After yesterday’s post, there was some good discussion in a couple of different fora. Some of the more interesting observations came off of the afterthoughts.
I think that there are some things that are too important to society to have them serve as engines of profit. I include the basics: housing, medical care, basic food provision for the masses, basic education, and so on. Note that this doesn’t mean “let’s make them into pure social programs.” I’m a big believer in market forces. It’s just that if housing is important enough to regulate – then don’t regulate it for the benefit / profit of the wealthy … regulate it for the the benefit of the majority.
To which my friend Scott said:
I don't understand the tendency to think that market forces (motive for profit) shouldn't be employed for "the basics" as you say -- a shortage of food makes the price go up and a farmer than can produce more of it and does so in order to make a profit.
Another friend, Lyell, jumped in and gave exactly the right answer:
If you had farmers leaving the industry after every little food shortage (market forces, ya'll!), you'd have far, far fewer products on the shelves and much more volatility in the ability to feed the entire population.
I’ll expand on that: It takes a long time and a lot of work to get a farm running. It takes a long time to produce a single crop, once you have that farm in place. It doesn’t take all that long to ship the food around, but it’s important to know whether you’re planning to eat it fresh or preserved in some way. By contrast with those long-view items you’ve the inescapable fact that every person on earth has to eat, nearly every day. Civilization is a thin veneer, perhaps three meals thick, on top of chaos. It only takes a day or two of being unable to feed a family before even the most law abiding of citizens will go out and start doing very non-law-abiding things. We all have a strong, shared social interest in (to keep it in economic terms) low volatility in the food supply.
One can argue about the merits of various schemes accomplish that stability – but I’ll go out on a limb and say that if you’re opposed to a stable food supply – then you and I don’t have much to talk about, politics-wise.
Put another way: No matter your political affiliation, you want sufficient food to be available, at reasonable prices, every day, in every single city across the country. At a microeconomic level I support allowing the market to float and set prices on various products. I like the idea of being able to choose to pay a little more at Whole Paycheck, or to save a few bucks at the discount place nearby. However, at a larger scale it would be madness to have something as critical as the freakin’ food supply run entirely without some level of regulation and government support.
That support can take the form of price supports for slow growing crops (so that farmers will take the risk of actually planting them, year over year). It can take the form of tax deductions to help food producers stay in business through hard times. It can take the form of straight out subsidies – though those are harder for me to justify.
The point is that with none of those protections – we take unacceptable risks as a society.
At no point here am I suggesting “free gub’mint food for everybody!” That doesn’t work either. Put away your cries of “socialist.”
The main thing that I want to protect against is the idea that the greedheads, fast twitch traders, finance guys, and other margin humping types will somehow, for the first time in their existence, be motivated by a social benefit. Altruistic people are generally out-competed in today’s free market – which is well and good – provided that we keep them away from the core underpinnings of civil society. I’m certain that there’s the potential to extract massive profits from the baseline food production industry. It could be driven into a speculative bubble and then cashed out. We’ve got tons of history that shows that the best finance people will, very consistently, assign zero weight to the risk of food riots in American cities. Especially if those notional riots were to occur anytime after the annual bonus season.
You know for a fact that it won’t be the marketeers whose kids go to bed hungry.
Fortunately, a housing market collapse is a lot slower than a food supply collapse. We can sit in our homes and watch their notional values crumble (value that never really existed anyway) – but at least we can still live in the tangible asset while that happens. Renters are slightly more screwed – but only slightly.