Friday, March 27, 2015
Thursday, March 05, 2015
This article highlights some interesting statistics about economic mobility in the U.S. And posits that the dynamics in income growth are part of the reason Americans are not taking to the streets en masse to protest income inequality.
Another significant factor is 'real' wealth. Think, how do you value the 'real' assets that the masses control in 2015: Google, Wikipedia, Facebook, Twitter,Instagram,Netflix, Skype,podcasts, iTunes (you can now pay $1.99 for and buy just the songs you want vs. $10-$20 for a whole album for only a couple songs you like), hand sanitizer, RedBox, smartphones,TomTom/Garmin/GPS, DVRs, iBooks, vegetables that come in zip locked re sealable bags, gift cards( have you seen those huge end caps with hundreds of pre-loaded gift cards), corn and potatoes that are resistant to pests and require fewer pesticides and have lower levels of carcinogenic molds etc...if you keep thinking you could add to the list of numerous items, gadgets, apps,and innovations (wait until we start to see the benefits of the convergence of the internet of things, biotechnology, 3d printing and nano-technology) that each make a contribution to the aggregate real wealth of the masses across quite a broad spectrum of incomes. Instead of being too 'poor' to take to the streets, I think there is a sizable portion of the population for which this kind of growth in real wealth creation either poses a huge opportunity cost associated with political engagement, or on the other hand compensates for lower levels of growth in nominal incomes (which otherwise might elicit stronger reactions). On the other hand, if it were the case that most of the 'real' wealth in society could be quantified (which I don't know how you could actually measure a person's real wealth when it is comprised of so many things contributing to their overall well being in so many ways, not to mention start comparing by groups) , and it were concentrated or 'controlled' by just a few, then we might also get a different reaction. Not to say that there aren't societal ills and challenges faced by people of various means, but it looks to me like it would make more sense to tackle real issues faced by real people than be sidetracked by policies or debates around less meaningful statistical abstractions about income inequality.
Sunday, March 01, 2015
Nice piece from Marc Bellemare: "In that debate, I am often astounded by how anti-scientific the anti-GMO crowd can be. This is especially so given that the anti-GMO crowd is largely composed of people on the left; the same who are so often heard saying how anti-scientific people on the right can be when it comes to evolution, the existence of God, and so on."
People on the left often don't realize so many times that when they jump on so many of these policy bandwagons say related to taking drastic actions to combat climate change for instance, or GMO labels in this case, it's a giant leap beyond what the 'science' actually supports, in effect, a leap of faith. (I know there is also a sizable group on the far right also has an odd for supporting drastic extensive government regulation on GMOs)Suddenly, all of those recycle bins, hybrid cars, re-usable grocery bags, pig tail light bulbs,organic veggies etc. become reduced largely to 'quasi-religious practices.' Which is OK, everyone is entitled to their own beliefs, until they try to start trying to force their 'religion' on others at the ballot box, which they have been quite successful. No one is subsidizing or forcing anyone to put those ten commandment yard signs in your yard, but what about those red plastic recycle bins?
Channeling Landsburg's "Why I am not an environmentalist"
Marc's Post: http://marcfbellemare.com/wordpress/9675
Thursday, January 22, 2015
"It’s 10am, your rottweiler has just chewed your Italian leather boots, your wife has burnt your pancakes and your mistress is on the phone proclaiming that “it’s over because, really, you’re pretty lousy in bed.” Oh yeah, and while you’re at it, your broker is leaving you a message that the stock market is crashing and you’ve lost a third of your savings. A bad hair day? No, my friend. You’re likely living in a fat tail!..."
So in his paper, Nassim and his coauthors work through some pretty complicated mathematics and based on definitions related to things like fat tails, fragility, ruin, harm, uncertainty etc. (in the appendix) conclude that what they refer to as a non-naive version of the precautionary principle should be applied to GMOs.
I probably need to read the paper again and spend more time in the appendix and maybe it will all sink in, its technical. In the EconTalk podcast one interesting way Nassim presents GMOs is through a Hayekian lense:
Reading between the lines, I think he wants to think (which I concur) of nature as a spontaneous order of checks and balances and that recombinant DNA techniques are like a top down planning approach that ignores or bypasses this process. But...biotechnology actually represents a small incremental genomic disruption in a system compared to a wholesale genomic disruption like conventional breeding or mutagenesis (used in organic methods as well). If a Hayekian model applies, I would think you could make the same argument against other methods of crop improvement as well.
"Unlike GMOs, in nature there is no immediate replication of mutated organisms to become a large fraction of the organisms of a species. Indeed, any one genetic variation is unlikely to become part of the long term genetic pool of the population. Instead, just like any other genetic variation or mutation, transgenic transfers are subject to competition and selection over many generations before becoming a significant part of the population. A new genetic transfer engineered today is not the same as one that has survived this process of selection."
"The limited existing knowledge generally does not include long term testing of the exposure of people to the added chemical, even in isolation. The evaluation is independent of the ways the protein affects the biochemistry of the plant, including interactions among the various metabolic pathways and regulatory systems—and the impact of the resulting changes in biochemistry on health of consumers."
The literature certainly indicates that GMOs may be the less benign approach to crop improvement, and to appeal to Hayek in another way, our knowledge of the specifics of genetic disruptions from biotechnology is much more precise and less assuming than conventional approaches.
Research on Genomic Disruptions
Batista R and others (2008). Microarray analyses reveal that plant mutagenesis may induce more transcriptomic changes than transgene insertion. Proceedings of the National Academy of Sciences of the United States of America 105(9): 3640–3645
Baudo MM, Lyons R, Powers S, Pastori GM, Edwards KJ, Holdsworth MJ, Shewry PR. (2006). Transgenesis has less impact on the transcriptome of wheat grain than conventional breeding. Plant Biotechnol J. 2006 Jul;4(4):369-80
See also: Biotechnology and Genetic Disruptions
Sunday, January 18, 2015
“This is Adam Smith and Hayek and Ricardo played out at very high speed,” says Page, citing classical liberal economists who argued that trade generates the prosperity much of the world enjoys today."
Wednesday, January 14, 2015
"Greg Page, former CEO of Cargill, the largest privately-held company in America, talks to EconTalk host Russ Roberts about the global food supply and the challenges of running a company with employees and activity all over the world. Page talks about the role of prices in global food markets in signaling information and prompting changes in response to those signals. Other topics include government's role in agriculture, the locavore movement and genetically modified organisms (GMOs)."
It is really interesting to me, and you have probably seen before via social media the charts that try to depict our food system as being controlled by only a few companies creating a vast array of products but an 'illusion of choice.' Critics often complain about 'Big Ag' controlling the food supply and pillaging the planet. But what I have always seen in this is actually the work of a spontaneous order of a complex network of modern family farms, biotechnology companies, food processors, and retailers that cooperate to deliver healthy and sustainable food to a growing global population. And in terms of sustainability, I have said previously that modern food supply chains, made possible by companies such as Cargill, ADM, and retailers like Wal-Mart, have not only allowed us to get foods cheaper than we can produce ourselves or source locally, but may have also helped to reduce our impact on the environment (see I, Chicken).
Greg has a strong understanding of what economists (particularly F.A. Hayek) refer to as a spontaneous order and how the use of knowledge in society is optimized via price discovery:
"I think an underappreciated aspect of food and agriculture certainly the interconnectedness of the various links in the supply chain but powerfully within that is the role of price in changing behavior in a positive way."
"In point of fact,that you watch as price signals very quickly go through the global agricultural landscape and cause players and each individual link to behave differently. And I've seen it in a very positive way. That after, for instance, the very recent result, severe weather in 2012 in the U.S. Midwest, ... And I think people miss that, and it's under-reported, that that signal went out and its speed of response all across the food supply chain to price signals is something that I would not have appreciated as I came out of college in spite of taking a few courses in microeconomics. ...in point of fact people miss the huge positive value they have in terms of food security. "
Also food security, comparative advantage and free trade vs. locavorism:
"One of the big threats to food security is the attempt by individual countries to define food security only in the context of their own citizens. That manifests itself in some cases--people try to start trying to grow crops for which they enjoy no comparative advantage. And so they take valuable acres, valuable rainfall, and force farmers, through tax policy or other means, to plant crops which don't really suit their situation, because they are simply not prepared to have trust-based trade with others who do enjoy advantage in that crop....Might make great local politics in a given country. But if that were practiced on a broad scale by a large number of countries, a lot of our food security would evaporate."
On farm policy:
"the best thing about the U.S. farm bill versus what existed before the last decade--so, what we call freedom to plant--that a farmer can sit down in February and look at his land and look at an array of price signals that he is receiving and determine what crops he should grow. If you go back 15 years ago, in many cases you had to farm to the legislation--that in order to maintain your base acres, and therefore your safety net, you were compelled to grow crops. Today you have in the United States an enormous amount of latitude to make the single best decision for you and your family as to what crop you will grow this year, given your soil moisture levels and a host of other signals. But to sit down at your kitchen table with your advisor or whatever and to make a 10-key calculator determination of what to plant in response to the market signals that you are getting. And so one of the big plusses, and it also has been in the last 15 years, this freedom to use your land according to market signals. Are those market signals shaped by things like biofuels policy? Absolutely. And so, what affects one crop, what affects the price of one crop will clearly affect the level of production for all other crops as well."
They also get into the promises of biotechnology:
"we could feed the world without GMOs; there are other practices that we could follow. So the idea that we are prisoners of this technology I think is something that should be dispelled. On the other hand, I don't think we should try that. I think if our water is precious, if our topsoil is precious, if we really care about the hydrocarbon footprint that we have in terms of the amount of cultivation that we need to carry out, that we should think very carefully about eliminating or demonizing genetic engineering."
Russ closes by asking Greg about his interest and education in economics:
Russ: "I want to close by asking about your interest in economics and where it comes from, and how it affects your work life, to the extent that it does."
Greg: "Well, it affects it enormously. I see Cargill as a great laboratory of both macroeconomics and microeconomics; ... each year provides the opportunity to see many of the things that economic theorists would tell us actually play out on the kitchen tables of individual farmers with 10-key calculators responding to signals."
"We see people ignore--to me, to their great disadvantage--the lessons of those three economists [Hayek,Smith & Ricardo] in terms of how they price water, in terms of how they charge for infrastructure. And so we get to see both the positive power of the messages that those economists talked about but we also get to see the damaging effect of ignoring them. And in very few cases to we see them as being wrong. That these are rules that at least in food and agriculture apply rather consistently and rather quickly."
Sunday, January 04, 2015
"Today, champions of the buy local movement often follow the same faulty economic reasoning: nobody wins unless somebody loses and "I'd rather have the person who looks like me, lives by me, and talks like me win, so I'm going to buy from him." What's sad about this thinking isn't just that it draws arbitrary moral distinctions between humans based on physical traits and location, but it undermines the openness to trade and commercial interaction that has made so many people better off."
The law of comparative advantage implies that things should be produced by those that can produce it with the lowest opportunity cost. For food this might imply utilizing more efficient and environmentally sustainable supply chains (created by companies like ADM, Cargill, Wal-Mart, CSXetc.). But economics also requires us to consider all benefits of a transaction, so even if a local product might have a higher price tag, or be more resource intensive to produce, it might have some unique intrinsic value (like the superior taste of a local beer) that outweighs these other concerns. The article itself is controversial because it implies that sometimes the 'intrinsic' value of buying local for the sake of buying local (a fad) can take on an elitist tone, impoverishing disadvantaged workers (often different races and cultures) in developing countries, and possibly impose greater costs to the environment just to satisfy the fad tastes and preferences of wealthy middle class Americans.
But be clear, there is nothing wrong about having preferences toward local food or products. Economics has nothing to say about interpersonal comparisons of utility, and economists view each person as being the best arbiter of what's best for themselves. I have the opinion that the market will coordinate everyone's behavior to provide the optimal level of whatever types of food options individuals prefer, and local food certainly has a niche to fill. That's why I feel no sense of hypocrisy when I frequent the local farmer's market sporting a Monsanto cap. And, my favorite restaurants are local businesses that often source local produce and meats. If I had the time and resources, I might even start a beef operation that sources local beef to such places. But I would be in the wrong to force others to indulge my preferences through subsidies, taxes, or regulations.