bolo121

Sir Shek, the problem is not that free market can provide, but rather the price at which it provides. In a free market the price of essentials would adjust to meet demand. This would price out all of India's urban poor at once. Nothing inflames a mob more than seeing the upper middle class and rich with full bellies while they starve. The government of India simply cannot accept such a risk so they have to control prices.

cape_royds

With agriculture, there are some absolute physical constraints to production, although I think in a fully rationalized world, we would still be some ways from encountering those constraints.

Another thing with agriculture is that often short-run high productivity can be inimical to long-run optimal productivity. With suitable conditions one can get a win-win (such as in 18th cent. Britain), but in other environments short-run boosts can result in soil loss or aquifer depletion, etc.

A third thing is that global farm market liberalization might not benefit smallholders in developing countries. If speculators take advantage of liberalized markets to acquire large holdings in poor countries, the results could be economically perverse.

Fourth, it's not a good thing to have motor vehicle owners in developed countries competitively bidding for the same crops against hungry people in poorer countries. Someone like me can easily outbid some poor wretch in the suburbs of Lagos. Oh, sure it might trickle down to him at some point, but he'll probably die before that happens.

So I don't see market liberalization, at least in the classical sense, as a panacea to any future world food crisis.

Gun Grape

Saw the same thing yesterday. None of the grocery stores, the asian stores, Sams or even the commissary had rice. They all had signs limiting customers to 1 bag when the rice does come in. The Asian markets all have waiting list.

Now thats just sick. Yuck

Soy sauce on plain rice is bad enough but then you have to choose the worst brand there is.

gunnut

Come on. What's more important? A planet in peril due to global climate change? Or some people that might go hungry? We are doing them a favor by keeping this earth in the optimal temperature zone. Any warming or cooling trend will destroy the human habitat which we have enjoyed for the better part of 1990s.

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Shek

I am not smart about specifics, but I can tell you that price controls are not the answer. They mute the signal that price sends to suppliers (you can get a higher price, grow more!) and so it distorts the market. The trick is to figure out the best policy response in the short-term to allow the market to adjust in the long-term. If price controls will be the response, then I will not respond to future expected shortages because I, as the supplier, won't benefit from additional production that might alleviate the shortage.

Which leaves us back to the short-term. Let the price rise. Use subsidies to assist the poor in purchasing rice. The government appears helpful and price can send the signal to grow more in the future (or as pointed out earlier, it's cheaper for the government to fix the storage/distribution system than to hand out additional subsidies in the future). Price is a motivator to solve problems. Get rid of the price problem, and you may find yourself doomed to suffer the same problem again in the future.

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bolo121

Yes i suppose that subsidies are the only answer. The govt would have to purchase at or near the market rate from farmers and then sell to the poor at a low price.
I dont know about the growing more in India's context we're pretty much maxed out all the time.

antimony

There seem to be several holes in Professor Cowen's arguement. I do not think he understands the dynamics of 3rd world agrarian economics. Indeed, his primary research area seems to be the economics of culture and a leaning towards writing food guides (source : wikipedia).

Professor Cowen probably does not realise that the average farmer he is talking about does not have any other option but to continue farming rice, regardless of the price that he would get. There would be many factors to this, such as lack of alternatives (the only alterative for rice cultivation in many of those areas would probably be jute), land holding type, irrigaton. Many of these factors are not directly influenced by any government policy. Factor like rainfall would have an exponentially greater impact in any loss of cultivation area than any government policy.

Rice production declines in Bengal-Kolkata-Cities-The Times of India

Apart from this limitation in production, there are areas where government policy can benefit, such as processing and procurement. In many of the regions where rice is produced, procurement is in the hands of licensed procurement agents (middlemen) who are supposed to procure through a transparent auctioning process, but instead collude amongst themselves and rob the farmers. This is where Big Retail is trying, unsuccessfully, to break in and provide farmers another venue for selling their products.

Another thing, every country absolutely has the right to regard its own food security above the needs of others and take any measure necessary...

gunnut

Can you at least look at your post format after you hit the reply button? You're missing the left bracket ([) and the slash (/) to complete the quotation function in html.

Shek

If I can export my rice, I will receive more money. If I receive more money, I can save to purchase irrigation and/or pumps. I am now less susceptible to the vagaries of nature. My ability to save is absolutely tied to government policy.

Also, faced with lower prices, my best option may be to decrease output. I get more free time and I can potentially increase prices as well. It is not just a choice between rice or something else.

It's seems to be working, doesn't it? Ask North Korea how self-sufficiency works in the extreme . . .

antimony

If you believe farming options in the 3rd world are that flexible, here is a conundrum for you. India has banned only non-basmati varieties.

India bans export of rice move to have shockwaves | Articles | IndUS Business Journal

Basmati is an expensive variety, usually sold at a few dollars per pound over the other ones. So why don't the farmers simply change over to that, export lots of it and earn money? As per the new policy, they are even guaranteed to get a Minimum Export Price ($1200 per tonne). Simple reason - they cannot, also due to the factors that I mentioned above, chief of which is climatic.

I like free market economics as much as you do (ok, maybe not as much as you do, but in general). The place to attack here is procurement and not production. The government(s) need to bring in policies that increase the options that the farmer has to sell his goods.

What would you do with the free time? There are hardly other means of income in some of these places, so alternative employment may not be an option. you best option is to continue working and get some money for the rice that you produce

Since you like sarcasm so much, can I ask you why the US government continues to provide such high subsidies to rice farmers in the USA, when free market economics would decry any kind of subsidy program? Maybe now the government should stop subsidies since prices are high enough for rice production to be economically viable on its own. The government can then use the funds saved to expand area of cultivation within the US.
Problem solved !!!

Ironduke

Con-Agra's Lachoy tastes horrible... it's not brewed or fermented, it's some artificial salty chemical composition with Coca-Cola coloring. Kikkoman is a true Japanese-style soy sauce, though I understand the sweeter Chinese varieties are good as well, I've just never had them.

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Gun Grape

Japanese soy sauce, like the one imported to the States under the Kikkoman brand, and used most in restaurants is the koikuchi type. And are way too sweet for my taste.

We use various Korean soy sauces, Sempio brand, for cooking, dipping sauces and soups. Dark Chinese sauces on sushi/sashimi, and noodles. They are like the fine wines of soy sauces.

Go to a oriental specialty store and try some of the other types and brands.
You would not believe what a good soy can do for food.

Whats good on rice? Kim Chee

Because Americans love cheap rice. Even if we don't know how to cook it right
And rice is not a easy crop to grow. We also export lots of it. About half of the US rice crop. We are also the only country that exports rough rice. 4% of all rice exports worldwide and we do all of it.

S-2

Oh, I bet you ate well in the field.

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Ironduke

Wouldn't game theory posit that if one farmer lowered his production, others would increase theirs to reap extra profit?

antimony

Very good point...

And these are not a small number of large farmers who can collude and negate this; these represent a huge number of farmers with very small holdings

Of course, in real life, it is doubtful if they will actually be able to affect their production at all...