Thursday, 29 May 2008

Sen on the food crisis

In an opinion piece in the New York Times, Amartya Sen, who teaches economics and philosophy at Harvard and received the Nobel Prize in economics in 1998, writes on the current food crisis ... and he's no firend of ethanol. He says
There is also a high-tech version of the tale of two peoples. Agricultural crops like corn and soybeans can be used for making ethanol for motor fuel. So the stomachs of the hungry must also compete with fuel tanks.

Misdirected government policy plays a part here, too. In 2005, the United States Congress began to require widespread use of ethanol in motor fuels. This law combined with a subsidy for this use has created a flourishing corn market in the United States, but has also diverted agricultural resources from food to fuel. This makes it even harder for the hungry stomachs to compete.

Ethanol use does little to prevent global warming and environmental deterioration, and clear-headed policy reforms could be urgently carried out, if American politics would permit it. Ethanol use could be curtailed, rather than being subsidized and enforced.
Sen also makes the point that the crisis is due not to the falling supply of food but increased demand for it,
The global food problem is not being caused by a falling trend in world production, or for that matter in food output per person (this is often asserted without much evidence). It is the result of accelerating demand.
But there are also policy problems,
But the same growth also puts pressure on global food markets — sometimes through increased imports, but also through restrictions or bans on exports to moderate the rise in food prices at home, as has happened recently in countries like India, China, Vietnam and Argentina. Those hit particularly hard have been the poor, especially in Africa.
Sen's answer,
What is most challenging is to find effective policies to deal with the consequences of extremely asymmetric expansion of the global economy. Domestic economic reforms are badly needed in many slow-growth countries, but there is also a big need for more global cooperation and assistance. The first task is to understand the nature of the problem.
(HT: Greg Mankiw)

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