MacroScope

Will food prices rise?

October 19, 2009

The Becker-Posner Blog has an interesting debate posted on the question of  food shortages and their accompanying price rises. As usual, it is a to-and-fro between economist and Nobel laureate Gary Becker and his University of Chicago colleague Richard Posner, a U.S. appellate judge.

Becker reckons that some commodity prices will rise as the global economy recovers but that food is different.

“Rapid growth in future world GDP is likely to greatly raise the prices of oil and other fossil fuels, unless concerns about global warming induce major steps to reduce the demand for these fuels. Rapid growth in world output is also likely to sharply raise the demand for cereals, meat, and other foods in developing countries. However, I have tried to show why food is different from fossil fuels and minerals, like copper, in that the supply of food is not limited by natural bounds on overall quantity. Rather, the efforts and ingenuity of farmers and researchers are able to greatly increase world food supply to meet even very large increases in the world demand for food.”

Posner is not so sure, questionning the impact of technology on food production::

“Technological innovations may hold down increases in the price of food that are due to the increased demand for a rich diet as multiplied by increase in population. But those innovations may create substantial externalities even if they do not push up prices (indeed, the less the increase in prices, the greater the output of agricultural commodities and hence the greater the externalities). As more and more countries adopt the most efficient methods of agricultural production, and thus for example converge on the optimally genetically modified variants of crops, genetic diversity will decline, which will increase the potential damage from blights…. Agriculture is a heavy user of water, moreover, and global warming appears to be reducing the supply of water usable for irrigation by reducing the size of glaciers. The run off from the seasonal melting of glaciers provides a more usable supply of water than rainfall, because the water from a melting glacier is channeled, while rain that falls outside a river or other body of water is difficult to store for use in irrigation.

I am one of those timid souls who worry about the downside of technological advance and economic growth. I find the prospect of continued increases in population and income, and of the technological innovations necessary to cope with those trends, unsettling.”

You can read the full arguments on their blog here. But which side are you on?

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