X-Message-Number: 5539
Subject: Prices, markets, etc.
Date: Thu, 04 Jan 1996 07:48:13 -0500
From: "Perry E. Metzger" <>

> From: Peter Merel <>
> 
> >Lets take food production, for example. Land degradation is a smooth,
> >continuous process as is the increase in demand for food. 
> 
> Wow, never heard of the logistic map? 

Nope. Never have. Why don't you be so kind as to explain what it is.

> >When food
> >prices rise sufficiently, the owners of the land will have more than
> >sufficient incentive for land reclamation and cleanup, and as I've
> >noted, given the smooth nature of these processes it is unlikely to
> >creep up on us suddenly.
> 
> I'm sorry, but I don't understand how the continuity of a function
> influences its rate of increase, so this appears to be a non-sequitur.

I never said that the rate of increase and its continuity are
related. All I said was that land degredation and increase in demand
for food are smooth and steady functions. If you dispute that, well,
thats your problem -- you would be going against all available data in
addition to all common sense. Please re-read what I said.

> >I don't think you understand. Your feeble little attempts to plot
> >global food production are trivial in comparison with the quantity of
> >work being done by the millions of people working every day in the
> >trading of food commodities world wide. You are unlikely to produce
> >any information more accurate than that generated by the marketplace.
> 
> Non-sequitur again? Sure, commodities markets tell us some things about
> present supply and demand. Actually, they're not very good even for
> this, as the supply is often fabricated for political purposes

If you can find a large worldwide market that can successfully be
manipulated, please let me know -- but I suspect it will be a cold
day in hell before you manage it.

> (for a good example you might examine the way that the Japanese
> manipulate the Australian coal-mining industry in order to benefit
> Japanese steel),

How, exactly, do they do this? I have trouble believing that anyone
can manipulate the coal prices in any given country given the size of
worldwide energy markets. Anyone trying to manipulate the energy
markets would probably be squashed like a bug by arbitrageurs.

> and demand always ignores the economically disenfranchised.

Huh? You mean that the poor don't eat?

I'm really starting to get tired of this discussion. It appears that
someone who knows little of economics has become frightened by
processes they poorly understand.

> But anyway, I see no reason why commodities markets should pay
> attention to the ecological/economic woes of future generations -

They don't have to. The point is that if the amount of food available
per human on the planet was really dropping, or becoming harder to
produce, we would expect the long term trend to be for an increase in
food prices. Since the opposite is the case, we must assume that food
is not becoming harder to produce. Since the demand increases on a
fairly smooth basis, and since environmental degradation occurs on a
fairly smooth basis, we are forced to conclude that it does not appear
that environmental degradation has resulted in reduced global food
production or that we will face any sort of food crisis in the
reasonably projectable future. I can't predict what will happen many
decades off, but as I've stated, there is reason to believe that we
don't have a real problem given that market signals very nicely result
in resource reallocations.

> >[snip] However, I have grave doubts that we will EVER see massive
> >worldwide famine again so long as war and the like do not seriously
> >disrupt global production and trade.
> 
> Without useful data to support it, what authority does your opinion convey?

I'm afraid that the data *does* support my position.

> >Free markets do amazing things, you know. 
> 
> By gum, they do. Good and bad. They feed some people, and they let others
> starve. They boom and they bust.

1) The markets don't feed anyone or allow anyone to starve -- they
   merely provide a place for people to trade commodities. In any
   case, the comment is a non-sequitur -- the "morality" of markets
   bears no importance of any kind on their behavior, which is fairly
   predictable.

2) Actually, free markets rarely go boom and bust, although markets in
   which the money supply is manipulated sometimes do that -- see the
   work of Von Mises or Hayek for information on that topic. As I
   said, however, this is irrelevant. The point is that we would
   expect food prices to be a good indicator of relative supply and
   demand. Your thesis that per capita supply is tightening isn't
   borne out by the markets.

Perry


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