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Category: Policy

Published February 9, 2011

Miscellaneous Food Policy Links

I would love to take the time to discuss each of these items in detail, but Tuesdays are my big teaching day — I teach my section of the core undergraduate micro class for Public Policy Studies majors during lunch, and I teach my law and economics seminar after dinner — and yesterday was the day of the first prelim in my micro class. And today, I am moderating a panel on global agricultural markets at a conference at the Fuqua School of Business, so here goes:

  1. The Food and Agriculture Organization of the United Nations issued a warning that drought in China may considerably reduce the amount of wheat available on world markets. As Krugman notes, it’s not because China is largely autarkic (or self-sufficient) when it comes to wheat that this will not put pressure on the prices of other food staples. After all, various commodities are substitutes for or complements to one another, and prices rarely if ever change in a vacuum.
  2. Speaking of Krugman, I completely agree with him when he says that there is little to no evidence that speculation on food markets caused the current price spike. I am also a skeptic as to whether speculation and arbitrage will solve the world food problem given the transaction costs Krugman mentions. It could very well be, however, that speculation and arbitrage remains the best we can do to attenuate food price fluctuations.
  3. Center for Economic and Policy Research (a liberal, Washington, DC-based think-tank not to be confused with the academic London-based Center Centre for Economic Policy Research) co-director Dean Baker had an excellent, long post about how the Washington Post is systematically confused about the role of the Federal Reserve and its chairman, Ben Bernanke, in causing the food price spike, with thanks to my colleague Don Taylor for orienting me towards this post.
  4. Institute for Development Studies director Lawrence Haddad (whose paper with Alderman et al. I assign to students in my development seminar every fall semester)  had a post on how to make agriculture more helpful in attaining better nutrition for people in developing countries.
  5. From Tom Paulson, an  example of the causal claims I warned against in yesterday’s post on whether food prices caused Tunisia and Egypt.
Published February 7, 2011

Food Prices and Urban Households

Over the past few weeks, I have written extensively about the twin issues of rising food prices and food price volatility.

It all began with this post, in which I explained the difference between rising food prices and food price volatility and which came as a result of people frequently misusing the concept of food price volatility in the media, both mainstream and social.

Continue readingFood Prices and Urban Households
Published February 4, 2011

US Monetary Policy and Rising Food Prices

According to this Wall Street Journal article, the Chairman of the Federal Reserve, Ben Bernanke, says US monetary policy should not be blamed for rising food prices:

“Bernanke said constraints on supply — such as bad weather — along with increased demand are to blame for pushing up prices for food commodities.

Strong growth in emerging economies is moving millions of people from poverty to the middle class, changing their eating habits — “more beef and less grains and so on,” Bernanke said.

The Fed’s policies are aimed at growing the domestic economy and “to address stability in the United States,” he said. For some foreign countries facing high inflation, “their policies have not been such to keep growth and capacity in balance,” he said.

“I think it’s entirely unfair to attribute excess demand in emerging markets to U.S. monetary policy,” Bernanke said. Those nations can use their own monetary policy and adjust exchange rates to deal with their inflation problems, he said.

I tend to agree wholeheartedly with Bernanke, as many developing countries have a bad track record when it comes to managing inflation. That bad track record is often the result of bad monetary policy.

By the way, what the Chairman of the Federal Reserve describes — the fact that consumers in developing countries substitute protein for carbohydrates as income increases — is generally known as Bennett’s Law.