Did monetary expansion cause the Arab Spring?

South Africa's top economic and financial daily, Business Day, ran an article yesterday referring to research conducted in part by my old school friend and occasional commentator on this blog, Chris Becker.

Proof that high inflation leads to more public violence 

NEW research appears to show a direct link between inflation and social violence. In the months before the Marikana massacre, in which more than 30 miners died, there was a spike in nondiscretionary inflation — the inflation the poor experience — from 3% to more than 10%. The same is true of the xenophobic attacks in 2008. Just before these attacks, nondiscretionary inflation surged to 20%. The recent violence in Sasolburg was also preceded by an acceleration in inflation.

One might blanch at the definitive description (i.e. "proof") given to an in-house research document that, as far as I can tell, is unscrutinised by outside review. Certainly, I can immediately think of a host of problems that would need to be accounted for before we even begin to talk about proper causation.

That said, I don't doubt that food shortages and price hikes can, and do, trigger civil unrest and social upheaval. The idea is eminently plausible and there have been many attempts to quantify this relationship (more on this below). I commend Chris for trying to establish a more systematic understanding of the issue in the South African context.

However, I find it striking that this particular article makes no mention whatsoever of the real factors that have been driving high food prices in recent years. You know, massive crop failures due to historic droughts in the former Soviet Union, North America, and elsewhere... That kind of thing. In fact, here's a timely case study on South Africa that pinpoints these exact issues, which is itself part of a broader research programme linking food riots and political instability to agricultural supply-side shocks (in particular, those related to climate).

In contrast, the singular premise of the above BD article seems to be that food hikes -- and subsequent violence -- are entirely the fault of "delinquent" monetary policy.[*] I'm certainly not suggesting that loose monetary policy can't lead to inflation. Rather, the failure to acknowledge these severe real shocks makes any kind of simple analysis very misleading. (I should say that I am going strictly on the article here; Chris and his co-authors may well try to account for real factors in their actual research. At least, I sincerely hope so.) 

However, my faith in journalistic competence is somewhat shaken by the inevitable reference to -- you guessed it -- Shadowstats, the preferred purveyor of hyperinflation statistics for conspiracy theorists freedom lovers everywhere!™ Furthermore, statements like "The conclusion[...] is inescapable: inflation leads to violence" are more or less misleading in the same sense as the suggestion that increasing the temperature of your bath water will lead to you being boiled alive. There may may a kernel of truth therein, but it is clearly important to recognise that this is a matter of degree.

The passage that really caught my eye, however, was the following.

Becker conducted similar research internationally and found that countries experiencing the highest levels of social upheaval, such as Syria, Tunisia, Egypt and Algeria, embarked on huge monetary expansion in the months before the outbreak of violence. This monetary expansion translated into sharp increases in inflation just before the outbreak of violence. In Egypt and Tunisia, the violence culminated in the overthrow of the previous governments.

Woah. Let's just back up there a bit. We are now treading very dangerous territory as far as correctly identifying causation goes. It strikes me as as borderline irresponsible to intimate that the proximate cause of the "Arab Spring" was loose monetary policy. There are a myriad, interwoven factors at play and it would take a highly skilled statistician, armed with reams of data, to tease out the underlying drivers from concurrent symptoms. The fact is I've yet to see a paper on this subject make it through the peer-review process to journal publication... and I'm pretty certain that this is precisely due to the difficulties in attributing causation. With respect to my friend, I'm not convinced that he has managed to crack the problem that has stymied so many others.

I'll leave you with a final thought on this question of monetary expansion and the Arab Spring. A quick Google search on the topic throws up an article by Andrew Lilico that appeared in The Telegraph: How the Fed triggered the Arab Spring uprisings in two easy graphs (4 May 2011).  After demurely suggesting that most analysts are simply too afraid or short-sighted to "join the dots between the Federal Reserve’s second phase of quantitative easing and these revolutions [in the Middle East and North Africa]", Lilico bravely plunges forth to do exactly that. True to his word, he also produces two graphs, the most important of which appears below.

Now, I don't know about you, but that graph seems to show a rise in food prices that precedes the Fed's sharp increase in asset purchases... by several months. I am glad to report that this discrepancy wasn't lost on readers at the time. One commentator sardonically observes: "In my experience causes occur before effects."

It is a matter of some debate among economists how inflation manifests itself in the economy during times of monetary expansion. (E.g. Some of you may recall the rather heated discussions on Cantillon Effects that occurred in the blogosphere only recently.)  Well, it is a relief to know that the issue has been resolved thanks to the careful work of Mr Lilico. It turns out that expansionary U.S. monetary policy is so potent that it can positively impact the price of global commodities with a negative lag of several months!

Note (13/02/13): Follow-up here.

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[*] To be clear, South Africans have also experienced sharp increases in the cost of amenities like electricity and water provision due to some boneheaded policy decisions and as a legacy of inefficient parastatal monopolies. I've covered these issues numerous times before on this blog and elsewhere.

Unintended consequences

During the last year, South Africa has been in the throes of violent upheaval in the mining industry. Most prominently the "Marikana massacre", which received widespread coverage in the international press. The story is a complex one involving increased tension between mining companies and their employees, warring trade union factions, and growing political dissent in the ANC's so-called Tripartite Alliance with the SACP and COSATU. Of course, the stuttering global economy provides a backdrop to all of this as profitability margins have been inexorably squeezed.

The strike action has also spilled over into the farming sector. While the mining industry is located in the far north of the country, the farm strikes have been concentrated in the Western Cape and are therefore much closer to home. The town where my parents live is in the heart of the Cape winelands and the bulk of local industry is very closely linked to farming activity. As I have mentioned previously on this blog, my father is an agronomist and has spent his working life involved in the agricultural sector.

The farm strikes have been much less violent than those in the mining sector, but have still  incurred dramatic economic costs. Stock worth hundreds of millions of Rands has been burned and lost to malicious action. Local trade union leaders have called on international consumers to boycott South African produce until their demands on are met. Quite how all of this is supposed to benefit farm workers and alleviate unemployment is beyond me. (I fear it is beyond the people calling for the boycott.)

One of the most frustrating aspects of these events is that the strikers themselves are not permanent farm staff. They are predominantly seasonal workers and, in even worse cases, simply unemployed people that have been bused in from the cities by venal and opportunistic political leaders. (As some important background, the Western Cape is the only province governed by the opposition DA. The ever gracious and democratically-minded ANC Youth League has responded to this situation not by improving its own service delivery or reconsidering its political manifesto, but by promising to make the province "ungovernable".)

Speaking to some farming friends during my recent trip home, I was left with the distinct impression that they have had enough and will be looking to move into full mechanisation. The ongoing labour issues impose not only higher costs, but also a unnerving atmosphere of unpredictability and uncertainty. Nature waits for no man and an unreliable workforce is one thing that farmers can ill afford; a missed irrigation or spraying session can significantly alter your chances of enjoying a good harvest. One farmer told me that he believes the only way forward for the region is to follow the "Californian model" of grape and wine production, which relies on very little human labour in bringing goods to market.

Going back to mining, the platinum giant Amplats this week announced that it would impose severe cost cutting and restructuring measures to maintain to the profitability of its local operations. Government officials were reportedly "shocked" by the move. Doubtless they are the only ones taken by surprise. With the exception, of course, of our myopic friends in the trade unions.

I'll leave the final word to another friend, also a farmer as it happens, who writes on Facebook:

After months of costly strikes, Amplats will close four shafts and cut 14000 jobs. Massive victory for the labour movement against the forces of imperialism and capitalism. Have no doubt that AMCU and NUM will now provide financial assistance to those 14000 workers and their families, after having pawned them for their blood, union fees and finally, their entire source of income.

Don't let be misunderstood: Malthus edition

Poor Thomas Malthus. Has there ever been a more maligned and misunderstood figure in the history of economics?

With depressingly few exceptions, both his critics and supporters seem equally uninterested in discussing what the man actually wrote. Hardly a day goes by without some mocking reference to the Malthusian Doom that never seems to arrive and its progenitor's endless list of imagined shortcomings. For their part, most "modern Malthusians" in the environmental movement are equally ignorant of what the good Rev'rend was trying to get at, despite their appeals to his authority.

To try and illustrate by way of an example, consider this article by Ivo Vegter in South Africa's Daily Maverick. I'm going to ignore the general thrust of the post -- parts of which I agree with -- and focus specifically on what he writes about Malthus:

Malthus’s theory was simple. In fact, “simplistic” would be a better word for it. He postulated (though did not prove) that human population increases geometrically, while resources increase arithmetically. Geometric growth (often called exponential growth) occurs by multiplying a given quantity every year. Arithmetic growth (also known as linear growth) involves merely adding a fixed quantity each year. No matter what, the former will always outpace the latter over time. 

Let Malthus illustrate it himself: “Taking the population of the world at any number, a thousand millions, for instance, the human species would increase in the ratio of 1, 2, 4, 8, 16, 32, 64, 128, 256, 512, &c, and subsistence as 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, &c. In two centuries and a quarter, the population would be to the means of subsistence as 512 to 10.” 

Even a non-economist can understand this trivial piece of arithmetic. The problem is that neither postulate – not geometric growth in population nor arithmetic growth in resources – was supported by empirical evidence or economic theory. In fact, since neither has anything to do with reality: asserting them probably qualifies for at least some definitions of the word “mad”.

Okay, there's a lot that needs correcting here... and this despite the fact that Ivo spends a third of his time directly quoting the man! The first thing to note is that “postulates” is the wrong word to describe Malthus’s characterisation of population and resources [read: food] growth rates. Rather, he deduced these growth rates from preceding postulates and observations about the real world. Indeed, Malthus is quite clear about what his actual postulates are: “I think I may fairly make two postulata. First, That food is necessary to the existence of man. Secondly, That the passion between the sexes is necessary and will remain nearly in its present state.”

So, we're not off to the best of starts. Still, you could argue that mixing up assumptions and subsequent deductions is perhaps a harmless offence in this case... so long as Ivo gets his basic critique right. Let's look a bit deeper at his specific criticisms then:

“The problem is that neither postulate – not geometric growth in population nor arithmetic growth in resources – was supported by empirical evidence or economic theory.”

This, particularly with regards to Malthus’ “postulate” on population growth, is quite false. Among other things, Malthus supported his theoretical arguments with empirical evidence from the newly established USA, which had doubled in size every twenty-five years. (Adam Smith had made similar observations in The Wealth of Nations two decades earlier.) The richly-endowed and untapped New World was especially relevant to Malthus, because his entire theoretical argument hinged on how population levels would hypothetically evolve free of natural constraints. Far from claiming this as the expected order of things, Malthus is very clear in his thinking [emphasis added]:

I said that population, when unchecked, increased in a geometrical ratio[...].

Let us examine whether this position be just.

I think it will be allowed, that no state has hitherto existed (at least that we have any account of) where the manners were so pure and simple, and the means of subsistence so abundant, that no check whatever has existed to early marriages; among the lower classes, from a fear of not providing well for their families; or among the higher classes, from a fear of lowering their condition in life. Consequently in no state that we have yet known has the power of population been left to exert itself with perfect freedom.

As a stylized biological assumption, I really don’t see what the problem is. Ivo again misconstrues the matter when he later writes: “Therefore, assuming geometric growth in human populations is a simplistic fallacy.” No, it is a reasonable benchmark upon which we can compare observed population growth rates!

Malthus later provided further empirical justification for his theoretical arguments in his second Essay on the Principle of Population; for instance, citing evidence from his travels in Scandinavia. I mention this not only to show that Malthus didn't simply pull these figures from his nether regions... but because it is important to note that he substantially revised upon his original essay after it was first published. Each time he undertook such a revision, he would address criticism and seek to add further evidence in support his arguments. By the 6th edition of Population, he had pulled together evidence from over 20 different countries and cultures.

If Malthus provided sound reasoning and evidence for his arguments on population growth, then he was undoubtedly on shakier ground with his assertions on food production. In fact, his downfall here was to base his arguments largely on historical observations of agricultural yields... so even then I don’t see how you could argue that there was no appeal to empirical evidence.[*] That's not to say that he didn't try to provide any theoretical underpinnings to his position, as he effectively described agricultural production as being subject to -- what we would today call -- diminishing returns to scale. From his second essay [emphasis added]:

The science of agriculture has been much studied in England and Scotland; and there is still a great portion of uncultivated land in these countries. Let us consider at what rate the produce of this island might be supposed to Increase under circumstances the most favourable to improvement. 

[...]In the next twenty-five years, it is impossible to suppose that the produce could be quadrupled. It would be contrary to all our knowledge of the properties of land. The improvement of the barren parts would be a work of time and labour; and it must be evident to those who have the slightest acquaintance with agricultural subjects that, in proportion as cultivation extended, the additions that could yearly be made to the former average produce must be gradually and regularly diminishing.

Malthus failed to grasp how technological innovation would revolutionize agricultural production, it is true. One could argue that this was at least partially due to the fact that he couldn't foresee how future discoveries of fossil fuels -- oil in particular -- would completely transform the way in which people farmed... from agricultural mechanisation to petroleum-based fertilizers.[**] However, it is abundantly clear that Malthus didn't think up baseless assumptions from which he could then make wild claims about mass starvation and future misery. His much more conservative point was that population increases would be subject to natural checks on food supply.

I'm just a soul whose intentions are gooood

THOUGHT FOR THE DAY: Ivo is not alone in drawing a crude caricature of Thomas Malthus. Indeed, to repeat what I said at the beginning of this post: the man might be the most misrepresented person in the history of economic thought ... which is saying something in of itself. I’m not suggesting that Malthus was correct in his Population Essay(s), because he clearly overlooked the likelihood of tremendous advances in agricultural technology. However, it’s extremely discouraging that such a profound thinker is tied to his “worst” idea, and a cartoon version at that.
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[*] A more sophisticated argument might be to criticize Malthus for relying on a form of historicism, as opposed to empirical evidence. This is certainly a better line of attack, although not incontestable given the very broad context of his writings.
[**] In this way, he partially foreshadowed William Stanley Jevons, who actually wrote about energy matters... see here.

Chief EU science adviser on GMO

Scottish microbiologist Anne Glover is the recently appointed chief science adviser to the EU. The below excerpt concerning GMO is taken from an interview that she gave last month.

She makes three major points: (1) There is a fundamental need for a profit-driven agri-business, (2) Resistance to GMO is driven by emotion rather than any kind of scientific evidence, and (3) Anti-GMO lobby groups are partially to blame for the monopoly power that they so vehemently claim to oppose.

In terms of food security and safety – where do you stand on genetically modified products and what do you think of the EU’s rather dismissive stance to GM to date? 

“In my own area of science, molecular biology, I have used the GM technology for most of my research career and very helpful it has been in generating understanding about how biological and environmental systems work. So I know the power of the technology and the regulations we adopt in order to use it are very sensible and appropriate. I can also see that healthcare and our understanding of diseases has been revolutionised. There has been an unparalleled acceleration of our knowledge generation through the use of GM, which is a fantastic thing. 

“But people in Europe are anxious about the use of GM crops or animals and I have a concern about that because I don’t see the evidence base suggesting that there is substantial risk associated with it. Indeed, you could look at North America where they have been doing an experiment on our behalf for the last 15 years by growing and eating GM crops – and I don’t see over that period of time what negative impact it has had. There is a huge body of evidence, rightly so, looking at the risk of GM. People will ask me: ‘Is there no risk in eating GM crops?’ Well, of course, I would never say that as I am a scientist. What I would say is that whatever you eat for dinner this evening, there is a risk in eating that. There is risk associated with conventional agriculture, organic agriculture, any form of agriculture. 

“Agriculture has a big impact on our environment. The act of fertilising fields reduces the microbial diversity in the soil, but we don’t think that it has any long-term effects. We think it is something we need to do. There are implications for climate change and water spoilage issues so we need to do that with care. So around GM, let us examine the evidence. It doesn’t support the restricted activity in this area that we see. 

“People may say that it is just big business that is making money out of this, but I can’t help thinking that is the job of big business. It is a capitalist system we work in – energy companies make money, transport companies make money. So do agricultural companies. I wish there was a better debate around GM, based on evidence and not emotion. And I wish we could look at risk versus reward. Some farmers say that if we introduce these particular types of GM seeds, then we are tied in to using particular chemicals to manage our crops. They don’t like that because they feel it is a monopoly to a particular company and they are uncomfortable about that.” 

But isn’t that part of the problem, these allegations that a small number of firms have a monopoly in the GM market? 

“Possibly, the reason that [monopoly power] has happened is because of all the restrictions on GM. If I was running a small seed company, it is not an area I would be getting into because I couldn’t afford to do it. The lobbyists and pressure groups have almost been responsible for it by causing this withdrawal from evidence and this acceptance of the emotional argument. It really is not fair to use terms such as ‘Frankenstein foods’. We should be a bit more cautious in Europe here. By turning our backs on the evidence, there is a question over whether we are still going to be as competitive. We need to seriously look at GM crops when we tackle to the global problem of climate change and being able to feed the population of the world. It links into food security as well and we do need to think about that.”

Irony

From the Wikipedia page on Agricultural Policy:

Some argue that nations have an interest in assuring there is sufficient domestic production capability to meet domestic needs in the event of a global supply disruption. Significant dependence on foreign food producers makes a country strategically vulnerable in the event of war, blockade or embargo. Maintaining adequate domestic capability allows for food self-sufficiency that lessens the risk of supply shocks due to geopolitical events. Agricultural policies[...] may be an ongoing subsidy designed to allow a product to compete with or undercut foreign competition.

Could this possibly backfire? Hmmm, let me think... This week in Scandinavia:

Danish dairies say no to Norway

Dairy producers in Denmark have said they won’t export butter to neighbouring Norway, despite moves by Oslo to cut tariffs as the country battles to get the product back on supermarket shelves.

Norway, like Sweden and Finland, has been hit by a major butter shortage in recent months. The Nordic trio have seen less raw milk available annually amid soaring demand for high-fat dairy products such as creams, butters and milk. 

[snip] 

But while the Danes are happy to help out the Swedes and the Finns, Norwegian shoppers look set to be left in the lurch with Christmas looming. 

Oslo has slashed import tariffs on butter for the month of December in an attempt to attract foreign producers, but leading Danish dairies remain unimpressed. 

“We’ve been bashing our head against an excise wall in Norway for more than ten years, so we don’t have enough faith in a little hole in the wall to start sending butter via that route,” said Mogens Poulsen from dairy Thise Andelsmejeri to news website foodculture.dk. 

Danish news reports said the country’s other main dairy producers were similarly disinclined to make a beeline for the Norwegian market. 

“We can’t start building something up only to dismantle it again three weeks from now,” said Arla spokesperson Theis Brøgger to foodculture.dk.

It may only be butter, but still a telling example. On a general level, I don't know which I find more impressive: The fact that so many people are in agreement about the need to drastically scale down agricultural subsidies... Or that these subsidies somehow remain as entrenched throughout the world as they do.

UPDATES: (1) Norway is a great place to live in many ways, but their protectionist trade policies suck. Most of the Norwegians that I speak to are pretty happy to echo these sentiments, although that might not be a representative sample. (2) Damn. Butter futures would have been a good investment. Black market bids currently going around $500 per half kilo!

Avoiding hypocrisy on the big issues

Think of an important environmental issue. Now imagine that there is a large body of scientific research, underpinned by peer-reviewed literature, which has arrived at a broad consensus regarding the relative risks that this issue poses to both the natural ecosystem and human well-being. Standing against this majority scientific position is a stark group of contrarians. They do not have much (if anything) in the way of peer-reviewed science to support their arguments, but instead point to controversial studies by partisan think-tanks and fringe researchers. Further, they invoke a number of conspiracy theories to explain why their position has been marginalised to a scientific minority and yet, ironically, they enjoy significant public support of an almost religious zeal. To be sure, the contrarians certainly aren't adverse to appealing to people's religious sensitivities as way of convincing others of their arguments...

"Yes, OKAY", you're telling yourself, "I know all about climate change scepticism. Get to the point." Except I'm not talking about climate change. I'm talking about genetically modified organisms (GMOs).

Genetically enhanced?

The climate debate and the GMO debate have eerie parallels. Certainly, both are highly polarising issues, which present a myriad of conflicting "facts" to anyone wishing to form an educated opinion on the subject(s). You can spend weeks... months... lost in the dark recesses of the internet trying to disentangle fact from fiction, whole truths from verisimilitude, and legitimate concern from moonbeam conspiracy theory.

When it comes to potentially confusing subjects like these, I believe that we should always make it our first priority to consult the relevant scientific literature. What better way to start addressing a topic than by referring to the qualified experts who have studied these matters in depth, subject to rigorous cross-examination by their peers? This is how we truly weed out the good ideas from bad. In its best form, peer review doesn't appeal to a priori beliefs or care for ideological predispositions. What matters is that you can design and carry out a study (or present a theory) according to accepted scientific standards, in a manner that can be replicated and/or tested by others. The strongest theories survive, while the weak are discarded. Indeed, that's the beauty of peer review; it acts as self-correcting and self-regulating mechanism.

But here's the rub: There is a tremendous inconsistency in the way that people use peer review to approach the respective issues of climate change and GMOs. Since my post here is directed at "environmentalists" as much as anyone else, let me use them as an example.

An environmentalist will happily cite the leading scientific journals, the IPCC and other major scientific bodies in defending his/her position on climate change -- presumably that it is i) happening, ii) driven by human activity, and iii) will bring negative consequences in the absence of strong mitigating action. To all this, I say, "rightly so". However, change the subject to genetically engineered crops, and suddenly those rules go out the window. The selfsame environmental organisations that invoke the most respected scientific bodies to confront climate sceptics, all but ignore what these organisations have to say about GMOs. If that sounds like an unsubstantiated generalisation, have a look for yourself: Greenpeace, Friends of the Earth, etc... are all remarkably consistent in their inconsistency. To be honest, it's disappointing to see just how few exceptions there are to this trend. I realise that people tend to seal themselves off to evidence that isn't congenial to their world view, but we owe it to ourselves to face facts. Speaking of which, let's consider some of the common charges laid against genetically engineered food...

1) GMO crops are dangerous to our health
Um, no. Since their formal approval and introduction into the American marketplace in 1996 and elsewhere, GMO products have been consumed by hundreds of millions of people. To date, not a single substantiated case of human illness or harm has been documented. Nada... not one. Consistent with this, numerous scientific articles published in leading medical journals have have upheld the notion that authorised GMO crops are safe for human consumption. Claims to the contrary have been rejected by reputable journals precisely because they fail to live up to scientific scrutiny.[*] And, of course, there's a functional benefit specific to genetically engineered crops that somehow keeps getting overlooked in this debate: They can be made to produce additional vitamins and nutrients, which are otherwise lacking in certain staples, and thus improve human health. (E.g. The so-called "Golden Rice", which has been biofortified with provitamin A and thus helps to ward off a deficiency in this important vitamin. Another example, virtually all insulin used to treat diabetes nowadays is produced using GMO processes.)

2) GMO crops are bad for the environment
Again, the evidence suggests quite the opposite. The introduction of GMO crops has generally enabled farmers to reduce their reliance on pesticides and herbicides, or allowed them to use less harmful chemicals (e.g. glyphosate). Using herbicide-tolerant crops has also meant that farmers have had to rely less on tilling the soil as a means of controlling weeds. "No-till farming" is good for the environment in the sense that it helps to prevent soil erosion and rainwater runoff. This not only reduces the loss of important nutrients in the soil, but also means that water quality is improved since less chemicals ultimately end up in the waterway.

3) GMO crops have reduced yields and they are more expensive
Despite the claims of many anti-GMO campaigners, this too remains an unproven accusation. Indeed, according to some of the most extensive studies on the matter, GMO crops have been shown to have lower production costs relative to conventional methods, as well as higher output and other extra conveniences. More importantly, these benefits have generally outweighed the higher costs of the engineered seeds in places like the United States.

Before concluding, let me attempt to pre-empt criticism of this post with two caveats:

First, I am by no means suggesting that peer review or our leading scientific bodies are infallible. Certainly, there are well understood problems associated with group-think (or even article suppression and qualification masturbation), which may undermine the process. Just as a majority position does not necessarily constitute an unassailable truth, so we should not -- to channel Richard Horton -- confuse scientific "acceptability" with "validity". However, while peer review is subject to occasional bouts of subversion, it remains far superior to the alternatives. (A blogosphere free for all? No thanks...) Again, I refer to the self-regulating nature of scientific review. Call it the market economist in me, but I find it incredulous that an unsound scientific theory could persist at the expense of a better alternative for very long. In any case, if you chide people for not following the scientific consensus on one topic, it behooves you stick to these same principles on others.

Second, beyond the issues of human and environmental health that I focus on here, there may be other legitimate reasons to oppose the dissemination of GMO crops. I like organic products as much as the next relatively well-to-do Westerner, while I've had my say about animal cruelty before. Further, potential control of food chains by a small number of multinationals through patented crop biotechnology seems to me to be a reasonable concern, deserving the standard anti-trust treatment. I also believe that it's crucial not to collapse the feed-the-world movement into some purely technological debate. As Amartya Sen eloquently argued three decades ago in Poverty and Famines, access to food is much more a complex mix of economics, social and political factors than simply a matter of food production and availability. Indeed, hunger continues to persist in many regions that have bountiful harvests. Agricultural innovation is a wonderful thing (read Norman Borlaug), but technological solutions are not necessarily a panacea for problems of socio-economic origin. Still... These are distinct issues from the scientific aspects that I have discussed above (i.e. human health and environmental safety). If opponents of GM want to preserve their credibility, then they need to separate legitimate concerns from the unsubstantiated, discarding the latter in the absence of credible evidence.

THOUGHT FOR THE DAY: What's good for the goose, is good for the gander. Being concerned about the environment and human health doesn't mean that you can have it both ways, choosing to invoke scientific evidence when and where it is congenial to your position. Those of us who think that climate change is a real issue deserving meaningful action rightly point towards the peer-reviewed science as a first stop for informing our opinions. We would do well to do the same for other contentious issues, such as GMOs.

[*] The most  famous example being the highly-charged Puszstai Affair, in which a controversial study by the eponymous researcher was first published and repudiated by the medical journal, The Lancet. That people may feel (justifiably?) dismayed at Pusztai and his co-author's subsequent treatment by the scientific establishment does not detract from the very real flaws in his study. For instance, his strange decision to use a non-commercially available GMO crop to pass negative judgement on GMO crops in general. Just to be clear, he created a potato crop (expressing a protein toxin derived from a toxic plant), which had never been approved for human consumption by any government agency. He then fed this to rats and made an assessment of how much damage it caused to their stomachs (as compared to normal potatoes where the same toxin was independently added). As Sir Robert May sardonically observed: "If you mix cyanide with vermouth in a cocktail and find that it is not good for you, I don't draw sweeping conclusions that you should ban all mixed drinks."


For those looking for references, some suggestions for further reading are under the fold:

Food prices and climate change (gasp!)

Secondary subject line: The relative prices argument for strong action against climate change.

Paul Krugman must have been feeling more provocative than usual yesterday:

What’s behind the surge in food prices? The usual suspects have made the usual claims — it’s all about the Fed, or it’s all about speculators. But I’ve been looking at the USDA World supply and demand estimates, and what stands out from the data is mainly that we’ve had a huge global harvest failure. 

[snip]

Why is production down? Most of the decline in world wheat production, and about half of the total decline in grain production, has taken place in the former Soviet Union — mainly Russia, Ukraine, and Kazakhstan. And we know what that’s about: an incredible unprecedented heat wave. 

Despite his later disclaimer about attributing any single weather event to larger trends in our climate, you have to credit Krugman for knowing how to rile the opposition. The implication that rising food prices (i.e. inflation) are the result of climate change -- rather than the actions of Dark Lord Ben Bernanke and his evil minions -- is enough to have caused brain explosions in conservative households across America. The only way that Krugman could have come up with a more unholy combination aimed at upsetting this particular constituency would be to suggest that Mao Zedong was directly descended from Jesus.

Anyhoo, I don't wish to get dragged into the relative merits of Krugman's argument on what is causing the current rise in food prices.[*] What I am interested in, however, is the idea that he touches on here; how climate change could affect food prices. It got me thinking about one of the strongest arguments I have heard in favour of swift and decisive action against climate change: the role of relative prices.

The basic gist of the relative prices argument goes like this: Environmental goods and man-made goods are imperfect substitutes. With environmental goods expected to become "scarcer" as a result of climate change (increased drought, loss of biodiversity, etc), it follows that they will become more expensive in comparison with man-made goods. This will clearly impact our ability to generate future wealth and needs to be accounted for when we evaluate our best response to climate change. Indeed, incorporating this into our analysis strongly supports the notion that we should be looking at decisive action against climate change sooner rather than later.

The above ideas are neatly encapsulated in the following paper by Sterner and Persson: An Even Sterner Review - Introducing Relative Prices into the Discounting Debate. As I have said elsewhere, this might be the one paper that I would recommend everyone read to understand the basic arguments surrounding the economics of climate change. The authors do a great job in discussing the most salient aspects of the discount rate (which is central to much of what climate change economics is about) and the controversy surrounding different estimates by the likes of the Stern Review and his opponents, before adding their own contribution via the aforementioned relative prices twist. Seriously, have a look. It's not too long and very readable.[**] 

Anyway, I was thinking of all this when I read that Krugman post. I left a comment -- lost among the many :'( -- that included a quote from the above Sterner and Persson paper, which is very germane to the issue at hand:

"[G]lobal agriculture is said to represent 24 percent of global GDP (Stern Review, p. 67). A 1-percent loss of agricultural output might be estimated to reduce global GDP by.24 percent. Basic logic, however, tells us that a 50-percent loss of agricultural production would reduce global GDP by much more than 12 percent, and a 100-percent loss would reduce GDP by more than 24 percent of GDP. The mechanism behind this would be escalating food prices: As food became more and more scarce, its relative price would rise so fast that the dwindling food supplies would crowd out everything else and approach 100 percent of total GDP." (Pg. 68, emphasis added)

THOUGHT FOR THE DAY: Apart from being tremendously self-indulgent, one of the reasons I started this blog was because I wanted to try and act as an intermediary for ideas that I have come across in my field of specialisation (environmental and natural resource economics) and put them in a format that friends and non-specialists could easily access and debate. When it comes to the economics of climate change, reasonable people have argued that it makes sense to focus adaptation measures rather than attempting to reduce carbon output. Typically, this would involve the continued heavy use of fossil fuels in a bid to grow our economies as fast as possible so as put us in a better position to deal with any effects that climate change has. However, there are several reasons why I respectfully, yet firmly, disagree with this position. The impact that relative prices will have on our ability to create wealth is chief amongst these.

UPDATE: I have some follow-up comments about this relative prices issue, as well as the role of the discount rate in climate change economics here. 

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[*] For what it's worth, I think that we are going to see higher food prices generally in comparison to previous decades. In particular, the evidence points to a stronger link between the prices of energy and non-energy goods. This was a key driving factor during the 2006-2008 boom and, while the recession may have burst that particular bubble, I don't see any obvious reason why the fundamentals have changed. 

[**] For those of you feeling up to it, the ever-impressive Christian Gollier has put forward a number of analogous, though far more technical papers on this subject... For example here and here. [Wonkish: By focusing on the "ecological discount rate", Gollier actually goes some way to merging the relative price argument with Weitzman’s uncertainty principal, before arriving at separate discount rates for biodiversity (1.5%) and consumption (3.2%). As some of you may recognise, the former is pretty much on par with Stern’s rate of 1.4%…]

Meat and Veg(etarianism)

UPDATE: I stumbled upon this George Monbiot post today (Jan 24) from a few months back, discussing what seems to be a very interesting book by one Simon Fairlie: "Meat - A benign Extravagance". Fairlie apparently skewers a number of "green" myths concerning the environmental damage wrought by meat production; although he advocates a much different farming system than the one we currently have to prevent the environmental degradation and suffering that does occur from livestock farming. To his credit, Monbiot (an already admirable environmentalist and journalist in many ways) recants his previous views in light of Fairlie's evidence and research. Read the post; there's much food for thought (he he sorry) therein.

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Something's been cropping up quite often in conversations that I've been having lately.

Vegetarianism.

Me? I eat lots of meat. Too much, I fear, and have recently endeavored to cut back on red meat in particular. Now, "Stickman" isn't a particularly ironic moniker so I guess you could say I'm doing okay in the weightiness department. However, there is good evidence to suggest that large portions of Western society consume more meat than is strictly healthy. Part of the problem is that we humans are outgrowing our biology, as we now consume certain foodstuffs in much greater quantities than the natural settings of our ancestors ever allowed. (More on that below.) I thus find myself sympathizing with a several pro-vegetarian arguments, although I don't think I'll be going full veggie any time soon myself. Still, a number of my friends have embraced the non-meat path and my discussions with them, as well as fellow carnivores like myself, seem worth jotting down.

Naughty.

To start, it seems biologically obvious to me that we are "meant" to eat meat. Humans are essentially the perfect omnivore. Our teeth are a nice mix of flat molars, premolars, incisors, etc that allow us to easily process both plant and animal material. Similarly, our digestive tract (intestines and all) is adapted to process and absorb the nutrients from all ends of the spectrum. Not only have our bodies evolved to deal happily with everything from rump steak to salad leaves, we actually require certain vitamins and nutrients that are only available in one food group or the other. In other words, we have to source some food from animals (e.g. certain B-vitamin complexes) and some from plant matter.

Can't we just talk about this?!

Of course, that last sentence only holds true in completely natural surroundings and, as I said earlier, I see the vegetarian debate is an example of us "outgrowing" our biology. The irony is that the consumption of meat played a pivotal role in the development of the human brain and broader civilization. The higher protein and calorific content of a partly carnivorous diet provides sustenance over longer periods, which among many other things allowed us time to plan and engage in other activities besides living literally hand-to-mouth. Perhaps most importantly, it fostered coordinated group action and communication between individuals, which were critical to tackling your average woolly mammoth.[*] And, indeed, doing pretty anything of substance ever since.

Getting back to what is "natural", I guess you could say that this is now a largely redundant concept. We don't live very naturally at all anymore... And, of course, this is part of the problem as we now have instant access to quantities of meat (and sugar and fat) that we would never have come across in such abundance in nature. Witness the rising trend in developed nations where more people are dying from diseases of lifestyle opulence and excess (e.g. heart attacks and obesity) than infectious diseases. The flip-side to this is that we are having to consciously curb our intake of certain foodstuffs that our bodies crave; something that I don't imagine has precedent for most of human history. The other aspect of having "overcome" nature in this way is that we now have all manner of supplements and products to make fully-fledged vegetarianism a viable and healthy lifestyle alternative. Or so I'm told.

And then you have to unpack the more tricky component of our evolved biological selves: Ethics.[**] While our physiology and human history provide very good reasons to dismiss the notion that we should be herbivores, there's no denying the strong moral compulsion that many people feel when it comes to killing animals. While it's hard to defend someone's distaste for hunting when they eat meat that comes all conveniently packaged from the supermarket, I do think that decent people can agree the suffering endured by many farm animals is abominable. (Watch Food Inc or the even more disturbing Earthlings - which you can see in its entirety online - if you're feeling up to it. On a quasi-related subject I plan to write something on GM crops sometime soon... I'm actually generally pro them for reasons that I shall explain.) It's not too much of stretch going from anti-cruelty to believing that we should not kill animals at all, although I do make this jump myself. Visiting my family in England (including my aunt who has been a vegetarian for decades), my cousin had an interesting thought. She mentioned how she'd been discussing vegetarianism with a friend and they'd pondered whether eating meat might suddenly become totally unacceptable in much the same way that slavery did. I think that this idea has more to it than face value, because it shows how dramatically  we can shift away from a norm that has been socially acceptable for the majority all of human history.

Another twist in the ethical tale is related to matters of resource use, loss of biodiversity to farming and (dum dum daaaa) climate change. I have several friends that have completely or to a large extent cut back on meat, because of such reasons. I admire the strength of their convictions, but can only see the general trend in meat consumption moving one way... particularly with the increased wealth and rising demand for higher protein, Western-style diets coming out of developing nations.

I'm about done here, but I thought I'd leave you with a final, macare thought. I'm not sure where this thought first came to me -- likely some low budget sci-fi film -- but I sometimes have this vision of aliens feasting around a dinner table in much the same way that we do in polite society. Except, rather than roast pork or skewered beef, the meal on display is a grisly composition of human parts. The fleeting image of an exposed human rib-cage ready for the offing might not be enough to permanently put me off my food, but it does cause me to take a depressing second thought about that rack of lamb I love so much.

Right, that's it for now. I'm off to lunch.

o-[O< 

(fat full Stickman)

[*] This is a major theme in Jacob Bronowksi's The Ascent of Man, which although dated in some minor aspects, is still a fantastic read. The other great book detailing the role of diet in driving civilization is, of course, Guns, Germs and Steel by Jared Diamond.

[**] I know many would contend that morality stems directly from a higher power. I would encourage you to view this post if you're interested in that debate.