prices than, say, the riots in Algeria at the very beginning of the year, which forced the government to intervene to cut food prices on January 9. In other words, while riots were clearly caused by food prices in Algeria, it looks as though they were caused by several other factors in Tunisia and that the political unrest in Egypt may have been the result of political unrest in Tunisia.
The article in The Guardian notes that
“Richard Ferguson, global head of agriculture at Renaissance Capital, an investment bank specialising in emerging markets, said the problems were likely to spread. ‘Food prices are absolutely core to a lot of these disturbances. If you are 25 years old, with no access to education, no income and live in a politically repressed environment, you are going to be pretty angry when the price of food goes up the way it is.’ He said sharply rising food prices acted ‘as a catalyst’ to foment political unrest, when added to other concerns such as a lack of democracy.”
But this precisely highlights the problem that almost every social scientist grapples with on a daily basis: correlation is not causation. Yes, the uprisings in Tunisia and Egypt occurred as the Food and Agriculture Organization of the United Nations’ food price index was at an all-time high, but one must be careful not to commit the post hoc ergo propter hoc fallacy. Otherwise, one could conclude that high sales of Christmas cards cause Christmas, as one of my econometrics instructors once joked.
The problem with making such causal statements is that we do not observe the counterfactual. In other words, we will never know what would have happened had food prices remained at a relatively low level, so that at best, we can only speculate as to what are the causes of specific events.
Note how, in the above excerpt of the Guardian article, Richard Ferguson says that you can become upset to the point of rioting if you are young, if you are uneducated, if you have no income, if you live in a dictatorship, and if food prices rise sharply. But as the old French proverb says, with enough “ifs,” we could put Paris into a bottle, so it is best to realize that any pronouncement as to whether food prices have caused political uprising in Tunisia and Egypt is mere opinion.
(Illustration: xkcd.)