The Electric Commentary

Friday, August 12, 2005

Pop Quiz

If the price of food is high, what does it mean?

Answer: It means two things. That the demand for food is high, or that the supply of food is low. In general, the demand for food is fairly constant. Everyone has to eat. Therefore, if the price of food goes up, we know that the supply of food is down.

Some economic illiterate at the Washington Post has a slightly different take. First, the title:

The Rise of a Market Mentality Means Many Go Hungry in Niger


You've got to be kidding. Let's look at his in depth analysis:

It is the result not only of food shortages but a host of other problems, including vendor profiteering, a government policy shift toward a free market, and a decline in the traditional culture of generosity that once helped communities in Niger survive cyclical periods of scarcity.

In a country adopting free market policies, the suffering caused by a poor harvest has been dramatically compounded by a surge in food prices and, many people here suspect, profiteering by a burgeoning community of traders, who in recent years have been freed from government price controls and other mechanisms that once balanced market forces.


Ah! I see. The problem is not a lack of food, as the market indicates, but simply the price of food. If we just lower the price of food everything will be fine. Except that it will cause us to run out of food (he does, after all, note that there is a food shortage). And it will scare away those providing food, as they have no incentive to sell. His note that food shortages are not just caused by foot shortages is pure genius.

Let's take a look at this logically. As this reporter notes, Niger is not a good place to grow crops:

Niger, a landlocked nation of 11.7 million, suffers through hunger crises about once every decade. The sandy soil holds water poorly, and only one acre in 30 is considered arable. A short rainy season can be disastrous for a country of subsistence farmers, and last year, farmers faced both a lack of rain and an infestation of locusts.


So what do you do if you can't grow your own food? You trade for food. Of course you have to have willing trade partners for that:

Much of the agricultural sector is still government-run. Worst of all, tiny Niger, in which only 15% of the land is arable and non-desert, depends on its neighbors for cereal imports every year. But this year, those command-controlled neighbors, Nigeria, Burkina Faso, and Mali, are restricting exports to Niger, despite the fact that they've signed trade treaties against such hoarding. In other words, Niger's children are starving because of a failure to trade freely, and not a failure of the free market.


Don Boudreaux further notes:

I’m also struck by this remark in the report:

"A U.N. report found that prices in markets in Niger have shot up sharply because of profiteering, said James Morris, executive director of the U.N. World Food Program, speaking from San Francisco. Some traders, he said, have raised prices in anticipation of the arrival of aid groups, which often buy food locally to save on transport costs."


Perhaps if the U.N. weren’t in Niger, traders would be selling food directly to starving people rather than waiting for well-meaning westerners to buy it.


Note also the lack of any discussion of the cause of the food shortage (other than Niger's poor farmland, which is a constant problem). His basic theory is that before these alleged market reforms took place, the generosity of the people would cause food to magically appear.

Now that's some good reporting.

Megan McArdle has a related story, here.

1 Comments:

  • "At the same time, Nigeriens said, the tradition of sharing in their society is giving way to sharper, more selfish attitudes as Niger, one of the world's poorest countries, reaches for a more materialistic, Westernized future. That is especially true here, along the southern border with Nigeria, where an aggressive entrepreneurial culture has created the economic powerhouse of West Africa."

    My head is spinning. Let me see if I get this straight. A bordering country has become an economic powerhouse through aggressive entrepreneurship, and that's evidence that aggressive entrepreneurship is starving the people of Niger?

    By Blogger MDS, at 3:24 PM  

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