Let Them Sell Rice

Tyler Cowen argues that restrictions on trade in and sale of agricultural commodities are contributing to the current food crisis. The result of all these various protections and restrictions is to reduce overall production and to create an inefficient market where it's relatively difficult to get goods to where they're needed.

This is all why I find it difficult to get too upset one way or the other about things like CAFTA or the Colombia trade deal. The real gains to be realized from further liberalization of trade at this point have to do with farm stuff that's been kept off the table in all these negotiations.

Comments

The column is very interesting because he notes some of the key players in passing and then moves on. For example, China has restricted rice exports for domestic considerations -- for example, food security. The column does not seem to propose any manner or political justification for preventing, say, China, from doing so.

But since "free trade" is the answer for all problems whether or not it is, the example must be good enough, since it's in The New York Times and the key cases are mentioned in passing in an early paragraph and then ignored.

Posted by El Cid | April 27, 2008 2:04 PM

Why would freer trade necessarily result in lower prices? If I'm own a farm and can get more money selling my grain to some other country than in my own land, I'm gonna sell the grain to some other country. I think this sort of thing (well, with government legislation designed to make sure the countries involved used their "comparative advantage") happened in Ireland once.

Posted by DAS | April 27, 2008 2:14 PM

DAS has it exactly right, as the example of Ireland in the 1840s showed (the large Irish farmers didn't have completely free trade, but they were free to sell within the Empire). Completely free trade can result in a poor country exporting food in time of famine, if the growers can get more money selling that food to rich countries.

The Chinese government is wrong about a lot of things, but they aren't wrong for placing food security above neoliberal "free market" principles.

Posted by Joe Buck | April 27, 2008 2:23 PM

Sorry, food is one of those "in the long run we're all dead" issues that neither farmers nor consumers will ever trust completely to the free market. The status quo is screwed up, but it would probably be more politically sensible to call for different, more rational subsidies and protections than a simple end to all subsidies and protections.

Posted by Consumatopia | April 27, 2008 2:24 PM

Consumatopia, what are you sorry about? Or do you mean sorry in the sense of "I'm sorry that everyone but me is an idiot"?

Posted by Bloix | April 27, 2008 2:30 PM

Gee, here I was thinking that food shortages might be linked to expanding demand in economies like China, the steep rise in the price of oil, and the efforts to substitute ethanol for oil that have gone along with the price increases for energy.

But we'll always have Tyler Cowen. When you're tired of those stuffy 'root cause' explanations, turn to Tyler for your 'inefficient market' explanation- the one-size-fits-all explanation for every problem we'll ever have.

Posted by serial catowner | April 27, 2008 2:40 PM

Alternatively, there's Daniel Davies, noting the role played by the neoliberal deregulation of food markets, in particular, the pressure to reduce strategic grain reserves:

I wonder if, in fifty years' time, people will be writing nasty obituaries of recently dead neoliberals? I almost hope so. It really is hard to see what qualitative difference one might draw between the way in which the World Bank and IMF have fucked around with the food security systems of third world countries in the name of "free markets", and the way in which Stalin and Mao did more or less the same thing in the name of "collectivisation" [...] The great thing about the market mechanism, of course, is that when it kills a million people, it doesn't leave fingerprints.

Then again, Brad DeLong represents about as leftward as economists can lean in the US while remaining 'respectable', and Tyler Cowen gets space in the New York Times in between dining in ethnic restaurants.

Posted by pseudonymous in nc | April 27, 2008 2:40 PM

Ngh blockquote tags. The last graf is mine.

Posted by pseudonymous in nc | April 27, 2008 2:45 PM

I'd like to see someone explain why Malawi's recent decision to abandon the neo-liberal consensus and directly support its own small farmers in food production & distribution -- in which it went from being an indebted food importer to a self-sufficient food exporter -- is so awfully wrong.

Posted by El Cid | April 27, 2008 2:46 PM

DAS and Joe Buck don't seem to understand how free trade works. Rice goes to where the highest price is-if there's a desperate shortage of rice in, say, Thailand, then rice will be priced highest there, and rice will get exported thusly (assuming free trade).
If there's a domestic shortage of rice, then rice will get sold at home.
It's not too hard to understand. Governmental protectionism will only restrict the development of domestic rice producers, by limiting their market abroad.
I suppose theoretically the demand for food could be SO high in other countries that the price of food would be higher there than at home, even while some people are hungry at home...but in that case, the food would be going to solve a much greater starvation crisis than exists at home.
And in any case, with complete free trade, there is so much global capacity to produce food that even poor people should never be priced out of the market.
Of course, this does beg the question as to what we can do to further free trade in food (my guess is 'not much' but at least we can remove our own farm subsidies to encourage development of export markets in lesser developed countries as Cowen suggests).

Posted by jamie | April 27, 2008 2:46 PM

One problem is that in South and East Asia, where quite a lot of people live, there is really no substitute for rice. Without rice, people will not feel that they had a meal. You cannot make-up a shortage of rice with another commodity, wheat or barley. So "securing sufficient supply of rice" is a basic hurdle that a government has to pass. What Tyler proposes is little like outsourcing the military to low bidders, which would save money, improve productivity etc. Except that you cannot outsource national security.

Another issue is that if anything is amenable to "central planning", it is rice production. Wet rice requires investments in making irrigable fields and in water systems, so it is not a simple matter of having one year more rice planted and another, less, dependent on the trade conditions.

What we see is that in the time of mild shortage, "devoted" rice consumers who rely heavily on imports are screwed. This is not a proof that protecting the domestic production, as it is done in Japan and Korea, is wrong. It could be used as an argument to the contrary.

Perhaps the potential of West Africa or some other regions as a rice producer is underdeveloped, and the nature of international rice market is to blame. But this could be perhaps solved better using other tools than market liberalization, e.g. with bilateral partnerships.

I also think that rice problems are so severe because there is also a shortage of rice substitutes, primarily, wheat, that could be acceptable to people in, say, Egypt or Senegal.

Posted by piotr | April 27, 2008 2:59 PM

El Cid,
Your wish is my command. It's not so much that Malawi is wrong, it's just that US ag subsidies essentially price them out of the market...another reason for us to reduce our own subsidies.
see here for some more details.
http://www.latimes.com/news/opinion/la-oe-barber9jan09,0,7680407.story?coll=la-opinion-rightrail
http://africanagriculture.blogspot.com/2007/06/subsidies-market-distortions-why-food.html

Posted by jamie | April 27, 2008 3:03 PM

Perhaps I overgeneralize from my California experiences, but isn't the real issue in growing more rice in the US at any rate one of water resource allocation? Which has precious little to do with the usual free market bleating about agriculture subsidies.

Posted by Gene O'Grady | April 27, 2008 3:08 PM

Jamie,
One: If I live in a foodexporting country the price of rice will be higher, not lower, then it would otherwise have been.

http://rodrik.typepad.com/dani_rodriks_weblog/2008/04/the-free-trade.html

Two: Demand is not the same as need. Demand is want backed up by purchasing power. If people are starving in the slums of Bangkok, that does not mean there is demand for rice, just that there is a need rice. If the world market price is higher than what thai slumdwellers can pay, then rice will be exported. Demand

This is not a new insight, this is all in any god damn basic economics textbook, and Tyler is well aware of that.

And matt, if you are going to write on international trade, go read Rodrik´s blog before pontificating on the great value of free trade in agricultural goods.

Posted by Tomas | April 27, 2008 3:09 PM

Free markets are prone to cabals of speculators manipulating them. Be it a single stock, or an effort to collapse a more broadly traded currency, commodity, financial instrument - or inflate it wildly in a speculative bubble.

Right now, we have too much in the last three or four decades of these cabals at play in junk bonds, mortgage refinance, run on currencies, hedge funds swinging real estate prices, manipulating a stock or a fund sector to screw the little investor, gold&silver bubbles, rice, oil, etc. - for both consumers and producers to have any confidence in the fairness and effeciency of "free markets".

As is "free markets" are now transformed into markets where the consumer pays premiums to wealthy middlemen they didn't before, and producers no longer have their price set by supply and demand but by hedge fund derivatives and cabals fixing producer prices while working to make finished goods swing wildly.

With oil, consumers now pay a "terrorist insurance premium" to fatcats, the "tight refinery supply insurance" to middlemen, the "ethanol premium" to agribiz, the speculative premium to bankers and sovereign wealth funds from San Francisco, through London, Moscow, Tel Aviv over to Tokyo. All on top of the actual price of oil per barrel actually paid to consumers.

Government only appears to make it worse in many aspects. They happily bail out failed speculators with the tax dollars of people now soaked by high oil prices and collapsing home values and a trillion blown in Iraq to help "secure the ME oil reserves" - because the speculators, home lenders, hedge funds are "too important to the markets to let fail, unlike some dumb schlub that put half his retirement savings in Enron." The Cabals are very good at getting government to back the idea that "investor stupidity and poor choices cannot be rewarded unless the fool is big enough."

Rice, corn? Please! There is no true free market anymore...

Posted by Chris Ford | April 27, 2008 3:09 PM

Rice goes to where the highest price is-if there's a desperate shortage of rice in, say, Thailand, then rice will be priced highest there, and rice will get exported thusly (assuming free trade).
If there's a domestic shortage of rice, then rice will get sold at home. - jamie

Assumes people in the area with the desperate shortage of grain have the money to pay the highest price for it. Again, you may wish to learn about something called the Irish Potato famine.

BTW -- the idea that free trade is beneficial built on a theory called "comparative advantage". Who gets to decide what is a country's comparative advantage? When the theory was developed, Britain did. Learn a little about Gandhi and Nehru and homespun. I think there is a movie you might wish to see.

Posted by DAS | April 27, 2008 3:12 PM

piotr-
The reason why in a time of mild shortage reliance on imports fails is because other governments restrict the amount of rice being shipped out. Suggesting that more protectionism is the remedy current protectionism is...well, I can't even think of a sufficiently counterintuitive example. Suffice to say that just because some governments restrict the trade in rice, that's not a reason for every government to do so.
And how on earth is rice analogous to national security? You can always buy rice from other places. It tastes just as good. Relying on mercenaries to protect me does not taste as good.
And why can't rice producers make the investment in irrigation etc.? After all, they plant from year to year. The years that the rice prices are higher can yield profits that can be saved up for future investment in expansion.

Posted by jamie | April 27, 2008 3:14 PM

Tomas and DAS,
The global capacity for food production (assuming a relatively free market) is enough so that even the poorest people can afford rice.
Protectionism raises the price of food globally. Even if governments could temporarily keep the price of rice lower in exporting countries thru regulation preventing exports, they do so at the cost of hurting their own rice producers and their economy. Plus, they starve everyone else. So that's not really cool.
http://www.fao.org/english/newsroom/news/2002/7828-en.html
http://news.scotsman.com/world/Free-trade-can-stop-world.3999431.jp

Posted by jamie | April 27, 2008 3:29 PM

Free markets are prone to cabals of speculators manipulating them. - Chris Ford

While I am sure that Mr. Ford is imagining his cabals to be populated by people of my faith, he does have a point. Markets actually are often a good way of distributing goods and services -- and commodities are no exception. But there is no such thing as a free lunch: in order to have a market, there needs to be a profit motive for people to make trades. And the money for these profits has to come from somewhere ... ultimately it comes from the consumer. Think of it as a "market tax" (of course, you also need police for the market, so you have taxes to pay for those as well).

Of course, if there are more people demanding grain because they wish to buy it up to make a profit later (which speculation is woefully under-reported as conservatives are too busy trying to blame grain shortages on eco-hippies with their biofuel and liberals too eager to blame agribusiness) -- that is less grain going to feed people and hence drives the prices up.

*

Also, Jamie -- again ... for gosh sakes read up on the Irish Potato Famine already ... your response to piotr seems to indicate that you are un-aware that Ireland was exporting grain for the whole course of the famine! Alas, too many people who are so hot on trying to make being a nitwit free-trader the sine qua non of being economically serious (the economics equivalent of "you have to support Cmdr. Codpiece's latest war to be considered serious about national security") seem to not know anything about the natural experients in economics that have occured throughout history.

Imagine if our public health policy were dictated according to 250 year old medical books (and misunderstandings of said books at that -- the "free markets" crowd doesn't even understand Smith right) and the lessons of history and science were ignored in favor of some humoralist theory? Sometimes it seems that our econ policy is being dictated by those with an (mis) understanding of econs stuck in the Enlightenment and based on a "rationalist" theory that is un-experimentally confirmed and produces prescriptions that are counter to historical examples of what works (and are pretty much historically what doesn't work).

Additionally, as Tomas points out, demand is not just about need (in fact, economics -- at the 101 level -- tends to focus on "unlimited wants and limited resources" and not about needs). In order to have demand, you need to be able to pay. One thing that happens is that there is no global medium of exchange (and even if there were, cost of living may differ). In a poor country, where exchange media are scarce (a poor country is poor because it doesn't have much money! duh!), even if the price of rice goes higher and higher because of increased need, it still might not match the price which some rich speculator is able to pay simply to sell it off to some rich country later on. This is not some bizarre occurance as your post seems to indicate, but it goes on all the time.

Posted by DAS | April 27, 2008 3:32 PM

On one level Tyler Cowen is just a smarmy a-hole with a life-time ticket on the 'well-educated' gravy train, and Matt's just a guy who spent too much time in the Quadrangle.

On the other hand, this is a total baseline ignorance of what actually happened, and happens, on the part of Matt and Tyler.

The opening of native economies to more powerful world traders has always been accompanied by famine, as areas that supplied food and raw materials to the indigenous economy are converted to plantations and mines for export. In the 30s more people starved in famines in India than were killed by the Communists in Russia, but this has not happened since India became an independent country.

The 'free trade' policies are in a sense just the updated form of the British or American battleship bombarding the native port and forcing 'entry'. In another sense they've been updated to work against the poor of both countries, and for the international elites of both countries. Our government is eager to form agreements with the gangster government of Colombia, which murders trade unionists, but not so eager to form agreements with Venezuela, which supports unions.

Given the cupidity of the elites administering 'free trade' agreements, it's hardly necessary to add the stupidity of people like Cowen to achieve stunningly bad results. Instead of requiring basic freedoms and protections for workers to form unions, the agreements are used to destroy unions and prohibit nations from protecting their environments or enforcing safety standards.

And this is done so that an apple flying 9,000 miles from New Zealand to Seattle can displace an apple grown in Washington on the store shelf. Maybe the old guys I used to know didn't graduate from Harvard, but they did grow apples in their yards that kept all winter in an unheated basement without refrigeration.

For people like Matt, Cowen will be a more congenial read over Sunday morning coffee, but the simple fact is that the Clinton embrace of the gangsters in Columbia is likely to result in a 'free trade' agreement that, in turn, will result in peasants being murdered and driven from their land so the biggest gangsters can raise beef for export.

Of course, you knew that already. My point is that Matt and Tyler don't. They scored well on standardized tests, but the fact that they now make a good living saying things that people like them want to hear says nothing about how things actually are or ought to be.

Posted by serial catowner | April 27, 2008 3:33 PM

Sorry, I had been ignoring your repeated 'Potato Famine' stuff because it was tiresome and 150 year old example.
Here's what really happened.
http://mises.org/freemarket_detail.aspx?control=88
Now please answer my argument that in a free market global food production capacity is such that even the poorest folk, absent government intervention, could afford food.

Posted by jamie | April 27, 2008 3:37 PM

jamie,

How, besides saying something to the effect of "the Irish Potato famine actually was caused by not enough free trade" does the article prove your point and not mine?

Nu? Global food production capacity is high enough to feed everyone, which seems to be the case (although perhaps not sustainably so). However, how does waving the magic free market wand somehow make everybody able to afford food they cannot currently afford? If I am trading food, I'm gonna sell it to the highest bidder, not to some poor schlub who may need the food more. And markets can also be cornered (as Chris Ford would only be happy to tell you -- I'm sure in his book, though, Gould last name, well, you know ...).

Posted by DAS | April 27, 2008 3:47 PM

jamie: The main point of the linked editorial & Matt's comment had to do with the ability of poor people around the world to obtain food (i.e., rice) and that free trade was the way to address that.

Your response regarding our need to reduce our own agricultural subsidies still does not address the fact that in the exact circumstances in which we find ourselves now, Malawi actually addressed some of the root causes of their food supply troubles by directly helping the small producers.

They are anything but a paradise of good government, but with this set of moves it became more possible for Malawians to produce & buy food.

Had the U.S. completely removed all agricultural subsidies, Malawi would have still been in the position of food insufficiency. Unless somehow they could simply be told to be patient for another few years or decades when theoretical market gains via trade might begin to apply themselves.

Posted by El Cid | April 27, 2008 3:51 PM

Y'know, Jamie, when you provide a link to a web page with a banner reading "Advancing the tradition of liberty in the tradition of the Austrian School," a reader might be inclined to suspect that the content of that page is maybe gonna be a little biased in its outlook.

Posted by James Gary | April 27, 2008 3:54 PM

Another thing this ignores is that farmers are the first to get thrown under the bus in free trade agreements. Witness all the exceptions in trade deals with Asia in order to protect rice farmers in Asia. Farmers in America have learned that you can never trust a free trade agreement, because the government always sells out the farmers first.

Posted by How Insane Is John McCain? | April 27, 2008 3:57 PM

DAS-
you claimed that the Irish potato famine happened because of free trade (or at least that's how joe buck and I interpreted your argument). that article proves the opposite. If there had been more free trade, and less gov't regulation, no potato famine.
The point is that there is SO much capacity to produce food that it can be produced cheaply enough to feed everyone. Rice, in a normal free market, is not that expensive to produce or buy. The same goes for most agricultural products. Government distortion changes that-that's the point of all the articles I was posting.

El Cid-
If you read those articles I posted, you'd realize the problem in Malawi is not a food production shortage (in fact, they're overproducing) it's that they lack export markets. The reason why they lack those export markets is at least in part because of US subsidized crops. Remove subsidies=export markets=prosperity.

And this is my last post for a while, I need to study.

Posted by jamie | April 27, 2008 4:00 PM

ok one more real quick:
Gary-
for sure, they have a bias towards Austrian economics. Feel free to disprove any of the arguments they made.
HowInsane-
are you serious? 'Farmers' get thrown under the bus? You must not be aware of any of the Farm Bills that have been passed in the last 20 years.

Posted by jamie | April 27, 2008 4:03 PM

Re: the example of Ireland in the 1840s showed (the large Irish farmers didn't have completely free trade, but they were free to sell within the Empire).

Unless I am very mistaken, famine-era Ireland was also unable to import cheap grain from abroad (e.g, from the US) during the famine owing to exorbitant tarrifs intended to protect Britain's farmers from competition.

Re: I also think that rice problems are so severe because there is also a shortage of rice substitutes, primarily, wheat, that could be acceptable to people in, say, Egypt or Senegal.

Rice is used in very different ways than most other grains: generally one eats the cooked grain itself, rather than using it as the base for a flour, oil or syrup. That's a big reason why nothing much substitutes for rice. (I do recall reading the millet used to be a major grain staple in ancient China, anyone know if it's still in widespread use?)

Posted by JonF | April 27, 2008 4:07 PM

Since we're on the subject of lazy, overgeneralized introspection on how to contribute to the world's food accessibility needs, might it be relevant to take a look at the huge 3 years study of the International Assessment of Agricultural Knowledge, Science and Technology for Development, made up of 400 scientists, technicians, and other experts?

Reinventing Agriculture
By Stephen Leahy

JOHANNESBURG, Apr 15 (IPS) - The results of a painstaking examination of global agriculture are being formally presented Tuesday with the release of the final report for the International Assessment of Agricultural Science and Technology for Development (IAASTD).

The assessment has explored how agriculture can be reinvented to feed the world's expanding population sustainably in an era of multiple challenges -- not least those presented by climate change and a growing food crisis that has led to outbreaks of violence in a number of developing countries.

The expertise of some 400 scientists and other specialists was tapped for the IAASTD; governments of wealthy and developing nations also contributed to the assessment, along with civil society and the private sector...

...Amongst the 22 findings of the study that chart a new direction for agriculture: a conclusion that the dominant practice of industrial, large-scale agriculture is unsustainable, mainly because of the dependence of such farming on cheap oil, its negative effects on ecosystems -- and growing water scarcity.

Instead, monocultures must be reconsidered in favour of agro-ecosystems that marry food production with ensuring water supplies remain clean, preserving biodiversity, and improving the livelihoods of the poor...

...While global supplies of food are adequate, 850 million people are still hungry and malnourished because they can't get access to or afford the supplies they need, added Herren -- who is also president of the Arlington-based Millennium Institute, a body that undertakes a variety of developmental activities around the world. A focus only on boosting crop yields would not deal with the problems at hand, he said: "We need better quality food in the right places."

http://www.ipsnews.net/news.asp?idnews=41984

And from one of the report summaries itself:

Increased agricultural trade can offer opportunities for the poor. At the same time, growing evidence indicates agricultural trade liberalization to date has not significantly benefited small scale farmers or rural communities in many countries.

Approaches to give small-scale farmers greater opportunity to invest, innovate and to make [Agricultural Knowledge, Science and Technology] effective as a tool for improving rural livelihoods include a suite of policy options to stabilize and increase farm-gate prices.

These options include developing rational subsidy strategies wherever possible and renewed efforts to reduce trade distorting subsidies in developed countries to establish fair competition in the global market; streamline and improve provision of legitimate anti-dumping measures and provide temporary protection; and improve international market access for developing countries, and establish new contractual arrangements.

http://www.agassessment.org/docs/Global_SDM_210408_FINAL.htm

They also make very, very clear that there simply have to be different policies for different nations which find themselves in different situations.

Posted by El Cid | April 27, 2008 4:08 PM

El Cid-
If you read those articles I posted, you'd realize the problem in Malawi is not a food production shortage (in fact, they're overproducing) it's that they lack export markets. The reason why they lack those export markets is at least in part because of US subsidized crops. Remove subsidies=export markets=prosperity.

And this is my last post for a while, I need to study.

Posted by jamie

Neither of those "articles" addressed the actual problem. Neither of them explained how local people in Malawi could have afforded access to food purchases even if Malawi's exports to the U.S. somehow increased.

The L. A. Times opinion article, further, completely and badly misinterpreted the situation. It described Malawi's moves, and declared without argument that this was due to nothing other than wealthy nation agricultural self-subsidies.

But it wasn't, because Malawi wasn't just turning to self-sufficiency in a pique against U.S. agricultural subsidies. The "revolt" opinionated on went further -- i.e., it paid attention to those such as the Nobel-prize winning Amartya Sen who notes that a nation can export plenty of food for export sales while its own people, even its own small producers, can starve.

Please, cut it out. If you somehow think that your magical invocations and bad references are a response, please, go back to studying.

Posted by El Cid | April 27, 2008 4:18 PM

Face it, 'Jamie' lapsed into the floridly delusional when he asserted that even the poorest people can afford to buy food.

One point being missed here is that 'free trade' isn't free for you and me, it's just free for the richest one percent, who then impose their own rules on the rest of us- to their advantage, obviously.

Just because trade is 'free' doesn't mean you have an equal shot with Cargill at the Brazilian soy markets. In fact, the 'freer' the trade gets, in Matt and Tyler's terms, the less likely it is that you or I can go toe to toe with the big boys and not get squashed.

'Free trade' is all about using the power of government to subject 99% of us to cartels and oligarchies operating free of regulation. For the overwhelming majority of the people, 'free trade' isn't about freedom at all, it's about serfdom, which differs from slavery in that their is no owner to be responsible for the welfare of the serfs. I think we're entitled to be skeptical.

Posted by serial catowner | April 27, 2008 4:34 PM

for sure, they have a bias towards Austrian economics. Feel free to disprove any of the arguments they made.

....And this is my last post for a while, I need to study.

Why bother studying? When exam time rolls around, just supply your prof with some bullshit web link and tell him it proves your assertion is unassailably correct. That'll be sure to get you an "A."

Posted by James Gary | April 27, 2008 4:38 PM

OMG, the homophone cooties are catching! Just call it the obligatory poor spelling for posting with Matt.

Posted by serial catowner | April 27, 2008 4:44 PM

Unless I am very mistaken, famine-era Ireland was also unable to import cheap grain from abroad (e.g, from the US) during the famine owing to exorbitant tarrifs intended to protect Britain's farmers from competition. - JonF

But how does that matter really? If Ireland could have afforded US grain but then was exporting grain, it is effectively (after canceling out -- do I think too much like a chemist?) buying grain with grain (ok ... with that phrase, I'm thinking too much like a Rabbi of the Talmud ... maybe I should have introduced my argument with "come and hear"?). Unless there was some distinguishing feature of Irish grain, how would it be to Ireland's comparative advantage to export grain and import grain? It's narishkeit to call a market "efficient" if that's what's happening when you could have saved on transportation costs for those who are buying Irish grain to buy the US grain and leave the Irish grain for the Irish who needed it.

Posted by DAS | April 27, 2008 5:07 PM

I read a story somewhere that organized crime and other nefarious types are using commodities and futures markets for ill purposes. Either to launder money or to game the system illegally. I have a strong feeling that there is significant price manipulation going on somewhere in this system (lust like the California energy crisis) and that there needs to be a coordinated international investigation into this.

Posted by Bubba | April 27, 2008 5:34 PM

Funny thing about Doha though, is that if it were implemented the world price of most commodities would go up--since it mostly focuses on subsidies in developed countries.

http://rodrik.typepad.com/dani_rodriks_weblog/2008/04/syncretic-zoell.html

Posted by David | April 27, 2008 5:54 PM

This is all why I find it difficult to get too upset one way or the other about things like CAFTA or the Colombia trade deal.

Fuck this worthless blog.

Posted by antiphone | April 27, 2008 7:14 PM

I share some of antiphone's reaction. Tyler Cowen has a very, very long history of being factually wrong about a whole lot of things, from the important to the trivial. It's not quite true that if he asserts it, it's for sure wrong, but that's not a bad starting point. I have no idea why anyone who wasn't another thoroughly doctrinaire libertarian would want to take his word as evidence of anything about the world outside his head.

Posted by Bruce Baugh | April 27, 2008 9:01 PM

I agree with Matt and Tyler here. The lack of even a basic understanding of international economics in many of these comments is palpable.

Posted by Rock On | April 27, 2008 11:18 PM

Re:

Re: I also think that rice problems are so severe because there is also a shortage of rice substitutes, primarily, wheat, that could be acceptable to people in, say, Egypt or Senegal.

Rice is used in very different ways than most other grains: generally one eats the cooked grain itself, rather than using it as the base for a flour, oil or syrup.

===================

Actually, wheat and barley can be eaten as cooked grain after some processing. In the case of wheat, cuscus and bulghur are staples in a number of countries, but prices of wheat are also at record levels.

For that matter, all grains, unless toxic for some reason, can be consumed after cooking, including corn. You may want to crush it first.

Posted by piotr | April 28, 2008 4:41 AM

Re: For that matter, all grains, unless toxic for some reason, can be consumed after cooking, including corn.

Yes I know that grains can be eaten more or less whole. And I've certainly had corn on the cob too. However, with most grains we customarily process them into flour or use their products (like corn syrup). Rice is rather the odd one out in this respect. You simply can't replace it in Asian cuisines with corn kernels or wheat grains.

Posted by JonF | April 28, 2008 6:27 AM

Rice is rather the odd one out in this respect. You simply can't replace it in Asian cuisines with corn kernels or wheat grains. - JonF

Oddly enough, it works the other way around, though: from what I can tell of my dad's family's eating habits, in the old country they liked their kasha. And when they moved here they simply substituted rice for buckwheat groats.

*

Re: speculators. In the real estate bubble that's a huge part of the problem -- a large part of what drove up prices was people buying property with the idea that prices would go up (i.e investments). To the extent that more and more food markets are being commoditized, you will see more and more speculation driving up grain prices, etc.

So -- if you're a farmer and a speculator is offering to pay you twice as much for your grain as an actual hungry person could afford, to whom would you sell? This is a free market? Nu? This is a free market -- you can sell to whomever you want.

If Ireland, e.g., were allowed to import grain, maybe it would be cheaper to buy the imported grain. But the people buying the grain are only earning money from grain they are selling. So what happens if other people decided to buy the grain Ireland would have been importing rather than buying the grain Ireland sold? Well, it was not in Ireland's comparative advantage to farm grain then ... but what do you do with the farmers who would then have no grain? It was a while before semiconductors got invented and the Irish developed a comparative advantage ...

Posted by DAS | April 28, 2008 9:15 AM

I agree that for Asians it pretty much has to be rice, and not "just rice" but the rice they like. Otherwise, it is a bit like offering to college students a nutritional equivalent of beer, cheap vodka diluted 10 times. Riots are certain, and government survival is not.

Historically, people were consuming unfavored foods in times of hunger, for example, what would otherwise be animal fodder, like oats and turnips, wild greens, fir bark etc. Coca leaves could be used to supress hunger.

Which leads to an idea: distribute amphetamine in areas/countries affected by food shortages?

Posted by piotr | April 28, 2008 9:34 AM

Has the NYT ever run a columnist or editorial that is against "free trade"? Funny that - on this issue -they agree with the WSJ editorial board. I thought the NYT was progressive.

Posted by rcocean | April 28, 2008 11:50 AM