From: carruth@mksol.dseg.ti.com (matthew carruth)
Subject: Re: Misguided Economics
Organization: internet
Date: Thu, 13 Aug 1992 16:11:47 GMT

In article <viking.713599039@vincent1.iastate.edu>, viking@iastate.edu (Dan Sorenson) writes:
|> In <16840C7A0.MEDELMA@cms.cc.wayne.edu> MEDELMA@cms.cc.wayne.edu (Michael Edelman) writes:
|> 
|> >In article <viking.713133312@vincent1.iastate.edu>
|> >viking@iastate.edu (Dan Sorenson) writes:
|> >>        In any event, food is a strategic resource and one with an inelastic
|> >>demand.  The demand for food is constant, thus some means of regulating
|> > 
|> >Two false assumptions and an similarly invalid conclusion. Once again, we
|> >might ask: However did the world feed itself before the 1930s? And how is
|> >is that there is a continuing supply of the bulk of food items that are
|> >not subsidized?
|> 
|> 	Go to the Phillipines, and see just what an orange costs you.  The
|> world fed itself before the 1930's by individuals paying what they were
|> willing to for what food there was.  Remember that the US was isolationist
|> at that time, and did not use grain as political leverage in the
|> international market.  In addition, we have since come to the ideal that
|> the public needs to be given some security from the State.  In the 1920's
|> and prior, you starved unless you either had the money or the friend to
|> feed yourself.  Today this is not so due to government policy.  In addition,
|> we have since come to think of food as a resource that may be exported for
|> political reasons.  We didn't sell computers to the USSR, but we sold grain
|> even when our military interests would have been best served by letting
|> the region starve (a best guess, I'm not on the Joint Chiefs).  These
|> two changes make food a strategic resource, and that the demand for food
|> is inelastic can be proven if you'll just quit eating and tell us what
|> happens to you.


  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.
 
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.
  
|> 
|> 

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