Resource Shortages, Free Markets, and Our Response

“Hunger knows no friend but its feeder” – Aristophanes

We’ve been following a storyline for a few months now (dating back to summer 2010) about  potential disruption in the global grain market and shocks to the current price structure. A number of articles have emerged on the subject recently, with cnbc covering some financial and political aspects, and Brietbart picking up the environmentalist view. First, let’s consider the problem, then we’ll talk about solutions and proper responses.

At issue is the fact that the world has a very high demand for food – living things must eat it if they will continue to live. As we’ve noted in the past, population growth will be limited by, among other things, resource scarcity – particularly food. The converse of this is that all of the food we produce is consumed (for all intents and purposes). If, for some reason, the food supply is dramatically reduced, we face a serious scarcity crisis.

(As a side note, we’ve argued in the past that there is no need to place government controls on population size in order to avoid crossing some “sustainability” threshold – natural systems are quite good at providing their own limiting effects on sustainable population sizes.)

It appears as though there have been some shortages of late, and some poor grain harvests (particularly in Russia). This will no doubt cause food prices to rise, which will put some serious pain on the world population as a whole and possibly lead to some significant political instability. What shall we do in the face of such potential strain?

First, let me note that I support free market solutions – because I support freedom. The free market is just an exercise in freedom. You work, you produce, you keep what you produce and consume it as you see fit, including trading it with your neighbors for things they have produced. Freedom is a good thing.

The free market would dictate that resource shortages will lead to price increases – there is just no way around this. For me that means I’ll pay more for my hamburgers. For impoverished people the world over it means that their current food costs of 80% of their income will possibly climb to over 100% of their income, and serious hunger will ensue.

Is this a bad thing? Well, people going hungry is not a good thing. How do we address the issue? Some thoughts:

We could try price controls – labeling a certain apportionment of food at a certain prices as a basic human right. Will this work? No. price controls invariably lead to shortages. Remember gas lines in the Carter era? Reagan did away with rationing, prices rose a small bit, and the lines disappeared. Price controls on food will lead to long lines for bread, shortages of essentials, and will not solve the basic problem of greater demand than supply.

Price controls and policy controls are generally the response of the environmentalists and progressives alike. They hold that the people will not do what is in the global best interest and therefore must be forced to do the right thing by compassionate yet firm governance. This view takes life to be one giant “prisoner’s dilemma.” (As an aside, Lester Brown in the second article also argues for massive carbon emissions controls to stem global warming, which is apparently harming grain production. When all you have is a hammer, every problem looks like  a nail. These guys seem to hold that global warming – highly dubious as a “man-made” phenomenon – is the cause for every ill under the sun.)

We could try subsidies. I’ll admit that this is better than price controls. While subsidies pervert the free functioning of the market, they do not prevent market forces from finding an equilibrium (though probably the wrong equilibrium). Still, government subsidies take from productive people and give to those whose lack of productivity leaves them with a lack of produce for consumption. This ruins the fundamental feedback mechanism of human motivation, and therefore only prolongs economic pain.

What else is there? Well, perhaps we could turn away from government as a solution altogether. I’ve noted in the past that people are not as selfish and self-centered as progressives, or the news media would like to suggest. Hard working people, just scrapping enough together to get by, are willing to share what little they have with those truly in need – they’re just not willing to share with people they think are not pulling their own weight.

This has always been the solution I’d promote. Let us not sit and wait for a government solution to a problem that is beyond their control. (They have shown that they are capable of not much more than enriching special interests anyway.) There are plenty of world food aid organizations out there who could gladly supply the necessary resources to feed more in those impoverished nations. If the food price shocks do come, and they may, then our response ought to be to tighten our belts at home (paying more for our own food while we’re at it), and aiding the poor of the world with what we can.

(While we’re at it, we could scrap subsidies for biofuels that ruin perfectly edible corn.)

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