"Freer Trade Could Fill the World’s Rice Bowl"

Tyler Cowen says if Milton Friedman had the authority to set trade policy, we wouldn't have to worry so much about food crises:

Freer Trade Could Fill the World’s Rice Bowl, by Tyler Cowen, Economic View, NY Times: Rising food prices mean hunger for millions and also political unrest... Yes, more expensive energy and bad weather are partly at fault, but the real question is why adjustment hasn’t been easier. A big problem is that the world doesn’t have enough trade in foodstuffs.

The damage that trade restrictions cause is probably most evident in the case of rice. Although rice is the major foodstuff for about half of the world, it is highly protected and regulated. Only about 5 to 7 percent of the world’s rice production is traded across borders; that’s unusually low for an agricultural commodity. ...

The more telling figure is that over the next year, international trade in rice is expected to decline more than 3 percent, when it should be expanding. The decline is attributable mainly to recent restrictions on rice exports...

At first glance, this seems understandable, because a country may not wish to send valuable foodstuffs abroad in a time of need. Nonetheless, the longer-run incentives are counterproductive. ... Restrictions on the rice trade run the risk of making shortages and high prices permanent. ...

The reality is that many of today’s commodity shortages, including that for oil, occur because ever more production and trade take place in relatively inefficient and inflexible countries. We’re accustomed to the response times of Silicon Valley, but when it comes to commodities production, many of the relevant institutions abroad have only one foot in the modern age. In other words, the world’s commodities table is very far from flat.

Many poor countries ... could be growing much more rice than they do now. The major culprits include corruption in the rice supply chain, poorly conceived irrigation systems, terrible or even nonexistent roads, insecure property rights, ill-considered land reforms, and price controls on rice. ...

Of course, wealthy countries are partly at fault, too. Japan, South Korea and Taiwan all protect their native rice farmers; you’ll even see rice being grown in Spain and Italy, aided by European Union subsidies and protectionism. The United States spends billions subsidizing domestic rice farmers.

In the short run, these domestic rice producers mean less demand pressure on the world market, which might seem like a good thing. But, again, the longer-term effects are pernicious.

Low-cost rice production in countries like Thailand isn’t geared to meeting higher foreign demand, as it would be in a freer market. When more rice is needed, capacity is limited and the grains are slow in coming. And the protected rice from wealthy countries is simply too expensive to alleviate hunger in very poor countries.

Lately, it’s become fashionable to assert that, in this time of financial market turmoil, the market-oriented teachings of Milton Friedman belong more to the past than to the future. The sadder truth is that when it comes to food production — arguably the most important of all human activities — Mr. Friedman’s free-trade ideas still haven’t seen the light of day.

Update: Dani Rodrik comments, "The "free trade reduces prices" fallacy yet again."

 

Comments

[anne]

People bad, unpeople unliving in an unworld good. I completely understand and have now been thoroughly enlightened. This is a highly offensive essay; not that I am the least surprised.

[hari]

I don't think Cowen understands how rice as a commodity is actually traded - and its historical antecedents.

Curent supply/demand constraints are not a function of production. Its global consumption which has gone thru the roof in emerging countries. State Trading Co still control trade in basic commodities - incl. rice and edible oil. China and India are classical expamples.

However, Thai rice is being hoarded (right now) for higher unit prices. LatinAmerican suppliers are also following Thai (mainly overseas Chinese cultivators who traditionally control rice production/supply) in order to secure higher export prices. This is not a normal market behaviour....

It seems Govs, so far, have not intervened to *correct* the
supply disruptions.

[a]

"Nonetheless, the longer-run incentives are counterproductive. .."

Yeah, but in the short-run they're all dead.

[Remy Piwowarski]

I am afraid that lifting trade duties now could lead to higher exports from developing countries and, thus, at least for a certain period of time, to even higher prices of food there... Yes, indeed in the short run, they may all be dead...

*******
Remy Piwowarski
Executive Director
Economics International Open Forum
http://economicsinternational.blogspot.com/
House for young econ wolves...

[anne]

Where to begin is hard to decide, but a beginning might be to wonder at how representatives of the world's indigenous peoples, who met last week at the yearly conference on indigenous rights at the United Nations, might respond. What might be made of the destruction of the livings of the indigenous, the destruction of biodiversity as food production is ever more freely concentrated, the destruction of the environment, of entire eco-systems, as food production is concentrated?

[ken melvin]

Some one made up George Mason.

[bof]

Is Tyler Cowen not aware that his defense of Free Market à la Friedman sounds like the European Marxists after the passage of the Soviets tanks in Prague or Budapest?
You know, you can't condemn Marx's Ideas as long as they were not really, really applied...

It is so true: in politic, the opposite Extremes do rejoin.

[dissent]

There is also an issue with the 'Washington Consensus' and the IMF in which countries were pressured to shrink their ag sector. Thus they now are more dependent on others for their rice.

[rightsaidfred]

>>>>Where to begin is hard to decide

There seems to be a couple basic conflicts in this article. If developed countries are subsidizing their grain crops, doesn't this generally mean there is more of it than otherwise?

If there are free traders (USA) amongst hoarders (China), doesn't this give us more grain than if we were all traders? I'm assuming the free traders can ramp up production to clear the market in some fashion.

[Blissex]

The assumption in the article is in effect that food production capacity is infinite and therefore the only obstacle to higher production is artificially low prices.

In the limit that's true -- given sufficiently high prices for food there would a large incentive to develop interstellar travel and no doubt other "breadbasket" planets could be found (note that the whole theory of propaganda economics taught by people like Greg Mankiw is based entirely on assumptions like this).

As to our planet, there are arguments that good agricultural land has been used pretty much all cultivated, and that the increases in production in the past few decades have come almost entirely from oil and gas usage for synthetic fertilizers and for fuel for mechanized machinery, and there is some problem with the prices of those feedstocks.

[david]

Peter Griffiths wrote a book about this. Cowen should read it. It might even cause him to reflect.

[bakho]

How about starting with a fact. Many of the world's poor do not make enough money to purchase food. How does one have a market if the amount people can afford to pay is less than production cost?

Inputs needed to produce and transport food are highly energy dependent and the costs have skyrocketed with higher energy costs. Cowen does correctly identify that typically the lowest cost production areas are already under cultivation and bringing in new production means higher cost production.

The unasked and unanswered question is,
"Who buys the commodity and how do they pay for the ever increasing production costs."

[anne]

Fred:

"There seems to be a couple basic conflicts in this article. If developed countries are subsidizing their grain crops, doesn't this generally mean there is more of it than otherwise?"

Since 2005 the demand for grain for fuel has increased from 20 million tons to 50 million tons annually, however for 7 of 8 years the demand for grain has increased faster than supply. Irrigrated land through the world, for some reason increased only till 2000. Irrigated land per capita is declining. For some reason, again, productivity in grain production has slowed since 1990 from 2.1% annually to 1.2%.

[anne]

http://www.earthpolicy.org/Updates/2008/Update72.htm

April 16, 2008

World Facing Huge New Challenge on Food Front: Business-as-Usual Not a Viable Option
By Lester R. Brown

[Though I do not understand the mix of issues or expected duration, I do know that irrigated land is not growing, grain productivty increases have slowed, demand is regularly greater than supply, grain is being increasingly raised for fuel. The mix of issues is different.]

[RW]

The short answer is that the poor will not be able to afford food and the ranks of the poor are growing fast.

David Fischer (in The Great Wave) comments that by 1789 a wage-earner in France was spending 88% of his income to feed his family and writes:

"By 1787, Europe's most powerful government (France) was on the edge of bankruptcy. ... Ministers tried desperately to balance their books. Economies were enacted. The king himself, Louis XVI, set an example by reducing his household expenses from 22 million livres to 17 million, largely by consolidating the royal stables. ... The financial ministers of Louis XVI pleaded desperately for more revenue, and were refused. The possessing classes refused to accept new taxes. Many demanded more privileges and exemptions. This combination of public need and private greed was fatal."

Although perhaps we could join Cowen and say, as the Duc de Deux Ponts did of the peasants in 1786, "It is in our interest to feed them, but it would be dangerous to fatten them."

[anne]

The problem any country but especially a poorer country must deal with is that as food prices rise, the poorest quickly are unable to afford food and food flows away from the poorest unless the market is controlled. Food flows out of areas of hunger and, especially, nutritious food flows away from the poor in general and more so as prices rise and hunger grows.

Food now is competing incresingly with fuel, not just grains for ethanol, not just rising fertilizer expenses, but expensive fuel will mean increased burning of all that grows for fuel however inefficient.

There are contradictions I do not fully understand but know to be true, but poor people can by significantly overweight while being "hungry." What becomes most quickly too expensive is what is significantly nutritious.

[Real Person from the Real World]

For all the cheating and corruption going on.... All you have to do is take a look at how the petroleum markets are working. Gas going to $5 a gal? why? Well, it isn't all over consumption or a lack of locating new resources to supply dwindling ones.... altho those are trotted out as plausible solutions ....meanwhile SPECULATION is a part of it, along with illegal manipulation of markets for maximum gain by the monied. Same thing with foods. Up the price of gas by speculation, then use excessive energy costs as an excuse for rising prices or shortages of foods.

[Control]

"Many poor countries ... could be growing much more rice than they do now. The major culprits include corruption in the rice supply chain, poorly conceived irrigation systems, terrible or even nonexistent roads, insecure property rights, ill-considered land reforms, and price controls on rice. ..."

Er, yes, but there is very little the US can do about this. Americans don't control the political systems of other countries, the people who live there do. If indigenous citizens choose insecure property rights, Americans don't get a vote.

"The reality is that many of today’s commodity shortages, including that for oil, occur because ever more production and trade take place in relatively inefficient and inflexible countries."

This makes world trade less efficient. If Americans are forced to pay monopoly prices to OPEC et al, the domestic standard of living is lower than under perfect world competition. Americans still don't get to vote in OPEC country elections.

Americans have collectively chosen a number of inefficient monopolies of their own that reduce the domestic standard of living. Americans do get a vote in these, and working on increasing domestic competition is the best chance Americans have to improve their standard of living. Take the log...

[Ken Houghton]

david (6:02am) tells a good joke.

Let's start here: "Only about 5 to 7 percent of the world’s rice production is traded across borders; that’s unusually low for an agricultural commodity."

A sane person would note two things: (1) that implies there isn't much excess rice produced and (2) Cowen's next 'graf ("So when the price goes up...trade in rice doesn’t flow to the places of highest demand.") ignores the obvious: if 93-95% of rice isn't being exported, the highest demand is indigenous. So not sending it elsewhere is exactly correct.

[evagrius]

Didn't they have free trade during the Potato Famine in Ireland?

[btgraff]

"The possessing classes refused to accept new taxes. Many demanded more privileges and exemptions."

the more things change, the more they stay the same.

[Ken Houghton]

Dani Rodrik sets some of the record straight.

[jean]

Evagrius, yes it was a deliberate policy of genocide. They did not 'disturb the distribution of food' for the Irish. The Irish were worse than slaves, if that could be. They were allowed to grow no food for themselves, all food was cash.
"Free trade decreed that no government surplus food--"no welfare"-- be given to the starving, in order to leave the market for food undisturbed. "We do not propose," Prime Minister Lord John Russell told the House of Commons, "to interfere with the regular mode by which Indian corn and other kinds of grain may be brought into Ireland." Free trade insisted that the destitute work on the Public Works or in the workhouses." http://members.tripod.com/american_almanac/potato.htm

[AC]

Even when protectionism fails, people are still offended by seeing the word "market." Very sad.

[RW]

Almost as sad as those who have converted the concept of a market into an increasingly abstract and empty ideology that almost godlike would direct human affairs (if only we would just let it).

And to add to the pathos those who have some idea what kinds of human relationships and goods are appropriately placed within the concept of a market are forced to endure sermons from those who seem to believe they should be taken seriously despite the major category errors they commit and the general lack of real-world support for the politics and policies they espouse.

[anne]

Actually the point is to allow agricultural markets to develop with frames that are sound both for environmentally and farmers, not to limit market activity but to frame the activity so that little trade restraint and little regulatory intrusion is necessary. But, a free agricultural market strikes me as inherently self-limiting and self-contradictory. I can think of no such free market. Can you?

[John V]

Rodrik's counter-argument seems to not be addressing Cowen's point.

Cowen is talking about global prices and absolute prices while Rodrik is talking about relative prices and strictly for exporting countries.

Either way, is Rodrik saying this to advocate protectionism?

I hope not.

[John V]

Angus sums up in more detail what I just said.

[anne]

Whatever may or may not be hoped, there is no cross country free trade in agricultural products of which I am aware, and the least of the free traders are the most developed countries. The idea that American farm products could be freely traded given reasons from political (such as there being a Senate) to environmental is ridiculous. There can be, however, relatively vibrant markets though un-free.

[anne]

Chinese development of and protection of agricultural markets has been critical to the remarkable sustained development experienced, even as our experience shows. That the basis for the Depression is earliest found in agriculture in the 1920s, and that this basis was recognized by Franklin Roosevelt from the beginning is almost never commented on now that John Kenneth Galbraith is gone. So it was.

The recovery of agriculture from the Depression could not have been un-aided. There was an enviornmental catastrophe in the Middle West that had to be dealt with.

[anne]

That rural regions have been largely neglected in terms of poverty thrusts since the 1970s, I would argue is a signal factor in persisting urban poverty even though rural populations have continually grown smaller since the Depression. Not that rural regions are necessarily poor but the pockets of poverty there are untended.

[anne]

http://www.nytimes.com/2008/04/27/weekinreview/27sack.html

April 27, 2008

The Short End of the Longer Life
By KEVIN SACK

THROUGHOUT the 20th century, it was an American birthright that each generation would live longer than the last. Year after year, almost without exception, the anticipated life span of the average American rose inexorably, to 78 years in 2005 from 61 years in 1933, when comprehensive data first became available.

But new research shows that those reassuring nationwide gains mask a darker and more complex reality. A pair of reports out this month affirm that the rising tide of American health is not lifting all boats, and that there are widening gaps in life expectancy based on the interwoven variables of income, race, sex, education and geography.

The new research adds weight to the political construct popularized by former Senator John Edwards of North Carolina, that there are two Americas (if not more), measured not only by wealth but also by health, and that the poles are growing farther apart.

The most startling evidence came last week in a government-sponsored study by Harvard researchers who found that life expectancy actually declined in a substantial number of counties from 1983 to 1999, particularly for women. Most of the counties with declines are in the Deep South, along the Mississippi River, and in Appalachia, as well as in the southern Plains and Texas.

The study, published in the journal PLoS Medicine, concluded that the progress made in reducing deaths from cardiovascular disease, thanks to new drugs, procedures and prevention, began to level off in those years. Those gains, as they shrank, were outpaced by rising mortality from lung cancer, chronic obstructive pulmonary disease and diabetes. Smoking, which peaked for women later than for men, is thought to be a major contributor, along with obesity and hypertension.

"Some people are actually sinking," said Majid Ezzati, one of the report's authors. "The line of excuse that we can live with inequality as long as no one is getting worse is just no longer there."

The researchers found statistically significant declines for women in 180 of the 3,141 counties in the United States and in 11 counties for men. In an additional 783 counties for women and 48 for men, there were declines that did not reach the threshold of statistical significance.

Of particular concern is that the gap in life expectancy between top and bottom counties expanded by two years for men and by about 10 months for women. In the worst-performing counties, all in southwestern Virginia, the drop in life expectancy over the 16-year period was nearly six years for women and two and a half years for men....

[Bruce Wilder]

anne: "That the basis for the Depression is earliest found in agriculture in the 1920s, and that this basis was recognized by Franklin Roosevelt from the beginning is almost never commented on . . ."

I agree, wholeheartedly.

The idea, recently pushed by Krugman, but also at the heart of Bernanke's work, that the Great Depression was simply the result of a kind of technical error in economic policy management, particularly as it relates to money and banking, can be pernicious, when it leads to forgetting the very real problems in the real economy of the 1920's and 1930's. Franklin Roosevelt and the New Dealers did not have Keynes' important and vital insight -- that is true, and should not be denied -- but they understood much else, which is scarcely dreamed of, in Keynes, and we do ourselves no service, when we use the great insight of Keynes as a soporific.

[anne]

When infant mortality is selectively increasing in the rural South, when life expectancy is selectively decreasing in the rural America, especially for women but for men as well, when nutrition is an obvious factor in both instances, I would suggest there are problems with our agricultural markets left from what was undone through the years of Franklin Roosevelt and John Kennedy and Lyndon Johnson. Such problems are not fixed by imagined free markets which we could not possibly free in any event.

[Real Person from the Real World]

Re the potato famine being deliberate genocide. I read something somewhere recently, that stated the some British politicians did see the problem and did try to ameliorate the famine by changing some laws allowing the importation of food, but it was too late to do any good. While the Brits can be snobs, they have generally been humanists when it comes to actual values.

[bakho]

Trade can actually be counter productive to food supply. In regions that experience famine or food shortages due to environmental or other effects, food in the form of relief aid can flood the area and depress local food prices. The relief food provides a disincentive to local producers. To stimulate production once the environmental conditions improve, it is useful to have a program to purchase food from local growers to stimulate the local market.

[bakho]

Why can countries that export cash crops can have food shortages? What is the price that the cash crop commands, compared to what the local population can afford to pay for food?

One of the reasons why the US subsidizes food production is to maintain a surplus of food. Does anyone think it would be a good idea to turn the US food supply over to the free market and let total demand exceed total supply? Everyone would have to store excess food as a buffer against the market. How efficient would that be?

[Alex Tolley]

anne: "When infant mortality is selectively increasing in the rural South, when life expectancy is selectively decreasing in the rural America, especially for women but for men as well, when nutrition is an obvious factor in both instances, I would suggest there are problems with our agricultural markets"

Perhaps, but it could also be the result of poor nutrition choices due to cost differentials, time availability and access to healthcare. Russia has also experienced a lifespan decline since the breakup of the Soviet Union. Are there economic and health parallels with the US?

[John V]

bahko,

Does anyone think it would be a good idea to turn the US food supply over to the free market and let total demand exceed total supply?

Why do you draw this conclusion?

[2slugbaits]

Tyler Cowen said, "Low-cost rice production in countries like Thailand isn’t geared to meeting higher foreign demand, as it would be in a freer market."

I don't understand his comment. Thailand and Vietnam are the two largest exporters of rice, and just the other day the World Bank had to put out a statement saying that, contrary to news reports, the Bank does not believe Thai exports will be a problem.

http://eapblog.worldbank.org/content/for-the-record-the-bank-is-not-warning-about-thailands-rice-export-risks

Also, isn't the immediate reason for higher rice prices due to increased demand from Africa and the Middle East? Dani Rodrik's concerns seem to be with increased exports leading to higher home country prices for rice. But wouldn't there also be higher income?

I haven't heard anyone mention this before, but more volatile prices for agricultural commodities might resurrect concerns about the old "cobweb" model that we all learned about in the textbooks and then proceeded to forget the next semester.

http://en.wikipedia.org/wiki/Cobweb_model

[anne]

Remember that the poorer the country, the pooer the person, the less demand for food, especially for nutritious food. Also, as I am continually taught by African friends there has come a perverse sense among many people even as there was early on in America that what is less nutritious food can readily become food that is most desirable. Mass market food processing accompanied by advertising, turns what is desirable to what may be unfortunate in nutrition.

[rightsaidfred]

anne: "...I would suggest there are problems with our agricultural markets"

The US commodity markets at the farm gate work pretty good, as far as markets go in this day and age, if you are a fan of low cost producers ruling the day. You can buy #2 yellow corn for about 8 cents a pound. After that, things seem to ramp up, and a one pound box of Corn Flakes is, what, $3.00?

Another factor I would throw out there is the loss of farmland, good farmland, to suburban sprawl. We convert something like 1 million acres a year, of the best ground, out of our 250 million acre farm ground base. How long can this go on?

[anne]

Along with my grandfather, I have grown learning to enjoy making the British as uncomfortable as possible, but what was understood then about the consequences of the failure the potato crop and what was understood subsequently should make us at least a little cautious. Be thankful, after a fashion we do not speak Gaelic, anyway.

[anne]

http://ebooks.adelaide.edu.au/y/yeats/william_butler/y4c/part60.html

1919

His Phoenix
By William Butler Yeats

THERE is a queen in China, or maybe it's in Spain,
And birthdays and holidays such praises can be heard
Of her unblemished lineaments, a whiteness with no stain,
That she might be that sprightly girl trodden by a bird;
And there's a score of duchesses, surpassing woman-kind,
Or who have found a painter to make them so for pay
And smooth out stain and blemish with the elegance of his mind:
I knew a phoenix in my youth, so let them have their day.

The young men every night applaud their Gaby's laughing eye,
And Ruth St. Denis had more charm although she had poor luck;
From nineteen hundred nine or ten, Pavlova's had the cry
And there's a player in the States who gathers up her cloak
And flings herself out of the room when Juliet would be bride
With all a woman's passion, a child's imperious way,
And there are — but no matter if there are scores beside:
I knew a phoenix in my youth, so let them have their day.

There's Margaret and Marjorie and Dorothy and Nan,
A Daphne and a Mary who live in privacy;
One's had her fill of lovers, another's had but one,
Another boasts, "I pick and choose and have but two or three."
If head and limb have beauty and the instep's high and light
They can spread out what sail they please for all I have to say,
Be but the breakers of men's hearts or engines of delight:
I knew a phoenix in my youth, so let them have their day.

There'll be that crowd, that barbarous crowd, through all the centuries,
And who can say but some young belle may walk and talk men wild
Who is my beauty's equal, though that my heart denies,
But not the exact likeness, the simplicity of a child,
And that proud look as though she had gazed into the burning sun,
And all the shapely body no tittle gone astray.
I mourn for that most lonely thing; and yet God's will be done:
I knew a phoenix in my youth, so let them have their day.

[anne]

[Notice, please be careful, Typepad is running sluggishly as far as I can tell.]

[James Killus]

Whether or not the British "have generally been humanists when it comes to actual values," it is a matter of historical record that Ireland (more accurately, British-ruled estates in Ireland) was exporting foodstuffs during the Potato Famine.

In economics, "demand" means not just the need to consume, but also having the money to pay for what is consumed. A "free market" allows those with more money to take food from human mouths and put it into the mouths of animals, be they livestock or pets. And interesting little bobbles in demand elasticities allow massive profits to be made from temporary shortages and panics.

I do wish that the Friedman worshipers would even occasionally repeat Uncle Miltie's arguments against the criminalizing of drug markets. Then we'd see how firm their committment to the faith really is.

[anne]

James Killus:

"Whether or not the British 'have generally been humanists when it comes to actual values,' it is a matter of historical record that Ireland (more accurately, British-ruled estates in Ireland) was exporting foodstuffs during the Potato Famine."

That is precisely what happens as hunger and famine develop unless markets are controlled governmentally as Ireland and India have shown and unless the extent of the problem is understood above the local level as the case of China shows early in the 1960s. But, there have been unfortunately many historical instances. Food tends to flow away from the poor as the poor grow poorer.

[anne]

[Forgive the notice, but I am fairly sure there is a Typepad problem rather than a problem with my computer. Typepad had seemed sluggish and possibly has become more so this day.]

[John V]

James,

Reason on War on Drugs.

Reason on Decriminalization.

Cato War on Drugs material.

The Independent Institute on the War on Drugs

And some blogs:

Marginal Revolution

Megan McArdle

Will Wilkinson

Volokh Conspiracy and more here.

Unqualified Offerings.

I could go on. I dunno, I guess because I read a lot sites that can be loosely called "fellow travelers" of Friedman, your comment strikes me as very odd and wrong.

says...

Real Person from Real World,

I think you're absolutely dead on. Remember Enron? The high cost of electricity was the result of "extreme" demand. It's just simple supply and demand, right? Speculation and deception in the tech bubble. Then onto the energy markets. Onto the housing and petroleum markets. Now onto food. Speculation and manipulation. It seems so obvious to me that it needs to be looked into. Why don't economist refute this or prove it true?

"For all the cheating and corruption going on.... All you have to do is take a look at how the petroleum markets are working. Gas going to $5 a gal? why? Well, it isn't all over consumption or a lack of locating new resources to supply dwindling ones.... altho those are trotted out as plausible solutions ....meanwhile SPECULATION is a part of it, along with illegal manipulation of markets for maximum gain by the monied. Same thing with foods. Up the price of gas by speculation, then use excessive energy costs as an excuse for rising prices or shortages of foods. "

[reason]

OK...
Now in an ideal world (and if it had always been an ideal world, Tyler Cowen would be correct. But there is a theory of Second Best. And it this case it shouldn't be ignored.

Another point. Food is not like any other commodity. If there is a shortage people die (somebody must in fact). We must always ensure there is a surplus. How we best do that is another issue. Under perfectly feasible scenarios (a major eruption like Krakatoa for instance) it is possible that the world could be short of food for several years. A free world market would ensure that the poorest starve. I don't particularly like the morality of that. I think we need an international emergency stockpile.

[reason]

Correction...
Food is not like any other commodity...
Should be
Basic food is not like any other commodity.

I don't mean red meat or asparagas here.

[Lafayette]

Article: the market-oriented teachings of Milton Friedman belong more to the past than to the future.

I doubt that. I dislike economic pundits who take a philosophy/theory and just because it works where they've observed it, they figure it works everywhere.

Friedman's thoughts may have gone over well in Chile, where he was once a consultant, but that's about it in the developing world. His ideas, as relevant as they may be, are the fruits of a very advanced economic system. Beyond that system, they are often not relevant or only partially so.

As for markets elsewhere, pricing -- and particularly that of agricultural products -- follow the beat of a different drummer. And, that drummer of reference in sub-Saharan African countries, which COULD achieve food independence, takes the form of US/EU cereal agricultural subsidies that makes them unbeatable imports in very many if not most African countries.

The DOHA round isn't scuttled but it is certainly moribund. And, it will have to wait for lead-head to be back in Crawford, eating dust one might hope, before DOHA will be able to make any progress whatsoever in lowering American and European farm export subsidies.

[reason]

Lafayette...
What really hurts the third world is how expensive our currencies are. They will be getting richer when they can IMPORT from us.

[Barkley Rosser]

Tyler overstates the case, but he is at least partly right on some points. Thus, the sudden imposition of export restrictions by some grain exporting countries is both a violation of free trade and does exacerbate the higher prices of the importing countries. Dani Rodrik's argument that it lowers the prices in the exporting countries is correct, but I would note that more countries are importers than are exporters, with some of them deeply dependent on those imports, so the price rise effect is more widespread in terms of countries than the price-lowering effect.

He is also correct that all kinds of mismanagement and corruption regarding elements in the production change, including involving irrigation systems, has aggravated things. The problem for his argument here is that this is not all necessarily resolvable by simply freeing up markets or improving property rights. Thus, in Mauritania, a program to improve irrigation systems was sandbagged a decade and a half ago by corruption due to large landlords and businessmen who got the government aid for this directed their way but did not improve the irrigation systems.

Finally, of course, there is the pernicious aspect of many of the subsidy systems in place in the higher income countries. The most egregious of all has got to be the ethanol subsidy program in the US, now diverting one quarter of our corn production, which in turn is about one half of world production of corn, into ethanol. We now know that this is not even a net gain in terms of energy efficiency, and at most offsets about 1% of oil imports to the US. This is simply a horrific scandal of dysfunctional government intervention in the agricultural system, if not directly a trade restriction per se.

[Gerard MacDonell]

Nice try, Dr. Thoma. You throw out some red meat for the lefty hounds and then ring the bell with Dani Rodrik. All the while you maintain plausible deniability. You are like the guy who farts, says pew, leaves the room and then wonders why the fuss.

But I am on to you. What do YOU think of the idea that the best thing we could do for the world's hungry is to slow the cross-border flow of food. Do the math and make the claim. Do you really disagree with point raised by Cowen? I am not asking you to commment on his character or methodology. I am interested in the conclusion. Substantially, is Cowen wrong?

[anne]

"Substantially, is Cowen wrong?"

Yes, Cowen is wrong substantially and incidentially, and using gutter thinking and gutter language will make Cowen no less wrong but will show just what gutter thinkers are about.

[anne]

"Do you really disagree with point raised by Cowen?"

Yes, I happily disagree with compassionless conservatives; and imagine me being on to gutter thinkers. I am so on to gutter thinkers. Say what?

[John V]

Cowen responds to Rodrik's critique.

[John V]

Anne,

While I found MacDonell's choice of words and illustrations a little uncalled for, I think he raises a good question. And I think you should explain why Cowen would be wrong...especially since he isn't even claiming what Rodrik says he's claiming.

You seem to simply be asserting he's wrong...just because. And Cowen is neither compassionless nor a conservative.

[John V]

Furthermore,

I too would be interested in hearing Dr. Thoma's response to MacDonell's question.

[John V]

Dani Rodrik in the comment thread of Cowen's response (linked above)

"We may well want free trade in rice, but I doubt it would be for the reasons Cowen adduces in his NYT piece. Free trade in rice would do little to alleviate the food crisis we are facing, and in fact would probably make it worse in the short run as it would result in a further increase in the real price of rice on world markets (according to World Bank and other estimates). One can of course tell all kind of dynamic stories related to scale and long-term investment effects that might reverse the impact effects. But I suggest we start with what we know reasonably well before we speculate."

[anne]

Tyler Cowen is a wholly compassionless * conservative, who shows as is typical no concern for the local populations who may have historical ties to the land, no concern for poorer people who may have trouble affording food, no concern for the environment. Beyond that I am ever so sympathetic.

* I think Cowen might like dogs, but I am sticking to a political-economic characterization.

[anne]

"While I found ---------- choice of words and illustrations a little uncalled for...."

Me, I know when a lout is a lout. Am I being on to the lout, because I so enjoy being on to louts?

[John V]

Anne,

Again, baseless and/or false assertions. We can all talk like that and get nowhere in understanding other POV's.

When you are that certain and convinced of the ill intentions and dastardly views of good people, something must be seriously wrong with your way evaluating them.

I seriously doubt either Thoma or Rodrik, conscientious and good people like Cowen, would share that claim of Cowen...almost to the point of being a certainty.

We should never lose of the fact that economists and economics in general have ALWAYS been centered around a concern for the Wealth of Nations, improving the conditions man and understanding what causes poverty and strife with respect to resources. It's a constant that holds true across politics and ideology. I think you seem to lose sight of that.

[anne]

With apologies to Milton Friedman and disciples, stray thoughts....

Demand for grain has grown faster than supply for 7 or 8 years, while demand for grain for fuel rather than food has grown from 20 million tons to 50 million tons annually since 2005. Irigated land available for grain prouction has stopped growing, irigated land per capita is decreasing. Agricultural prouctivity growth has slowed.

[anne]

Always and forever for improving the conditions of man....

http://www.foxnews.com/story/0,2933,230045,00.html

May 14, 2004

Interview With Milton Friedman
By David Asman

DA: Do you agree with President Bush that the actions in Iraq were necessary as a part of our war on terrorism?

MF: I think you can argue either side of that. Where I do feel strongly, is that having gone into it, whether we should have or not, we must see it through.

DA: Even if it costs some of our freedoms?

MF: There’s no way to avoid a burden on your freedom. The costs themselves are a burden on your freedom. The restrictions that are necessary in order to get rid of the terrorists are a burden to your freedom. So there’s no way in the short run to avoid a restriction on your freedom. But if we’re going to avoid a permanent reduction in freedom, we have to see this war through....

[anne]

http://www.nytimes.com/2007/10/28/business/28view.html?hp

October 28, 2007

To Know Contractors, Know Government
By TYLER COWEN

ALLEGATIONS of misbehavior by employees of Blackwater USA in the shooting deaths of 17 Iraqis have brought the military's use of private contractors into question. But whatever the possible sins of the Blackwater firm, the overall problem is not private contracting in itself; contractors do not set the tone but rather reflect the sins and virtues of their customers, namely their sponsoring governments.

It is easy to rail against contractors for holding money above loyalty to country; Halliburton, for instance, has been a target of this criticism. But money isn't the real issue. Few Americans would join the armed services without pay, and most American weapons are made by the private sector for profit.

Furthermore, privateers, private ships licensed to carry out warfare, helped win the American Revolution and the War of 1812. In World War II, the Flying Tigers, American fighter pilots hired by the government of Chiang Kai-shek, helped defeat the Japanese. Today, many of our allies receive payment, either implicitly or explicitly, to support American efforts. War is, among other things, an economic undertaking, so the profit motive in military affairs isn't always bad or ignoble.

When it comes to supplying troops, or protecting high-ranking officials, private military contractors often offer greater flexibility and rapidity of response. The employees, many of whom are former soldiers or operatives, tend to have more experience than current, mostly younger soldiers....

[Always and forever for improving the conditions of man, and all that jazz.]

[anne]

"We should never lose of the fact that economists and economics in general have ALWAYS been centered around a concern for the Wealth of Nations, improving the conditions of man and understanding what causes poverty and strife with respect to resources."

Like the sorts of University of Chicago economists who were busily teaching us that immorally invading and occupying Iraq was really going to be costless or, with luck, profitable. Say what?

[John V]

Anne,

Too shrill for my tastes. Besides, I think you are attributing far too much to that "big murky and blurry group" when to comes to matter of war and peace and civil liberties. You treat them as one group because of some agreement on economic policy and assume they share Neo-Con visions on the role of the state vis a vis its citizens and foreign policy. You seek to assert hegemony where there is none.

Sorry.

[anne]

"Too shrill for my tastes."

Sort of like the shrillness of Paul Krugman and Joseph Stiglitz, I am thrilled though quite deserving of the inclusion.

Return with us now to the thrilling days of explaining to, say, indigeneous peoples everywhere what free trade in food and other resources has meant historically.

Gosh, I enjoy shrillness.

[John V]

... Besides, I think you are attributing far too much to that "big murky and blurry group" when to comes to matter of war and peace and civil liberties. You treat them as one group because of some agreement on economic policy and assume they share Neo-Con visions on the role of the state vis a vis its citizens and foreign policy. You seek to assert hegemony where there is none.

Sorry.

[anne]

Nice....

The problem is that free trade in agricultural products is a wholly mythical creature, so we have no accurate sense of what it might actually entail since it has not been allowed by developed or developing countries. However, we do know that especially at a time when we need to be increasingly concerned with environmental disruption and there has been a subtle progress to the immediate food problems that are being selectively realized, I am more impressed by selective market openings with protections at least discussed for anticipated problems that will be experienced by farm families.

Much of the world's population is rural and agriculture dependent. Looking to the problems encountered in China's transition in agriculture should be important, but is much neglected.

[RW]

There are more specialized sources of data in regards to China's development but for a grand overview of sustainable development (and some very good analytic pieces too) I recommend China Watch at http://www.worldwatch.org/taxonomy/term/53

[anne]

RW:

"I recommend China Watch at http://www.worldwatch.org/taxonomy/term/53 ."

Excellent, and thank you.

[Barkley Rosser]

anne,

I do not think one is going to find a clear relation between free markets or the lack thereof and periodic episodes of food shortages with famine. We know that outright starvation is a matter of governments in particular countries going out of their way not to help the most badly affected regions. The basic shortages arise due to either bad weather (as in the early 1970s and also now to a large degree with the three year drought in Australia) or a disease outbreak in a monoculture, as with the Irish potato famine.

Note that Rodrik agreed with Cowen that freer trade in agriculture would probably increase global supplies. You are right that we have effectively never seen free trade in agriculture, and it is currently one of the sectors in which trade is and has been the least free. Usually it is a matter of countries subsidizing their own farmers and then protecting them against imports. The EU has been the most outrageous about this, but the US has done it big time also, as has Japan. This has for a long time depressed prices for many grains, thereby lowering production in many poorer countries, which is an underlying factor in the current mess.

Indeed, I have long argued that the worst thing about NAFTA was not US jobs being lost to Mexico, which were minimal (the whole Dem debate in Ohio was a pathetic farce on that issue). It was that the US subsidies for corn damaged the corn industry in Mexico severely, triggering mass outmigration from that sector and driving down industrial wages in Mexico, also aggravating cross-border migration.

This is not just some abstraction, but I note that the Cancun round of the WTO negotiations broke up over this issue more than any other, with the President Fox of Mexico complaining bitterly and loudly about this very matter, and with the Cairnes Group of grain exporters, which included some well off countries such as Australia (where Cairnes is located), but also a lot of lower income food exporters, complaining mightily about the combo of subsidies and protectionism in the EU and the US, with the latter not budging. Hence the breakdown of the talks.

And, of course, the US ethanol subsidies have simply exacerbated this enormously to little positive effect on the energy markets.

[Blissex]

«Russia has also experienced a lifespan decline since the breakup of the Soviet Union. Are there economic and health parallels with the US?»

A very interesting comparison of how prepared are the USA compared to the USSR for a Great Depression:

http://www.timebomb2000.com/vb/showthread.php?t=221239
http://www.lifeaftertheoilcrash.net/Prepare.html

As to the critical importance of the price of oil and grain the demise of the Soviet Union a couple of interesting articles:

http://www.aei.org/publications/pubID.25991,filter.all/pub_detail.asp
http://www.hubbertpeak.com/reynolds/SovietDecline.htm

One thing that neither source mentions is that Gorbachev was the guy in charge of agriculture before becoming party secretary, and in part he became party secretary because the soviet elite hoped that his agriculture experience would help.

[Blissex]

«Indeed, I have long argued that the worst thing about NAFTA was not US jobs being lost to Mexico, which were minimal (the whole Dem debate in Ohio was a pathetic farce on that issue). It was that the US subsidies for corn damaged the corn industry in Mexico severely, triggering mass outmigration from that sector and driving down industrial wages in Mexico, also aggravating cross-border migration.»

"Worst thing" sounds like a Communist position: helping rich farmers in the USA in states that reliably vote Republican and are over represented in the Senate, and encouraging a vast oversupply of desperate laborers to rich USA businessmen who reliably donate to Republican campaigners both seem to be some of the best things that have happened to the productive, deserving classes of the USA.

[BJ Feng]

If this was an one party issue, the farm bill would not keep on getting passed with ever higher amounts. Democrats like Tom Harkin, are just as guilty.

I love the tone here, of course it's whine and complain--point the finger at the evil "rich". If the rich are so terrible and responsible for all the ills of the world, then I wonder why a society hasn't thought up of a way to eliminate all the rich. Oh, wait...that's called Communism and it ended in miserable failure. The only people who still think back upon the good ol' days of Communism are the ones who never had to live under it. Nice to remiss about the equality of Communism while drinking your latte, living in the richest country in the world.

[wjd123]

For those who read Dani Rodrik's "The "free trade reduces prices" fallacy yet again" and wondering what Dani Rodrik said about the free trade reduces prices fallacy the first time around, it's this:

Does Free Trade Bring Lower Prices?
Daniel Drezner has some nice things to say about me and my blog, but then takes me to task for understating the gains from free trade in a recent entry. He writes:

In focusing strictly on the employment effects, however, Rodrik elides the biggest gain from trade -- lower prices.

Since Drezner’s point reflects a common misunderstanding about the effects of trade, it is worth some explication.

Advocates of globalization love to argue that free trade lowers prices, and the argument seems sensible enough. Think of all the cheap goods from China that we can buy at Wal-Mart. But anyone who understands comparative advantage knows that free trade affects relative prices, not the price level (the latter being the province of macro and monetary factors). When a country opens up to trade (or liberalizes its trade), it is the relative price of imports that comes down; by necessity, the relative prices of its exports must go up! Consumers are better off to the extent that their consumption basket is weighted towards importables, but we cannot always rely on this to be the case.

Consider your typical Argentinian for example, who consumes a lot of wheat and beef. Since these are export products for Argentina, free trade implies a rise in the relative price of the Argentine consumption basket. (The gains from trade are still there, of course, but they derive from the usual allocative efficiency improvements, not from lower prices across the board.) And in the U.S., the Wal-Mart effect has to be qualified to take into account the fact that the relative price of the goods that the U.S. exports (including for example agricultural commodities) is higher than it would have been absent trade. Similarly, when the U.S. gets better market access abroad for its agricultural exports (a key demand under the Doha round), you can be sure that this will raise domestic prices for these goods, not lower them.

Of course, if you are running a huge trade deficit like the U.S., you can have cheaper prices all around—for all to go on a consumption binge as long as the party lasts. But this is hardly the argument we make when we teach the benefits of free trade.--

[Lafayette]

Corporate Welfare ... down on the farm

bw: If the rich are so terrible and responsible for all the ills of the world, then I wonder why a society hasn't thought up of a way to eliminate all the rich.

Well, it has. Maybe you were born after Reagan's stay in the White House?

Taxation does not "do away" with the rich, but does mitigate their richness by redistributing income (and wealth). It is therefore essential for Income Fairness. Part of that fairness revolves about farm subsidies, which (if you look at their ultimate destinations) has less to do with small farmers and more to do with BigAggie. I.e., payments to conglomerates, or Corporate Welfare -- that inevitably "trickles down" to the upper class by means of stock-options, etc., etc., etc.

The French "did away" with the aristocratic rich in the 18th century, during "the Terror" -- with a device galled the guillotine.

Somehow, I don't think you would find that an acceptable solution.

[Lafayette]

BR: I do not think one is going to find a clear relation between free markets or the lack thereof and periodic episodes of food shortages with famine.

It's possible. Just look at Africa.

Both the EU and the US are Free Markets, are they not? Free market practices in terms of agricultural export subsidies (by the EU and the US) have been responsible for much of the ifamine in Africa -- because it results import prices so low in some African nations that there is no incentive to farm cereal and tuber crops. Local agriculture is thus limited to fresh produce, which is too expensive to export from Europe and the US to Africa. But, cereals are dry-bulk shipped with low-cost ease.

When African countries cannot afford the imports -- because they don't have all that much foreign exchange -- the indigenous are reduced to harvesting manioc roots (a poor substitute) to find life-sustaining carbohydrates. The same could be the case for some Far East countries that have a rice-eating population (and who have closed the export door due to low reserves).

One cannot imagine how important carbohydrates are to human subsistence. Take a look at history and how the lowly potato contributed to much of Europe's population growth upon its arrival to Europe from the New World.

[And, consider the reverse effect: If you are of Irish origin in the US, thank the lowly potato -- the failure of the Irish potato crop in the mid-19th century provoked a famine that reduced the Irish population by a quarter and subsequently much migration to the US.]

Jean Ziegler, UN reporter on the question of the Right to Food, is making a point when he insists that Western agricultural subsidies (particularly those that shift farming from cereal to bio-ethanol crops) are inhuman. Of course, he's a Leftist zealot, but that does not make him entirely wrong despite his shrill manner of expressing his opinions.

[reason]

What Barkley Rosser says, is 100% correct. Plus we need to think what to do about ensuring food security when we have a serious problem (say a major geological or biological disaster). We need reserves. We know from Electricity privatisation that the market considers reserves a waste. The (properly free and competitive) market can make sure we use what we have efficiently, but it cannot ensure we are adequately protected in emergencies (seriously there are any number of examples showing this - Katrina for instance).

[Lafayette]

Article Cowen: But money isn't the real issue. Few Americans would join the armed services without pay, and most American weapons are made by the private sector for profit.

Which planet does this guy live on? The Inner Belt?

In my talks with Europeans, what once impressed them the most -- that is, those who actually remember "our boys" who liberated their land from the Nazi yoke -- was how uninformed the soldiers where about Germans and Nazis in particular. They seemed to be fighting because that was what our country asked of them. They simply believed in the common menace.

No, I don't buy this BS about joining the Army for the pay. I am convinced that, were the nation truly menaced, our boys would once again rise to the challenge. Any nerd-cum-pundit who thinks people bet their lives for pay needs a long session with a shrink.

Blackstone was conceived by Rumsfeld to keep the numbers of causalities as low as publicly admissible. The Iraqi forces would not fight, so American mercenaries (that's what they are called, why doesn't Cowen know that word?) were thrown into the breach.

Mercenaries have existed since Roman times. The town of Nimes, in the south of France, has an alligator amongst other symbols on the town's flag. Because it was formed by Roman mercenaries who had fought in Egypt where they first encountered that animal. They were given land in Nimes as their compensation for long years of war.

They are employed in the underside of wars, where government don't like to justify their use. They have no status under the Geneva War Convention and therefore can be treated as spies.

Yes, this type of individual arises in any war. But, they are definitely not the average soldier. They are those who are truly renting their talents for the money. And the darlings of Hollywood in many a film.

Of course, their usage is also indicative of a mentality that is prevalent in some circles. Those in which, if a money-figure cannot be attached to a subject, it has no pertinence and therefore is wholly irrelevant. War is good for business. So why didn't the Washington cronies invest their own children to pursue it?

It is unfortunate that many young adults, men and women, are enticed into military service by the siren-song of an "education". An education is a birthright that no one should have to merit fighting in some foreign country a war into which a jerk-president got the nation.

Only plutocrats think EVERYONE has a price. Because THEY sold out to play the money-game long ago.

[reason]

Lafayette...
Crocodile NOT Alligator PLEASE!

[reason]

What John V and Tyler are missing is that a rise in the world market price can turn importing countries into exporting countries and negatively affect the poorest segment of countries where that happens. What should a responsive government do in this case? I see two alternatives, either it can interfere and stop exports (as many have done), it can subsidise food for the poor or it can choose to import starvation. It is absolutely that what has happened is not a good long term solution, but people starve in the short term.

[Lafayette]

;^)

evg: Didn't they have free trade during the Potato Famine in Ireland?

Of course not. Had free trade existed, the Irish would not have had the famine, would they?

Free trade was invented much later -- on September 3rd, 1903. And patented shortly after.

[Lafayette]

reason: Crocodile NOT Alligator PLEASE!

Mea culpa, mea culpa, mea maxima culpa.

Yes, crocodile.

[anne]

http://www.nytimes.com/2007/10/28/business/28view.html

October 28, 2007

To Know Contractors, Know Government
By TYLER COWEN

But money isn't the real issue. Few Americans would join the armed services without pay, and most American weapons are made by the private sector for profit....

[Yuck.]

[reason]

You know that is what I really think annoys me most about glibertarians. The lack of any sense of what is relevant. They really do live in the most ivory of ivory towers.

"This thing about people being in danger of starving, interesting isn't it. We can make it into a parable of the dangers in interfering with markets!"

[BJ Feng]

What really annoys you Reason is the mechanics of the real world where there are COSTS and benefits to every action. Somehow the cost side is mostly forgotten by liberals who demand government action and control over everything from health care costs to wages to trade. A government dictated economy simply cannot produce as much as one governed by the market, how many times must this be repeated and taught? Even the Communists have learned this lesson and are moving away from centrally planned economies where they issue production quotas for rice and goods, and restrict trade to what they think will benefit the country.

[reason]

BJF you don't get it at all do you. Of course it is known there are costs to actions. Why do you think liberals are so concerned about pollution.-)

What is missing is any feeling for what counts, for what is urgent. A meal for a starving man, treatment for the seriously ill, a movie, enjoying the feeling of power that comes from a big car (or a big gun), its ALL the same to the glibertarians.

[reason]

BJF...
Please also just stop the straw man arguments, they are just annoying. Hardly anyone here is advocating socialism. They just think it should be acknowledged that efficiency in production (i.e. incentives) and efficiency in consumption (diminishing marginal utility of money) sometimes conflict.

[Lafayette]

Moral Sentiment

BJF: What really annoys you Reason is the mechanics of the real world where there are COSTS and benefits to every action.

I doubt that seriously -- but I shall tell you what annoys me of most of posters.

It is to attach a monetary value to every subject matter in order to access and discuss it conceptually. Meaning this, such commenters have not a single, moral fiber or sense of morality - as if morally lobotomized. All that matters is monetary value to the exclusion of all other values (most of which are far more important).

Economics is a science of numbers and the values of numbers, which is just its principle failing. One does not account for well-being in balance sheets or even GDP projections alone or net personal worth. Societies have evolved to a higher plane, where commercial profit can indeed by an important motive but by no means the most important. The respect for personal dignity of all individuals exacts fair treatment for their well being -- meaning fairness in opportunity, fairness in chance, fairness in remuneration, fairness in treatment.

In the moral balance, the dignity of an individual is far more important to either equilibrium pricing or R-O-I calculations. Furthermore, without the state to assure that "level playing field", then ours easily becomes a society of survival of the fittest. Or, to the winner the rewards and to the vanquished a just ignominy.

What is so sorely disappointing with some comments is the lack of a moralist component. It's as if one has never read any literature of Classical Economics, where it is the underpinning of Political Economy.

The Wealth of Nations was written by a moral philosopher with considerable training in the science of ethics -- and only then a political economist. His other book of note is the The Theory of Moral Sentiment. I highly recommend it to those of the Right so seemingly attached to religious principles.

Mankind does not depend upon economic thought to subsist, but rather the reverse. Where economics does not serve the common welfare, it serves only individual profit; meaning it falls well short of its objectives.

[Lafayette]

BJF: Somehow the cost side is mostly forgotten by liberals who demand government action and control over everything from health care costs to wages to trade. A government dictated economy simply cannot produce as much as one governed by the market, how many times must this be repeated and taught?

Hogwash. Who is "dictating the economy"? Where? Burma?

The lesson was learned in heavily interventionist Europe decades ago. Bringing up communism is fools-gold, BJF. There are damn few such countries where the government dictates prices -- except with some foodstuffs. However, there is at least one business cartel (OPEC) that is robbing western democracies of any gains in productivity by curtailing supply of its product. Not a communist in that group, btw. (Except maybe Hugo Chavez.)

The cost side is not forgot. It is controlled in those instances when the market solution brings an equilibrium at a price which is unaffordable for a critical Public Service.

Can you not understand this notion. Or, is it that you do not want to understand it. Yep, it's the latter.

[reason]

Lafayette...
what OPEC is doing is good for the world. That it slows down our use of a non-renewable resource, and brings forward investment in alternatives is not a problem it is an opportunity. If you lived in a desert but had a pot of gold, you too would control how fast you used it up.