From: viking@iastate.edu (Dan Sorenson)
Subject: Re: Misguided Economics
Organization: Iowa State University, Ames IA
Date: Fri, 14 Aug 1992 00:16:28 GMT

 carruth@mksol.dseg.ti.com (matthew carruth) writes:

viking@iastate.edu (Dan Sorenson) writes:

>  You can probably eat a bit less, but you cannot quit
>|> consuming this resource and still remain alive.

>The demand is quite elastic in both quanity and quality. Most middle class Americans
>could get by with 25-50% fewer calories than they eat now.  Look at the 
>flabbyness of people in general society.
> 
>The quality issue is even more important.
>We could, for example, remove meat from our diet and replace it with lentils.  The
>savings in direct costs and lower production costs would be great.  The major
>aid groups can feed people in 3rd world countries for very small dollar amounts.  As
>with other products, a small change in consumption has a big effect on the market.  If
>people bought 10% more gasoline than usual tomorrow, then we would have a nation
>wide shortage, briefly, until the market adjusted.  The market is a very effecient
>device.  A system of consumers and producers is a symbotic relationship: both
>groups need the other to prosper.  If the market supports were removed suddenly, then
>there would be a brief, possibly, dramatic adjustment.  If prices went up to
>much higher levels, then people would eat less, and eat cheaper foods.  The market
>would respond with lower prices.  Since food is grown all over world, new 
>supplies could be brought from another areas. There would be no significant shortage,
>for long, and the price would move to a lower level quickly.

	I certainly agree with all you've posted.  However, you admit that
there "would be a brief, possible, dramatic adjustment."  That is precisely
what the government is trying to avoid I suspect, along with protecting the
source of some political clout overseas.  If you're old enough to remember
the gas crisis in the mid 70's, you know that an "adjustment" like that in
foodstuffs won't wash with the public.  I doubt we're going to starve these
days, but it is still a possibility one should be concerned with.  The
market has rarely fallen below the price support's minimim cost, but in the
few times it has we've seen very dramatic adjustments ripple through the
economy, as each portion affects every other portion.  Finally, food can
indeed be imported from other countries.  However, I suspect the quality
and selection will drop due to the shipping needs of different foodstuffs.
With grains, the targets of most price supports, the storage and handling
needs are fairly simple, and they serve to support the livestock and
a good portion of the food processing industry where oils and fillers are
needed.  Thus, the higher costs to your taxes might just result in lower
unemployment rates in many industries, and that certainly helps the tax
base.  Additionally, I'm willing to pay a few extra dollars in taxes to
purchase a wide variety of high-quality foodstuffs in my supermarket.

	For what it's worth, shipping is a big destroyer of quality and
low price.  Here in Iowa, meat is quite cheap ($1.75/lb for 95% lean
ground beef) and of excellent quality.  In Pennsylvania, it was half again
as costly and of fairly low quality.  Can you imagine the difference you
might see from shipping foodstuffs from overseas?  Since this is all a
political thing anyway, one should be aware of the public outcry that
would result from having to eat lentils.  My grandmother ate kale soup
for a week strait during the depression.  I'd bitch and moan like
crazy if I had to do that.

>It takes an active intervention
>of a government to force the market to extremes.  The artificial energy crisis of 
>the 70's is a good example.  There was never a shortage of oil.  There was a
>disruption of supplies and then the government, in the name of social justice,
>got involved and we had years of artificial market dislocations brought on by
>ham-handed regulators.

	Yes, but we always had plenty of oil.  Balancing the supply with
the cost will not result in the lowest price, but it does tend to allow
a more stable supply, and that keeps people happy.

<Dan Sorenson, DoD #1066 |"There'll be angels on Ariels in leather>
<z1dan@exnet.iastate.edu | and chrome, Ridin' down from heaven    >
<viking@iastate.edu      | just to carry me home." -- R. Thompson >
< ISU thinks I need more education, which they provide for a fee. >

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