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‘Who is in charge of bread supply in London?’

By skepticlawyer

Sometime before 1989, a Soviet official asked economist Paul Seabright who was in charge of London’s bread supply. Seabright gave him an answer that is comical but also true: ‘nobody’. The bread we eat turns up on our tables thanks to an incredible team effort (bakers, machinists, electricity suppliers, distributors etc etc). And even more incredibly, there is no-one in charge of that team.

It just happens.

Hold that thought in your head for a bit, and bear with me while I take a detour via some current (very popular) non market ideas about food distribution.

In the recent (and very stoushy) climate change threads on this blog, Legal Eagle flew the flag for equality in the face of other considerations that often engage those on the political left. In various comments, I pointed out that I was less concerned about equality: like many people on the libertarian right, given a choice between liberty and equality, I will often (but not always) sacrifice the latter value to the former.

This can seem callous to those who aren’t aware of the economic reasoning behind it, so I’ll explain.

Many of you will be familiar with John F Kennedy’s famous quip that a ‘a rising tide lifts all boats’. The tide, of course, is that of prosperity, something with which much modern politics is concerned, at least in liberal democracies, and also in the authoritarian capitalist states. Note, however, that Kennedy’s quip doesn’t suggest that the tide of prosperity will close the gap between the different boats. Indeed, it often doesn’t. It just means that, over time, everyone will be better off.

Because attempts to close the equality gap between boats have been so fraught (and often downright murderous), I am quite happy to live with this sort of inequality. There are rich people and there are poor people, but as long as the latter are getting better off over time, I’m not terribly concerned about what the rich people are doing.

I am concerned, however, if anyone (be they rich or poor) tries to tell me what I should be doing. This includes things that rich people like to force on others (everything from barriers to market entry to attempts to tell me what I should eat and how to raise my children) and poor people like to force on others (everything from telling me who I should employ in my firm to arguments against abortion). Of course — as Noel Pearson pointed out in the piece Legal Eagle quoted — there  are poor greenies. Of course there are also likely to be wealthy anti-abortionists and poor promoters of a ‘closed shop’. In my experience, however, the stereotypes have a fair degree of accuracy. Doctors and lawyers — these days — are much better at abusing their scarcity power and raising barriers to entry than trade unions. Poor people tend to be religious.

And rich people tend to be green.

There’s also a variety of inequality that even a right libertarian like me isn’t willing to tolerate. That’s a situation where poor people start to go backwards in absolute, not just relative terms. I don’t mind the rich getting a lot richer as long as the poor get a bit richer. I won’t wear the rich getting richer while the poor go backwards. And any time I see a policy that looks like it’s heading in that direction I will call it out, especially if the policy proposers engage in deliberate obfuscation of the fact that implementation will have that effect.

A current favoured hobby-horse of the rich and green is what is known around the traps as the ‘locavore’ or ‘local food’ movement. This crowd fail ECON101 on so many levels that I’ve often wanted to see them sliced and wrapped in plastic, but I’ve been sadly remiss in getting around to doing it myself. Fortunately, Virginia Postrel has done the job for me in an excellent piece for The Wall Street Journal.

Before moving on to Postrel’s piece, for those unfamiliar with this aspect of greenie-ism, I’d best provide a definition. According to G Feenstra and M Roosevelt, the local food movement is:

A collaborative effort to build more locally based, self-reliant food economies – one in which sustainable food production, processing, distribution, and consumption is integrated to enhance the economic, environmental and social health of a particular place” and is considered to be a part of the broader sustainability movement. “It is part of the concept of local purchasing and local economies, a preference to buy locally produced goods and services. Those who prefer to eat locally grown/produced food sometimes call themselves locavores or localvores.

In economic terms, the local food movement is an attack on two foundations of the modern, free-market economy (the one that’s been lifting everyone’s boats on a rising tide of prosperity for a long time now). Those two foundations are the division of labour and comparative advantage.

The effect of undermining those two foundations is — very simply — to make food more expensive, especially fruit and vegetables. People who advocate ‘local food’ consumption seldom admit this, but Postrel caught leading locavore Michael Pullan out doing just that:

Michael Pollan, the best-selling author of “The Omnivore’s Dilemma” and a leading advocate of buying locally grown food, recently upset many of his fans by daring to put numbers on his oft-repeated prescription to “pay more, eat less.” Eight dollars for a dozen eggs? $3.90 for a pound of peaches?

Those figures were way too specific and way, way too high to go unnoticed. The humanistic foe of industrialized eating suddenly sounded like a privileged elitist, and the local-food cause seemed insensitive to cash-strapped shoppers.

But Mr. Pollan was only being honest. Patronizing local farmers who produce in small batches tends to cost more. You may find some peak-season bargains at the farmers’ market, but there’s no such thing as a free locavore lunch. Getting fruits and vegetables only from local farms necessarily limits variety—few crops are available everywhere all the time—and it doesn’t come cheap. Economies of scale apply even to produce.

In other words, local food is for the rich. The poor are excluded from this particular market. Now, as mentioned above, I have no trouble with that. People can do what they like with their money, including spending a small fortune on food or bequeathing everything they own to a cats’ home. If the poor miss out, that’s unfortunate but not the end of the world. Even poor people in the industrialised world live like Roman emperors in days gone by, at least in terms of light, heating, warmth, diet, education and health care. They may miss out on a few orgies but that’s neither here nor there (I suppose that’s what ASBOs are for). The industrial revolution has made kings and princes of all of us. It’s when rich people’s personal preferences translate into policy proposals that we need to start doing some serious costing and honest accounting. Postrel continues:

The locavore ideal is a world without trade, not only beyond national borders but even from the next state: no Florida oranges in Colorado or California grapes in New Mexico, no Vidalia onions in New York or summer spinach in Georgia.

Fully realized, that ideal would eliminate one of the great culinary advances of the past half century. Unripe peaches notwithstanding, today’s supermarket produce departments are modern marvels. American grocery shoppers have choices that would have been unimaginable only a few decades ago. When I was growing up in the 1960s and 1970s, the only way to get fresh spinach or leaf lettuce was to plant a garden. Avocados were an exotic treat, asparagus came in a can, and pomegranates existed only in books.

Now my neighborhood supermarket sells five types of lettuce, plus spinach, endive, escarole, radicchio, frisée, rapini, three kinds of chard, mustard greens, dandelion greens and kale. That’s not including all the cabbages—or, of course, the prewashed salads in a bag that have particularly boosted fresh-spinach purchases. In this ordinary produce department, you can buy not only avocados, asparagus and pomegranates, but everything from purple baby cauliflowers to spiky kiwano melons that look like some kind of scary deep-sea creature. Need portobello mushrooms, Japanese eggplant or organic ginger at 2 a.m.? The store is open 24/7.

This cornucopia of choice and convenience is a tribute to logistical ingenuity and gains from trade, the very progress the local-food movement is sworn to overturn. For those of us blessed with a Mediterranean climate, giving up imports means higher prices. For everyone else, it means a far more limited diet.

I’ve picked on the local food movement in this piece, but it strikes me that many environmental proposals will have a similar effect: that is, they will make the poorest poorer in absolute, not just relative terms. I should also point out that it is relatively rare, these days, for a policy proposal to have that effect, even if only in the short run. The last time (in the UK at least) a policy proposal had the effect of undermining the steady rise in prosperity enjoyed by the poorest over the last 200 years was the Poll Tax.

I am old enough to remember the riots that convulsed Britain in the wake of that enactment, and because I’m a lawyer over here I happen to know that non-compliance was so great that the UK government was forced to abandon its attempts at enforcement. The legal system threatened to buckle under the weight of conscientious objections. It was living proof of Henry David Thoreau’s observation that if enough people disobeyed a law, then the government’s choice was either to change the law or put half the population in gaol.

The UK government changed the law.

Here is Postrel again:

The local-food movement’s ideological parochialism would be dangerous if it were somehow enacted into law. But as persuasion, it tends to focus on the positive: the delights of local peaches and fresh cider, not the imagined evils of Chilean blueberries and prepeeled baby carrots. In this regard, it resembles the English Arts and Crafts movement of the late 19th century. William Morris, who is remembered today more for his wallpaper and book designs than for his social theories, didn’t manage to overturn the industrial revolution. But he and his allies left a legacy of beautiful things. Pleasure is persuasive.

It is important, as Postrel notes, to pierce the veil of beauty and pleasure offered up by the Green movement, just as it is important to demand realistic projections of the effects of climate change. Professor Stephen Schneider’s comments about ‘runaway greenhouse’ in the Insight episode on which Legal Eagle appeared are instructive on this point. It is also vitally important not to allow the Greens to have too much control over the environmental policy agenda; although they’ve managed to skewer Penny Wong in the climate change portfolio, I’m glad for Australia’s sake that she’s been replaced by a sensible trade unionist like Greg Combet. They will find it much harder to shift him if policy proposals land on his desk showing that the people he used to represent will be poorer in absolute terms.

There’s another thing, too. Unlike many libertarians, I’m willing to admit that there is such a thing as market failure. I don’t think it’s very common, but it does exist. Free market food distribution, however, is so far from market failure as to be invisible from where I sit.

To the extent that food distribution is distorted, it is by agricultural tariffs and subsidies that lock many developing world producers out of global markets. I often buy Nigerian garlic at a local Afro-Caribbean ‘provisioner’. It is without exception better than the EU-grown garlic available in Sainsbury’s. The reason it is more expensive is because EU farmers are protected by tariffs and rewarded with subsidies. Strip away that protection and we’d all be able to enjoy inexpensive, high quality Nigerian garlic at competitive prices.

But it would come from Nigeria, not Spain or France.

I don’t want people who would put themselves in charge of London’s bread supply running the country. I think the dizzying answer to the Soviet official’s question — ‘nobody’ — is representative of the best in us, at least when it comes to feeding the poor.

142 Comments

  1. mel
    Posted September 27, 2010 at 12:21 am | Permalink

    I disagree with you on a number of points, but in the interests of brevity I’ll deal with only two here.

    “And rich people tend to be green.”

    I think you’ll find the correlation between white and green is greater than that between rich and green. In Victoria, for example, Greens are not getting elected to local councils in the wealthiest electorates but rather in electorates with high numbers of tertiary educated whites from less well off backgrounds.

    We have Green councilors representing lower middle class/working class areas like Footscray, but we most certainly don’t have them representing blue ribbon areas like Toorak. Janet Rice is one example http://www.janetrice.com.au/index.php

    During my time of involvement I met umpteen dozen social workers and teachers at Green meetings, but I don’t believe I ever met a millionaire.

    “Free market food distribution, however, is so far from market failure as to be invisible from where I sit.”

    Huh?

    In Oz you get food dirt cheap because it is imported from the third world and because the two big supermarket chains have local farmers by the proverbial short and curlies. “[T]he median age of farmers in farming families increased from 47 years in 1986 to 51 years in 2001. ” In other words, hardly anyone chooses to be a farmer anymore because the income is crap. The aging of the farmer population is not sustainable.
    http://www.abs.gov.au/ausstats/ABS@.nsf/7d12b0f6763c78caca257061001cc588/cdcd7dca1f3ddb21ca2570eb00835393!OpenDocument

    Modern agriculture is also based on very high fossil fuel energy inputs that not sustainable. What are we going to do when the guano runs out?

    Yes indeedy, we need a thicket of regulations and oversight to save the free market from itself in food production just as much as everywhere else.

    But I certainly agree that we don’t want a central planning committee delivering us our daily bread. That would be a disaster.

    Like you I also find the local food idea unconvincing. But so do many other Greens. To the best of my knowledge it has never been Greens policy in Australia. Many of the smarter green thinkers are also not convinced. Here is Peter Singer:

    “You have to ask yourself what’s particularly good about being local. People say, “Well, I want to support my local economy.” But if you’re living in a prosperous part of the United States, what’s really ethical about supporting the economy around you rather than, say, buying fairly traded produce from Bangladesh, where you might be supporting smaller, poorer farmers who need a market for their goods? So I think that just in terms of supporting your local economy, I’d say no, you should support the economy where your dollars are needed most. But then people will say, “Yes, but there’s all the fossil fuel used in shipping it over from Bangladesh or wherever.” But people often don’t realize that if you’re shipping something like rice by sea, the fuel costs are extremely low. Shipping is a very efficient way of transporting. It may be that if you’re buying rice in California, the rice from Bangladesh has used less fossil fuel than California rice, even counting what it takes to get there. We also found that when we looked at tomatoes produced in New Jersey early in the season by being grown on heat, when you calculate the amount of oil that goes into heating the greenhouses, it turns out that you could have trucked them up from Florida with a similar amount of oil. If people are prepared to eat locally and seasonally, then they probably do pretty well in terms of environmental impact. But there’s not many people who live in the northern states of the U.S. who will say, “I’m not going to have any tomatoes between November and July.” So I think there’s a certain amount of double talk about local food that’s just too rosy.”

    http://motherjones.com/politics/2006/05/chew-right-thing

    To sum up, I think you’ve concocted then slain a straw greeny. Or maybe just the dopey fringe.

  2. Posted September 27, 2010 at 1:22 am | Permalink

    Thanks for the mention, but I should clarify that I didn’t catch Michael Pollan touting expensive fruits. There was a big Internet kerfluffle about it, mostly among people who are sympathetic to the locavore movement. Here’s an example: http://blogs.seattleweekly.com/voracious/2010/08/shopping_with_famous_authors_m.php

  3. Jacques Chester
    Posted September 27, 2010 at 7:20 am | Permalink

    In other words, hardly anyone chooses to be a farmer anymore because the income is crap.

    That is not an example of market failure. It’s an example of price signals reallocating labour without requiring GOSPLAN to do it.

  4. LJS
    Posted September 27, 2010 at 8:35 am | Permalink

    At the risk of betraying my ignorance is anyone actually advocating locavore-style consumption as a replacement for our current system? My reading of Ms Postrel’s article was that approaches like Mr Pollan’s have some advantages (taste) but you pay for it – often quite a premium so realistically it’s not an option for everyone but then I’ve not heard it advocated as such – maybe I hang around with the wrong greenies! Being surprised at the reduction in variety when buying local, seasonal produce is just an example of how detached most people are from food production and isn’t unique to locavores (though given their supposed interest in food it’s a bit facepalm inducing).

    I’d have thought (perhaps ironically given some of the clientèle) that farmers’ markets etc. were a good example of the free market in operation. As Ms Postrel says in the west our industrial system does an amazing job of providing an abundance of cheap produce at the local supermarket. Since there are no free lunches the price we pay for this (ignoring for the moment most of e.g. Mel’s concerns above) is that food is not optimally fresh, and compared to produce from you’re own garden tastes a bit bland but hey, I can eat an orange whenever I want to which is pretty neat! Some people decide thy want to prioritise freshness or taste so buy locally to get that and in doing so pay a premium (under a CPRS maybe they would be surprised at the premium?). Huzzah! the free market successfully does it’s thang and services a niche, everybody is happy.

    Maybe it’s different in the US/UK but in terms of Aus food politics I agree with Mel that it feels like you’ve slain a straw greenie. Like I said above maybe I hang out with the wrong greenies (maybe we’re not actually greenies? *shrug*). Maybe I completely misread your post, I don’t know! Anyway I enjoy reading this blog so keep up the good work!

  5. TerjeP
    Posted September 27, 2010 at 9:00 am | Permalink

    Unlike many libertarians, I’m willing to admit that there is such a thing as market failure. I don’t think it’s very common, but it does exist.

    Is that really unlike many libertarians? I’d say that like most libertarians you’re willing to admit such a thing as market failure but you don’t think it is very common or that proposed remedies necessarily deliver a net benefit.

  6. Henry2
    Posted September 27, 2010 at 9:09 am | Permalink

    Gday All,

    SL I believe that rather than Green/Libertarian, this argument is far more Protectionist/Free Trade although the Protectionists are very happy to use food miles and ‘Food Inc.’ as an aid to their cause.
    To this degree I agree with Mel.
    Protectionism is a credo based on ensuring that those folks within your own community on the lowest wage structures maintain their jobs instead of those same jobs being exported to other countries where even poorer people can aspire to some sort of similar income.
    To this end lazy industrialists and unions can both find some succour in Protectionism.
    I often find that its not until I encounter folks talking about something that I know about that I realise how little they actually know. I was a farmer until 1998. I know a bit about farming in Australia. Not enough to actually go farming again but a bit more than you and Mel obviously.
    Firstly its important to recognise the difference between common or garden protectionism and quarantine. Too often I see serious quarantine issues either used as protectionism or dismissed as mere protectionist. In this case I guess I come down on the side of benefit of the doubt. The cost of losing markets to a foreign disease such as F&M or fireblight is far higher than the few cents cheaper the OS product may be.
    Secondly, local food isnt always dearer. We were able to buy milk and cream straight from the dairy for less than half the price that supermarkets would charge. Government regulation (a thicket of regulations?) forced this market to close and now we bypass the dairy on the way to the supermarket.
    Thirdly, Mel says
    ‘Modern agriculture is also based on very high fossil fuel energy inputs that not sustainable. What are we going to do when the guano runs out?’
    These are two very different issues. ‘guano’ is a source of phosphorus and phosphorus is used in most modern fertilisers. Peak phosphorus is close and is a serious issue. Modern fertilisers often include nitrogen. The cheapest source of this nitrogen is a byproduct of natural gas production. Nitrogen itself will never be in short supply as the atmosphere is mostly N. Conversion to a usable form is the issue here.
    Again Mel talks about the aging farmer. The aging farmer is a product of two different drivers. The first is the absolute success of the green revolution(http://en.wikipedia.org/wiki/Green_Revolution) which has enabled food prices to remain virtually unchanged for half a century. The second is that farms are now bigger because the margins are so small. Without a second green revolution this will change in the not too distant future and I suspect we will see the rise of corporate agriculture in Australia.

    The most expensive fuel per kg of product in food production/distibution is the fuel used between the retailer and the consumers fridge.

    By all means buy the freshest, most locally produced everything that you can but please dont regulate to force the rest of us to.

    Regards,

    Frank

  7. TerjeP
    Posted September 27, 2010 at 10:02 am | Permalink

    The Greens also want more expensive electricity and can’t get their head around nuclear. They’re aesthetic fanatics who think a 300 year old tree is more important than an 80 year old tree. Sure this is a free trade / protectionist issue but let’s not pretend it isn’t also about a Green totalitarian mentality.

  8. Nick Ferrett
    Posted September 27, 2010 at 10:04 am | Permalink

    I don’t want to sound like a cheer squad for the big retailers, but surely the fact that Coles and Woolies keep the prices down at the supplier end is a good thing so long as it means lower prices at the checkout?

    And the fact that farming is attracting fewer new people than it once did can’t simply be put down to the fact that farm gate prices are low. The drought made it a pretty unattractive career choice. I would imagine it would also have had the effect of destroying a few family farming businesses so that there were fewer businesses to be inherited than previously. In addition, primary production doesn’t enjoy as much of the tariff and other protection it used to enjoy so its a less attractive proposition for that reason. One of the reasons that Woolies and Coles are able to keep downward pressure on farm gate prices is competition from overseas.

    To the extent that the declining participate in the industry is explained by removing protection, it can hardly be said that the change is unsustainable. Rather, it is consistent with the fact that there were too many firms in the sector and that, in the absence of protection, they have exited and not been replaced.

    To take one example, before deregulation of the dairy sector in Queensland, the regulatory regime saw farmers being allocated the amount of milk that they were allowed to sell into the market. The rest had to be poured down the drain. Literally. Protectionism had bred a situation where there was simply way more supply than demand and many more participants than the market justified. My point is that matters like that also explain the exit of industry participants without justifying the conclusion that the industry is in some fatal decline.

    The local food movement does not work on any level. Extrapolated to involvement of large sections of the population, it must mean increased production costs as economies of scale are destroyed. If it becomes anything more than a niche, it makes the supermarket model less economically viable so that prices have to increase even for those who don’t choose it.

    The fossil fuel point is also a bit of a furphy as a point in favour of the “locavore”. If every local farm has to have fertiliser dropped off, and water piped to it and waste removed and so on and so on, the environmental costs (including fuel costs) would, I suspect, be every bit as bad as ordinary farming.

  9. JC
    Posted September 27, 2010 at 10:09 am | Permalink

    In Oz you get food dirt cheap because it is imported from the third world and because the two big supermarket chains have local farmers by the proverbial short and curlies.

    Which means you would have to see it in the profit results of the two large firms in the grocery market here.

    Funny but these profits they’re ripping away from the farmers just aren’t there.

  10. desipis
    Posted September 27, 2010 at 10:10 am | Permalink

    Bangladesh, where you might be supporting smaller, poorer farmers who need a market for their goods?

    The question here though, is are we providing a market for excess food supply, or are we competing with poor Bangladeshis who have no hope of competing with the prices created from western demand? Historical trade barriers have created market segmentation allowing different equilibriums for the price of food in different markets. Even with the lower prices in poorer countries there are still many that cannot afford the food.

    Removing the trade barriers will change the equilibrium, causing higher prices in poorer countries. This means more people unable to afford food. It’s basic market theory that higher prices means lower demand. The problem in applying this to food is that lower demand in the market doesn’t mean people stop needed food.

    There are rich people and there are poor people, but as long as the latter are getting better off over time,

    Are you willing to let the poor people in rich countries be better off at the expense of poor people in poor countries?

  11. desipis
    Posted September 27, 2010 at 10:26 am | Permalink

    …surely the fact that Coles and Woolies keep the prices down at the supplier end is a good thing so long as it means lower prices at the checkout?

    What happens if this price pressure is bankrupting any farmers who use sustainable farming techniques, in favor of those using short term farming practices?

  12. Henry2
    Posted September 27, 2010 at 10:47 am | Permalink

    Despis,

    ‘What happens if this price pressure is bankrupting any farmers who use sustainable farming techniques, in favor of those using short term farming practices?’

    I would love to hear your definitions of sustainable farming techniques and short term farming practises. I would then like you to explain which modern farmers use each method.

    Regards,

    Frank

  13. desipis
    Posted September 27, 2010 at 11:52 am | Permalink

    Loss of crop diversity would be the most concerning for me.

  14. Posted September 27, 2010 at 11:56 am | Permalink

    Maybe it’s different in the US/UK but in terms of Aus food politics I agree with Mel that it feels like you’ve slain a straw greenie.

    “Eat Local” is very big in the UK at the moment, beginning with concern over food ‘air-miles’ a couple of years ago (for some reason everyone was picking on Anchor butter at one stage). The heavily subsidised producers within the EU are pushing it as a way to get consumers to discriminate against non-EU products so they don’t have to, British farmers will latch on to pretty much anything that offers them a lifeline and it pushes up through-traffic at Farmers Markets for the over-priced handicrafts (and by the way, last time I looked there were no coffee farms in the UK and on what planet is the posh bakery from Jenners considered primary industry?!)

  15. Henry2
    Posted September 27, 2010 at 12:17 pm | Permalink

    Hi desipis,

    Im sorry for misspelling your name earlier.

    Im not sure if your post #13 was in response to my #12, but if it was I dont think your answer was adequate. The wikipedia link you referred to defines crop diversity then proposes an answer to a problem they havent spelt out.
    Were you saying that farmers that use sustainable farming techniques make use of crop diversity when farmers that use short term farming practices dont? If you were could you please direct me to your proof?

    Regards,

    Frank

  16. mel
    Posted September 27, 2010 at 12:33 pm | Permalink

    LJS says:

    “I’d have thought (perhaps ironically given some of the clientèle) that farmers’ markets etc. were a good example of the free market in operation.”

    That’s a very good point.

  17. JC
    Posted September 27, 2010 at 2:28 pm | Permalink

    They are free market in action, Mel.

    Just as other people have a right to call it first rate greenified nonsense crapola (altogether different from the other stuff we eat).

    What happens if this price pressure is bankrupting any farmers who use sustainable farming techniques, in favor of those using short term farming practices?

    What pressure would that be? Do you have any example of anyone “short term farming” in the way you characterize it, as I would like to see evidence of these rapers and pillagers in action.

    The word sustainable has been so abused by greenologists that it has become an essentially worthless term.

  18. Posted September 27, 2010 at 2:45 pm | Permalink

    Mel – In Oz you get food dirt cheap because it is imported from the third world

    Really? Most of our food appears to come from Australia. I didn’t know Ardmona was a 3rd world country.

    and because the two big supermarket chains have local farmers by the proverbial short and curlies.

    But what I’ve read indicates that food is cheaper in markets where the Coles and Woolworths don’t dominate. Where one or the other dominate food is more expensive. And doesn’t our food come from the the 3rd world? Who are these local farmers then?

    Modern agriculture is also based on very high fossil fuel energy inputs that not sustainable. What are we going to do when the guano runs out?

    True.

    Yes indeedy, we need a thicket of regulations and oversight to save the free market from itself in food production just as much as everywhere else.

  19. Posted September 27, 2010 at 2:49 pm | Permalink

    And btw Mel The Greens do have a policy of government encouragement of local food production:

    The WA Greens:

    a review of National Competition Policy legislation to favour local production close to final markets due to rising transport costs and carbon emissions

    The Australian Greens:

    support initiatives that increase local product quality and nutrition, local value-adding and local distribution, and promote Australian produce to the Australian community.

  20. Posted September 27, 2010 at 2:52 pm | Permalink

    Yes indeedy, we need a thicket of regulations and oversight to save the free market from itself in food production just as much as everywhere else.

    This is simply doctrine regurgitated amongst a false denial of local food production policy without addressing any of Skeptic’s points.

    What I don’t understand about the Greens is their failure to appreciate the concept that the economy is an organic entity.

  21. Posted September 27, 2010 at 2:57 pm | Permalink

    I’ve got to go to work, but I will be back, so play nice :)

    Two comments:

    1. Peter Singer is very smart. I spend most of my time disagreeing with him, but that doesn’t mean he isn’t very skilled and very capable of spotting holes in his own side’s arguments.

    2. The issue (always, and ever) is enactment into law. I take Nick’s point about ‘bigger than niche market’ being potentially disruptive, but ultimately my concern is using environmentalism as a cover for protectionism.

  22. Patrick
    Posted September 27, 2010 at 2:58 pm | Permalink

    Desipis, I don’t believe I have ever heard that argument before. I can see why.

    First: higher prices does not necessarily mean lower demand. This is only the case if demand is sufficiently elastic. It is hardly obvious that demand for food staples for human consumption is highly elastic.

    Second: there is not much point requiring Bangladeshi farmers to give their product to their starving countrymen if the result is that the farmers don’t make any money and starve themselves. I would have thought that the point was to allow the farmers to realise a surplus which they could re-invest, hopefully employing some of their erstwhile starving countrymen as well as stimulating demand for tractors and other goods in Bangladesh, etc.

    Trade and exploitation are pretty much the only way anyone gets richer, ever. I assume you prefer trade and I assume that you don’t dispute that the Bangladeshis, at least, could do with being richer.

    Or, in short, why should we condemn the poor Bangladeshis to remain poor just because they are from a poor country?

  23. desipis
    Posted September 27, 2010 at 4:00 pm | Permalink

    Frank/Henry2,

    Sorry I wasn’t clearer. My point was that the price pressures were pushing farmers towards all using the same types of crops, the ones that focus on maximum yield. This is moving the agricultural industry as a whole (not necessarily individual farms) towards lower and lower crop diversity. Maximising yield at the expensive of diversity might seem like a good thing until you consider the risks.

    Patrick:

    It is hardly obvious that demand for food staples for human consumption is highly elastic.

    All products become elastic once their price exceeds the income available to consumers.

    there is not much point requiring Bangladeshi farmers to give their product to their starving countrymen if the result is that the farmers don’t make any money and starve themselves.

    The farmers aren’t going to starve. They just won’t be able to import as many goods, or invest the money elsewhere. The future economic growth of your country isn’t important when you’re starving to death.

    Trade and exploitation are pretty much the only way anyone gets richer, ever.

    What happened to hard work and investing?

    Ultimately, I’m not arguing against trade. I’m arguing against the notion that more open trade is all sunshine and roses for everyone involved, particularly those at the bottom.

  24. mel
    Posted September 27, 2010 at 4:10 pm | Permalink

    “Really? Most of our food appears to come from Australia. I didn’t know Ardmona was a 3rd world country.”

    I never said otherwise, Adrien ol’ boy. Here is what I said again:

    “In Oz you get food dirt cheap because it is imported from the third world and because the two big supermarket chains have local farmers by the proverbial short and curlies. ”

    Note the word “and” and what comes after it.

    “This is simply doctrine regurgitated amongst a false denial of local food production policy without addressing any of Skeptic’s points. ”

    Keep your pants on, Adrien. I said “to the best of my knowledge”, I did not falsely deny anything. The WA Greens policy is irrelevant since it is a state policy on a federal issue; it can’t be enacted and it doesn’t override federal greens policy. The federal greens policy sounds more like subsidies than barriers to imports. Even the supposed free market Liberal Party proposed a raft of direct and indirect agricultural subsidies at the last fed election, see here: http://www.liberal.org.au/~/media/Files/Policies%20and%20Media/Regional/Agriculture%20Policy.ashx

    Don’t be such a show pony, Adrien.

  25. JC
    Posted September 27, 2010 at 4:34 pm | Permalink

    I’d have thought (perhaps ironically given some of the clientèle) that farmers’ markets etc. were a good example of the free market in operation.”

    That’s a very good point.

    .

    one last point about this…

    I take it then that the argument about free markets etc is settled then. There’s no more debate about the efficiency of free markets to supply what we need.

    Mel:

    Our food subsidies although bad are perhaps the lowest in the world.

  26. Henry2
    Posted September 27, 2010 at 4:38 pm | Permalink

    desipis,

    Thats interesting. Apart from the fact that these crops are all maximum yield crops, do you have any evidence that they are all the same ie. one monoculture from sea to sparkling sea?
    Do you have any evidence that we are headed for a calamity like the great potato famine?
    Indeed did you read the website you gave to find the reason why the Irish potato crop was so susceptible to the blight?
    Did you find the conditions the same here in Australia as they were in Ireland at the time?

    Regards,

    Frank

  27. JC
    Posted September 27, 2010 at 4:43 pm | Permalink

    Monsanto, a stock that I own has some amazing potential new products out that will just blow our socks off.

    Agriculture is in for some pretty decent returns over the next couple of decades.

  28. Posted September 27, 2010 at 4:46 pm | Permalink

    While I don’t particularly love Monsanto, they do get it no matter what they do.

    People worry about GM crops hybridising or escaping into the wild, so Monsanto add terminator genes to their seeds. Immediately they are accused of evil conspiracy to rip off farmers who can’t reuse the seed.

  29. mel
    Posted September 27, 2010 at 5:01 pm | Permalink

    Jacques says:

    “While I don’t particularly love Monsanto, they do get it no matter what they do.”

    Well I agree with you there. Some of the hysterical theories about the evil Monsanto are just plain wacko, yet some reasonably smart lefties seem to believe them.

    “Monsanto, a stock that I own has some amazing potential new products out that will just blow our socks off.”

    Funny how these amazing new products almost never live up to the hype. You’re far too old to fall for the marketing razzle dazzle, Joseph.

  30. Posted September 27, 2010 at 5:08 pm | Permalink

    Our food subsidies although bad are perhaps the lowest in the world.

    What food subsidies?
    Perhaps the lowest? Then which countries subsidise less?

  31. Posted September 27, 2010 at 5:17 pm | Permalink

    I’m not against GM crops but I do think people can easily fail to appreciate the risks involved. There are consistent claims GM foods are safe and this in spite of that being an unknown. Moreover there are studies which indicate some GM foods do generate pathological responses. Trust Monsanto if you will but I’d rather trust evidence.

    1. Crit Rev Food Sci Nutr. 2009 Feb;49(2):164-75.

    Health risks of genetically modified foods.

    Dona A, Arvanitoyannis IS.

    Department of Forensic Medicine and Toxicology, University of Athens, Medical
    School, Athens, Greece.

    Comment in:
    Crit Rev Food Sci Nutr. 2010 Jan;50(1):85-91; author reply 92-5.

    As genetically modified (GM) foods are starting to intrude in our diet concerns
    have been expressed regarding GM food safety. These concerns as well as the
    limitations of the procedures followed in the evaluation of their safety are
    presented. Animal toxicity studies with certain GM foods have shown that they may
    toxically affect several organs and systems. The review of these studies should
    not be conducted separately for each GM food, but according to the effects
    exerted on certain organs it may help us create a better picture of the possible
    health effects on human beings. The results of most studies with GM foods
    indicate that they may cause some common toxic effects such as hepatic,
    pancreatic, renal, or reproductive effects and may alter the hematological,
    biochemical, and immunologic parameters.
    However, many years of research with
    animals and clinical trials are required for this assessment. The use of
    recombinant GH or its expression in animals should be re-examined since it has
    been shown that it increases IGF-1 which may promote cancer.

    PMID: 18989835 [PubMed - indexed for MEDLINE]

  32. JC
    Posted September 27, 2010 at 5:22 pm | Permalink

    Funny how these amazing new products almost never live up to the hype. You’re far too old to fall for the marketing razzle dazzle, Joseph.

    Not really Mel. In fact older has made me wiser to avoid the hype.

    Here’s what one I-banks says;

    Maintain Neutral view following investor event: Following MON’s annual Whistle Stop Tour in Gothenburg, Nebraska on August 11-12, we continue to be impressed with the company’s robust product pipeline and dominance in seed technology. However, we remain concerned about the near-term risks tied to new product performance and pricing as well as the longer-term earnings potential given the increasingly competitive environment and the looming Roundup Ready soybean patent expiration. Until we get greater conviction that the company can execute on its new product and price strategy, we prefer that investors stay on the sidelines.
    ?
    Strong product pipeline should keep MON ahead of competitors. The presentations primarily focused on the company’s pipeline and emphasized the gap between MON and competitors. Given MON’s track record, we believe the company is likely to be successful in developing many of these products, particularly SmartStax refuge-in-a-bag, insect-control soybean, and drought-tolerant corn. However, we worry about the company’s pricing power given the recent challenges in new product launches and the more competitive environment

    There are some others that are far more optimistic.

    I bought this stock in the low 50′s and really think it will surprise to the upside with its product line. They always ahead of their competitors by 5 years.

    I think it will eventually make its way to 130 a share.

    This I-Bank, that happens to be very respectable is I believe not counting on the additional food demand and the efficiencies some of these products can offer.

  33. JC
    Posted September 27, 2010 at 5:31 pm | Permalink

    Steve From Brisbanee..

    NaZeeland is less than us.

    ——————-

    Monsanto will end up feeding the world.

  34. JC
    Posted September 27, 2010 at 5:34 pm | Permalink

    You gotta just love this name for a product.

    SmartStax refuge-in-a-bag

    Next up in the promotional line, buy a bunch of their soya and also get a Mexican laborer in a bag.

  35. JC
    Posted September 27, 2010 at 5:38 pm | Permalink

    Here’s another example of science doing its thing.

    We’re literally drying up our world fisheries. This amazing comes along and the Greenlogists try to frustrate development.

    http://www.guardian.co.uk/environment/2010/sep/26/gm-food-battle-salmon

    Amazing.

  36. Posted September 27, 2010 at 6:58 pm | Permalink

    JH@31 on GM food safety.

    I must say that the safety of any GM will vary with the actual mod, and how it is used.

    Roundup Ready horrifies me for how it is used… and whether done by selective breeding or in a test tube. If I recall correctly, the blurb on the back of Roundup containers was, years ago, along the lines of “around the shearing sheds but not the market garden”.

    Even a mutation that doesn’t increase the amount of toxins on food, say, something increasing lysine in corn (introduction of agriculture in mesoamerica caused an “epidemic” of lysine deficiency… so monsanto’s high lysine high tryptophan corn is much more useful and less evil than roundup ready seed), might be good or bad for final consumers depending on which enzymes are affected, and the processing of the product before consumption.

    (In principle, I’m pro genetic engineering because it is such /fun/… Played with restriction endonucleases and the like back in the early 80s and made an E.coli that could happily munch through any antibiotic you could throw at it).

    Personally, the less rational “green” consumers should think twice before having about local Oz rice which is often highly irrigated, compared to overseas geographies better suited to rice. (But spuds, which /are/ water efficient, aren’t trendy enough, perhaps). More importantly, greens should read Garnaut and consider swapping from beef, lamb and pork to macropod if they do want to eat flesh and still lower carbon dioxide emissions (est 5% drop in Oz carbon-equivalent emissions just through changing the furry thing you eat).

    The easiest localvores to attack are the hypocrites who have moved into McMansions without veges and/or chooks in the back yard…. They have made land non-productive that would recently have been a farm.

  37. Posted September 27, 2010 at 7:44 pm | Permalink

    Roundup Ready horrifies me for how it is used…

    Roundup, or more specifically the surfactant used with the product, can be toxic. I did some research for an enviro group who were using, they were a bit embarrassed when I pointed out to them that it can toxic for various aquatic animals.

    Even a mutation that doesn’t increase the amount of toxins on food, say, something increasing lysine in corn (introduction of agriculture in mesoamerica caused an “epidemic” of lysine deficiency…

    And to most people this would seem innocuous, a small change in amino acid levels. Yet the Lysine – Arginine balance is very important for cardiovascular health.

    The type of mod is critical. For example, horizontal gene transfer does happen and it will at some point involve the transmission of these trans genes to other plant species.

    GM foods will provide benefits but evolution will create another set of problems. I have already read an example of how a GM cotton was successful in fighting off one bug but this resulted in another bug gaining dominance that was resistant to the GM cotton protection. So off we go again … essentially the same problem with antibiotics.

    We need GM foods, we have no choice, but one gene change does not JUST equal one protein change. Oh if life were that simple … .

    The big problem is this: it often assumed GM foods will be safe because we “understand” genetics. Ha! We don’t know how safe many of these products are. I expect many to be safe but if only one baddie becomes widely consumed we have a public health problem of huge proportions.

  38. Posted September 27, 2010 at 8:01 pm | Permalink

    Now you’re in trouble… I’M taking over {insert evil laugh}

    Just to warn you, I consider myself a greenie, though I am alas, also an economic realist. I even popped along to the local UK Green Party chapter when I was living in Wales having read the national policies and been very impressed. Unfortunately what I found was a field of watermelon’s and ex-Socialist Workers (and many not so ex). Very nice, very EARNEST people and almost uniformly unrealistic: the low point was possibly an email exchange with a formerly friendly chap with an unhealthy obsession about the far right. It kind of ended when I pointed out that all those generous workers terms and conditions he wanted to import from the social democracies of Europe were created in the 1930s by um, Adolph Hitler.

    Let’s face it – I just don’t play well with others.

    Now to address the conversation:

    JC @17:

    What happens if this price pressure is bankrupting any farmers who use sustainable farming techniques, in favor of those using short term farming practices? What pressure would that be? Do you have any example of anyone “short term farming” in the way you characterize it, as I would like to see evidence of these rapers and pillagers in action.

    In the UK at least, the low prices demanded by the supermarket duopoly are increasingly only achievable by large scale, monoculture, factory farming. Many don’t even rotate their crops anymore, preferring to artificially enrich the soil with nitrogen fertilizer which then runs off into the water table.

    Frank/Henry2, as a farmer would you say it would be fair to use soil health as a measurable gauge of sustainability of agriculture?

    Adrien @18:

    Really? Most of our food appears to come from Australia. I didn’t know Ardmona was a 3rd world country.

    You’re thinking of Armidale. Which is.

    Re: evil EVIL Monsanto… I’ll just point out that both SL and I are Queenslanders and therefore grew up with the cane toad legacy – and that was just importing an alien species, not creating one from scratch! Many, many reservations.

    JC, you say mutant fish, I see this.

    I like the look of agriculture as a future investment sector myself, mainly as I think eventual peak oil will make foreign food imports a lot more expensive so there will be pressure to (dare I say it) localise more production. Wouldn’t mind studying Land Economy and going on to work in renewables investment for Triodos or land management for a vertically integrated supermarket like Waitrose or the Co-op which both own their own farms.

  39. Henry2
    Posted September 27, 2010 at 8:42 pm | Permalink

    DEM,
    I didnt say I am a farmer. Far more WAS about it. Farming is a trade/art/skill that changes very quickly. After 12 years Im well out of it.
    I dont claim to know about the UK. Im not sure whether they have enough money that they can afford their fertilisers to be wasted into streams.
    I do know that in the last 20 years Australian soils have improved dramatically. This is predominantly due to the ceasing of overcultivation made possible by the use of knockdown herbicides.

    Regards,

    Frank

  40. desipis
    Posted September 27, 2010 at 8:52 pm | Permalink

    I’ll just point out that both SL and I are Queenslanders and therefore grew up with the cane toad legacy – and that was just importing an alien species, not creating one from scratch!

    Indeed. For the libertarian minded, GM plants and animals are like ecological laws passed unilaterally by one political party that we have no way of ever reversing.

  41. Posted September 27, 2010 at 9:05 pm | Permalink

    Mel@1

    We have Green councilors representing lower middle class/working class areas like Footscray

    Speaking as someone who lives in Seddon (next suburb to Footscray), when is the last time you look at Melbourne socio-economic status data? Let me assure you, this is trendy, young, urban, professional central. Yes, there are migrants. There are even some retired working class folk. But this is so NOT a working class area. Try Altona or Braybrook.

    In Oz you get food dirt cheap because it is imported from the third world and because the two big supermarket chains have local farmers by the proverbial short and curlies.

    Oz is not a world food exporter because of supermarket chains, but we are highly efficient food producers, which is why food is cheap.

    An increase in the average age of farmers of 4 years over 15 years says more about increased life expectancy, with slowed turnover in family farms, than anything else. The tendency of the EU and the US to subsidise their farmers has a bigger impact on the income of our farmers than Coles and Woollies, who have such “market power” they worry about fractions of cents per item in order to make a not-at-all remarkable rate of profit.

    But the trend to biofuels will no doubt help our farmers’ incomes by driving up the world price of food further.

    As for “needing” a thicket of regulations, many of those are, as ever, to protect incumbents. Others are a response to problems of transparency in packaged/pre-prepared food (you cannot just inspect the horse’s teeth any more: where you can, regulation is still pretty light).

    As for who are Green, I have already given my answer, which would predict Green meetings being full of, well, teachers and social workers. (And I doubt that any Party-political meetings have many millionaires in them: but quite a few rich folk seem to be very keen to display their environmental credentials.)

  42. Posted September 27, 2010 at 9:13 pm | Permalink

    As for the “local food” and “food miles” crap, we have been here before. Try late C19th and early C20th Germany, where it was all about sneering at the urban working class, who wanted cheap imported food, based on touting the “authenticity” of peasant food while justifying protecting Junker estates.

    Nowadays, it is about those who make their living off ideas parading their superiority over suburban masses who make, transport or otherwise purvey nasty “Gaia-wounding” stuff and want cheap, mass produced food. The modern “food miles” rhetoric arose in the UK, where again it is about going on about the “authenicity” of local food, while supporting protectionism against cheap imported food for the vulgar masses. The more things change …

  43. Posted September 27, 2010 at 9:19 pm | Permalink

    which would predict Green meetings being full of, well, teachers and social workers.

    Another silent slur on greenies? Green movements have very much involved scientists, from Ailo Keto in Qld to David Suzuki in Canada to Bellamy in Britain. What are going for here, guilt by association?

    A friend of mine who has developed some very nifty software for agriculture recently wrote to me that he is now finding that it is corporations who are becoming increasingly involved in genuine green initiatives. Are corporations run by social workers and teachers?

    Get up to date, there are plenty of real environmental issues. Scientists often played leading roles in driving these issues because scientists have the first hand experience of the impact and the knowledge base to appreciate the risks. For example, a recent study claimed that 8% of women in the USA had unacceptable mercury levels. Given the rise in neurodevelopmental disorders I consider that a very serious problem. But of course I’m a greenie so I must be a social worker or teacher, certainly not someone who has genuine concerns that is based on evidence.

  44. Posted September 27, 2010 at 9:30 pm | Permalink

    H2@26

    Do you have any evidence that we are headed for a calamity like the great potato famine?
    Indeed did you read the website you gave to find the reason why the Irish potato crop was so susceptible to the blight?
    Did you find the conditions the same here in Australia as they were in Ireland at the time?

    Another teaching moment!

    The potato blight hit much more than just Ireland. But only in Ireland did it lead to starvation. At the time, this was blamed on the “laziness” and “fecklessness” of the Irish. (Who starves to death from laziness?)

    The issue was poverty. Ireland was a place of insecure property rights: short-term tenancies on land with a long history of confiscations. This created bad incentives, which discouraged investment in land, skills or crop diversification. When the potatoes were blighted, unlike other parts of the British Isles or Northern Europe, people did not have the resources to shift or to take the shock. So they died or emigrated.

    Areas in Ireland with more secure tenancy arrangements suffered notably less.

    People can starve from bad incentives, as the early colonists in New England found when they tried to live in “Christian commonality” (i.e. collective farming). After a new governor re-instituted private property, food production surged.

    London also screwed up. The Peel Government had cocked up its attempt at disaster relief by trying to put itself in charge of the bread supply and the incoming Whigs had laissez faire economists (a grand new science which was unlocking the secrets of social existence: like genetics later did with eugenics and climate science is currently doing) parading that one could not interfere with the “iron laws of supply and demand”. If London had done as Dublin Castle had done in previous famines, and offered a bounty for imported food, the disaster could have been significantly ameliorated.

    So, the British were to blame for the Irish potato famine, particularly by presiding over an inadequate property rights regime generating bad (indeed, ultimately disastrous) incentives, but not quite in the way people thought.

  45. Posted September 27, 2010 at 9:34 pm | Permalink

    JH@43 Not denying their are real environmental issues. As I say in my post, my beef is with environmentalism and not environmental concern. Indeed, one of my complaints about the Greens is that their environmentalism is often bad for the environment.

  46. Posted September 27, 2010 at 9:36 pm | Permalink

    John H, Lorenzo was responding to Mel’s comments @1 on the occupational spread of Greens members. As Mel used to be a Green, he is probably qualified to comment.

    My particular concern with posts like these is to expose Green ideas to the kind of policy scrutiny that the majors have to bear routinely. This is a comment on one widespread Green shibboleth using one economic metric as my point of departure.

    There will be others in due course.

    On cane toads: this can also be written up an ‘government science failure’. They were introduced by the Qld government on CSIRO advice.

  47. Posted September 27, 2010 at 9:43 pm | Permalink

    JH@43

    certainly not someone who has genuine concerns that is based on evidence.

    If Green environmentalism was more evidence-based, that would be an improvement. There continues to be too much advocacy of recycling of previous command-and-control failures.

    Take the Greens’ recent enthusiasm for death duties. If there is one social mechanism which long experience shows encourages a long-term perspective, it is inheritance. Or the regular anti-market rhetoric, when the environmental record of the command economies is much worse than that of the capitalist democracies. Indeed, the evidence is that governments are regularly poor managers of property — in Victoria, it is government-owned land which has by far the worse bushfire record.

  48. mel
    Posted September 27, 2010 at 9:49 pm | Permalink

    “The tendency of the EU and the US to subsidise their farmers has a bigger impact on the income of our farmers than Coles and Woollies, who have such “market power” they worry about fractions of cents per item in order to make a not-at-all remarkable rate of profit. ”

    I’m well aware that Coles and Woolworths make relatively small profits. I’ve made that very same point in blog conversations with lefties who think Coles and Woollies are as evil as Monsanto! But the tight competition between the two big supermarket chains is not evidence that farmers aren’t being squeezed by them. Farmers make this complaint all the time, see here for example:
    http://nqr.farmonline.com.au/news/state/agribusiness-and-general/general/colesworth-killing-farm-profits-aba/1944844.aspx

    “An increase in the average age of farmers of 4 years over 15 years says more about increased life expectancy, with slowed turnover in family farms, than anything else. ”

    Not according to this federal government report, which notes:

    “There have been significant changes
    in the rate and types of people
    choosing farming since 1976. In the
    1970s and 1980s there was a rapid
    decline in young people choosing
    farming and in the 1990s these
    figures stabilised at the low level.”

    “People are farming longer into their later years as younger ones become less interested in taking over. The median farmer age has increased from 44 in 1981 to 50 in
    2001. Since 1976 the number of farmers in their 20s has declined by
    over 60 per cent.”

    http://lwa.gov.au/files/products/social-and-institutional-research-program/pf040777/pf040777.pdf

  49. Posted September 27, 2010 at 9:50 pm | Permalink

    is that governments are regularly poor managers of property

    Yes well not like we are any better. Govts have consistently introduced legislation to force companies and individuals to address the environmental damage they have created. So when we begin to take environmental issue seriously governments won’t have to interfere. The history is clear: govts have had to fight tooth and nail to get corporations and us to clean up our act. So I find it laughable when people condemn govt environmental initiatives because obviously the market isn’t going to fix the problem. What is fixing the problem, and what corporations and governments are increasingly responding too, is people who are prepared to fight for better environmental policies. It seems to me you want to throw the baby out with the bath water.

  50. Posted September 27, 2010 at 9:57 pm | Permalink

    Just a word: I’m having to log into the blog reasonably regularly and let people out of the spammer, even when you haven’t included any links. This post is enormously popular for some reason but we haven’t been able to track down exactly why.

    If you are a genuine commenter we will get your contribution up as soon as possible.

  51. mel
    Posted September 27, 2010 at 10:10 pm | Permalink

    Lorenzo says:

    “in Victoria, it is government-owned land which has by far the worse bushfire record.”

    Umm, yes, Lorenzo, government land has a worse bushfire record but don’t you think this might have something to do with the fact that it has more bush to burn as opposed to say, privately owned heavily grazed paddocks (such as the one across the road from my acreage)?

    BTW, some of the worst bushfires on Black Saturday started because of poorly maintained privately owned above ground power lines.

  52. JC
    Posted September 27, 2010 at 10:20 pm | Permalink

    In the UK at least, the low prices demanded by the supermarket duopoly are increasingly only achievable by large scale, monoculture, factory farming. Many don’t even rotate their crops anymore, preferring to artificially enrich the soil with nitrogen fertilizer which then runs off into the water table.

    So what though? I would guess other plants are receiving artificial nutrients.

    JC, you say mutant fish, I see this.

    Fair enough, Deux. Don’t eat it. However you shouldn’t stop other people from doing so particularly because seafood in most of the world now is very expensive.

    I’m well aware that Coles and Woolworths make relatively small profits. I’ve made that very same point in blog conversations with lefties who think Coles and Woollies are as evil as Monsanto! But the tight competition between the two big supermarket chains is not evidence that farmers aren’t being squeezed by them. Farmers make this complaint all the time, see here for example:

    Mel,

    The average return on farming over the past 30 years has been around 2 to 3%.

    If you agree that neither Coles nor Woolies are making out like bandits then the only complaint there’s left is that the public is paying too little for food. I really don’t think anyone should be trying to argue that point. Not even the Greenologists if they know what’s good for them electorally.

    Farming’s problem is structural. Too many small farms unable to obtain economies of scale. The quicker they’re out of the game the better. Farming belongs to the large combines which have more source to capital and know what they are doing.

  53. Posted September 27, 2010 at 10:33 pm | Permalink

    But the tight competition between the two big supermarket chains is not evidence that farmers aren’t being squeezed by them.

    Friend of mine owned a small goods farm. He sold his chillis only to find them, unprocessed, selling x4 the price he achieved. So tell me, how on earth does it come to be that just to transport and place in a shop ends up costing x4 the price of making the product. If anyone is inefficient here it is the transport and food chain arm, not the farmers.

    Farmers need to wake up to the reality of competition. Competition involves power, if you don’t have power, you’re done for. Farmers who want to be independent and not come together to fight for a better price are just being naive.

  54. JC
    Posted September 28, 2010 at 2:32 am | Permalink

    John:
    Farmers are awake to competition.

    They generally aren’t stupid people. However it hasn’t been an easy game because we’ve lived in a world of cheap food.

    However that will change over the coming decades and we could see some magnificent returns in farming particularly large scale farming.

    In fact I see farming as having the largest potential return of anything going over the next decade or so.

  55. Posted September 28, 2010 at 3:08 am | Permalink

    However that will change over the coming decades and we could see some magnificent returns in farming particularly large scale farming.

    In fact i see farming as having the largest potential return of anything going over the next decade or so.

    Thanks JC. You’ve mentioned that before and just tonight I passed on that advice to some friends.

  56. Patrick
    Posted September 28, 2010 at 5:15 am | Permalink

    The debate about large-scale farming is not some cute debate about whether we family farms are the awesomest or whether Monsanto is evil or even about any other lame teenage trope.

    The debate is better framed thusly: our world’s population is expanding and (thanks be!) growing richer. The increase in food consumption is most acute for those moving from semi-starvation to health, but is also heavily influenced by the ‘new middle classes’, who are generally far poorer than anyone here. Avoiding famine, especially amongst those unfortunate enough to be born in poor countries, will require vast increases in food production, which in turn requires ‘factory’ farming. Do we embrace ‘factory’ farming or not?

  57. Chris Bond
    Posted September 28, 2010 at 6:01 am | Permalink

    Patrick,
    What about the other alternative to ever more intensive food production – education and contraception so the world population does not continue upwards exponentially?

    Or are we already way beyond the point of no return, with China at 1.3 billion, India around 1.2 billion, etc, etc, the total world population approaching 7 billion according to Wiki.

    Maybe we’ll all ultimately be forced into a degree of localism in a generation or so when we have to put up impregnable barriers to stop the starving hordes from pouring across our (developed world) borders to snatch the food from our mouths.

  58. Posted September 28, 2010 at 8:20 am | Permalink

    What a thread of doom food supply and distribution is, given how many issues and biases tie in to it, and the wealth of historical examples and counter-examples to support or refute any point of view.

    I’d note that states in crisis from external forces, i.e. wars, almost always turn to command economies. If command economies didn’t work, why do states, needing maximum efficiency at such times, turn to this model and not others?

    Dynastic Egypt, apart from the disruption of iron from the north, had some pretty successful long-term command economies.

    It’s worth remembering that plentiful food is not always good food: the bugger-all lysine and tryptophan in maize causing endemic ill-health with adoption of agriculture in the americas, unless amaranth was added.

    Consumer preference for white rice has sometimes led to endemic beriberi (or deficiences in at least one of the B group if my memory on beriberi is wrong).

    Our modern epidemic of obesity, and the massive redirection of national spending to deal with diseases of plenty, is another disaster caused by advances ill-managed by society, and freedom of choice by many is in large part to blame.

    So too, cash crops for export can deprive a nation of better nutrition for locals.

    No economic or political faith can demonstrate unfailing success in providing good nutrition for a population. Free markets and capitalism are better than some systems at some times (as Marx argued!). Sometimes command economies are necessaey.

    Universal statements on such topics are, as always, frought with danger, especially if appealing to woo of invisible hands or Gaia.

    So, I ask my rightie friends, how could the decentralized decisions about food production and distribution, associated with unbalanced diets with the introduction of food production advances, be improved, avoiding things like mass pellagra, beriberi, and diabetes II? (I’m not /arguing/ with a rhetorical question here… I’d like to read and digest your proposals).

  59. Posted September 28, 2010 at 8:30 am | Permalink

    Dave, 2 points:

    1. Hayek in a nutshell: ‘you can plan the war, but not the peace’.

    2. Obesity: ‘volenti non fit injuria’.

  60. Posted September 28, 2010 at 9:24 am | Permalink

    Note the word “and” and what comes after it.

    I did. I’m still not aware of how the 3rd world supplies us with most of our food. I have a problem with the stranglehold that Coles and Woolworths have on the Australian food supply. I wonder to what extent this created by legislation as opposed to its absence.

    I said “to the best of my knowledge”, I did not falsely deny anything.

    Okay then, your knowledge is faulty.

    The WA Greens policy is irrelevant since it is a state policy on a federal issue; it can’t be enacted

    That can be said of all of the Greens’ policies. But it is immaterial to this discussion as it goes to show that there is support, amongst Greens, for local food movement type scenarios mandated by government. If this wasn’t the case then why have a policy? Why not just start a business? Or are there businesses that the Greens intend to assist by government mandate?

    The federal greens policy sounds more like subsidies than barriers to imports.

    And?

    Some other state-based Greens policies:

    Victoria:

    The protection of food production in peri-urban areas, and the promotion of community based food production and marketing.

    Qld:

    Facilitate community supported agriculture and local marketing initiatives that enhance connectivity between rural and urban communities, and drive demand for local, sustainably produced produce

    I see a general tendency here. The argument that these are state policies hence irrelevant to Federal issues is spurious. The Greens are a party that is state-based. Is there a major disagreement between state branches and the Green politicans in the Federal Houses? Also one of the policies I cited above was that of the Australian Greens.

    Subsidies, restrictions? It’s all the same. There’s a tendency to promote local food production by political decree. This has consequences. And the Greens like any other political agent are answerable to us for the consequences of their policies.

    I like certain of the Greens policies. But you have to wade thru a lot of chaff to find the good grain. There’s a feeling reading them that they think quantity is quality. They’d probably be a lot more successful concentrating on those ideas they have that are good. They have a chance of getting them up and making a difference. The rest are just brain-farts written by people who don’t know what they’re talking about.

  61. Jacques Chester
    Posted September 28, 2010 at 9:29 am | Permalink

    So, I ask my rightie friends, how could the decentralized decisions about food production and distribution, associated with unbalanced diets with the introduction of food production advances, be improved, avoiding things like mass pellagra, beriberi, and diabetes II?

    Pay ACA and TT to run a story about how these conditions give you cellulite. How the missing nutrient prevents the condition. The market will do the rest.

  62. Posted September 28, 2010 at 9:31 am | Permalink

    DEM – I’ll just point out that both SL and I are Queenslanders and therefore grew up with the cane toad legacy – and that was just importing an alien species, not creating one from scratch! Many, many reservations.

    I went to school and uni in Brizvegas. I spent many a Saturday afternoon fishing cane toads out the pool. Cane toads, they should write a song

  63. Posted September 28, 2010 at 9:39 am | Permalink

    John H –

    Another silent slur on greenies? Green movements have very much involved scientists, from Ailo Keto in Qld to David Suzuki in Canada to Bellamy in Britain.

    But being green doesn’t mean being Green. And vice versa. I think Steve Irwin was green but he definitely wasn’t a Bob Brown fan. The Greens can’t even count on such as The Wilderness Society for automatic support.

    When I was involved with them I wasn’t aware of a any social workers or teachers. There were two far-left unionists however. I didn’t get the impression that their agenda was primarily environmental.

    it is corporations who are becoming increasingly involved in genuine green initiatives.

    Indeed. There’s a certain streak of anti-capitalism in the Greens. It’s not universal but it’s there. Now that’s cool, they have a right to advocate that. Capitalism should not be some kind of compulsory godhead. But it seems to me that if they’re really serious about sustainability they’re better off using the power of markets and connecting with private sector agents who might share their concerns. They do, as you say, exist.

    That doesn’t mean they need to advocate some neoliberal free-for-all necessarily. Just be open to economic facts.

  64. Posted September 28, 2010 at 9:59 am | Permalink

    DB@58

    I’d note that states in crisis from external forces, i.e. wars, almost always turn to command economies. If command economies didn’t work, why do states, needing maximum efficiency at such times, turn to this model and not others?

    For the same reason that cities in sieges engage in rationing. There is a sudden, dramatic supply constraint, you are engaged in a common enterprise. So there is only a certain amount of food to go around, there is no way to increase the amount, everyone is in it together, everyone needs roughly the same amount. So rationing makes perfect sense.

    In modern “total wars” (which are much like big sieges anyway) food rationing also makes sense, for essentially the same reasons. There is more capacity to increase production, but there are other things one also wishes productive effort to go into (tanks, planes, munitions, ships: that sort of thing).

    Whether it is a long term goer for food production, I refer you to the experience of collectivisation, which produces much worse “food imbalances” (such as collectivisation famines) than anything seen in capitalist economies. North and South Korea have been running a “controlled experiment” for all to see, for example.

    The problem I have with so much of this stuff is endless concern (often to the point of gross exaggeration: we live in societies with record and increasing life expectancies, after all) for what “goes wrong” with markets, free choice, etc and no feel for what goes wrong with political mechanisms.

    The notion that there is a vulgar, cognitively crippled mass but out there, somewhere, somehow, there is some perceptive cognitive elite that just needs the right “levers of power” seems to me a patent nonsense. We are all broadly the same folk, so one needs to concentrate on the implications of particular mechanisms. And a fool can still put his own trousers on better than a wise man can do it for him.

  65. Jacques Chester
    Posted September 28, 2010 at 10:03 am | Permalink

    Even if the city under siege introduces rationing, a lot of the actual food consumed is going to come from the parallel market.

    People turn to rationing because they don’t realise that it’s a flawed alternative.

  66. Jacques Chester
    Posted September 28, 2010 at 10:04 am | Permalink

    Particularly since strict enough rationing will deter the invisible hand, which will send food elsewhere instead. Supply and demand applies in wartime too.

  67. Posted September 28, 2010 at 10:15 am | Permalink

    Mel @48 Agree that there is an issue, as noted elsewhere in this thread, with the viability of family farms. But the answer is better application of capital, which probably does mean bigger farms.

    JH@49 You are talking about externalities: a perennial problem. Indeed, one of the difficulties of political mechanisms is precisely how pervaded by externalities they are.

    Mel @51
    Yes, but the Victorian government has still been a spectacularly bad manager of bushfire risk. And, as it happens, I did not support the privatisation of the power-lines — that being the monopoly bit which is such a simple operation we can leave it to the government. Though, on the evidence, it would not have improved the bushfire risk management if the government had kept them.

  68. Posted September 28, 2010 at 10:18 am | Permalink

    JC @65, @66. Rationing is generally a bad idea, and there will be a black market, but in some circumstances it has advantages that outweigh the disadvantages. They are just odd circumstances and, the longer rationing is used, the more its disadvantages increase.

  69. Posted September 28, 2010 at 10:35 am | Permalink

    The problem I have with so much of this stuff is endless concern (often to the point of gross exaggeration: we live in societies with record and increasing life expectancies, after all) for what “goes wrong” with markets, free choice, etc and no feel for what goes wrong with political mechanisms.

    Indeed. I’m aware of at least one 20 year-old whose becoming influenced (sigh) by the idea of Jean-Jacques (fucking) Rousseau.

    The trouble with this dichotomy is that people characterize market economies only by their nefarities and ignore the benefits. This forces people who see the benefits to put all their energy into defending the capitalism and those things that are actually wrong with private sector agency never get addressed because the former group thinks it systemic and the latter group have been trained by the constant debate about this to ignore them.

  70. Posted September 28, 2010 at 11:16 am | Permalink

    CB@57 Humans have gone through production revolutions. The farming revolution of 10,000 years ago liberated us from the constraint of “what the nature happens to produce” (the ultimate local food) or “existing food”. The industrial revolution liberated us from the constraint of muscle power (a process than began with sails, windmills, watermills and gunpowder) or “inherent energy”. Some economic historians predict, on past patterns, another upward turning point in the middle of this century. Likely suspects are biotech and nanotech, both of which offer liberation from the constraints of existing form.

    Once the produced means of production (capital) became the key ratio with population, we stopped being in a Malthusian world. Particularly since the demographic transition kicked in, and fertility rates started to drop (as they are continuing to do) so that the point at which global population peaks keeps getting earlier and earlier.

    Of course, there are interesting variations. Iran under the mullahs, for example, has had the sharpest fertility drop ever recorded. Apparently, fewer and fewer Iranian woman are keen on bringing a daughter into the world of the mullahs. (I am sceptical of claims that it is all successful family planning: I recommend “Ayatollah, leave those kids alone” as perspective corrective.)

  71. Jacques Chester
    Posted September 28, 2010 at 11:27 am | Permalink

    The trouble with this dichotomy is that people characterize market economies only by their nefarities and ignore the benefits.

    And the other problem is the unexamined premise of “The Government Must Do Something”: that The Government Can Actually Do It.

  72. Posted September 28, 2010 at 12:06 pm | Permalink

    SL@59 – gotta love your succintness! (editing in slash mode crossing over to blog comments). Good points.

    1. Hayek in a nutshell: ‘you can plan the war, but not the peace’.

    Some wars on abstract nouns seem to have worked. From raw figures, LBJ’s War on Poverty, led by Field Marshall Keynes, over the period of active belligerence, is associated with a drop in use poverty/unemployment by nearly half. Other contributors and multiplier effects makes awarding medals tricky.

    2. Obesity: ‘volenti non fit injuria’.

    The dark arts of the advertising industry are (if expenditure by companies advertising products validates effectiveness) more than capable of subverting wishes unless ones wishes are to avoid advertising by limiting TV to Aunty, or has a strong mind. (offering as evidence the existence of sachets of lactose and artificial sweeteners at cafes as a blatant example of popular but misinformed consumer choice)

  73. JC
    Posted September 28, 2010 at 12:15 pm | Permalink

    Patrick,
    What about the other alternative to ever more intensive food production – education and contraception so the world population does not continue upwards exponentially?

    Or the natural un-authoritarian contraceptive method called wealth.

  74. Posted September 28, 2010 at 12:27 pm | Permalink

    But being green doesn’t mean being Green. And vice versa. I think Steve Irwin was green but he definitely wasn’t a Bob Brown fan. The Greens can’t even count on such as The Wilderness Society for automatic support.

    Lorenzo was originally referring to environmentalism. The Green Party are disturbing, I haven’t seen anything explicit where they repudiate capitalism and cannot understand why anyone in this day and age cannot see the value of free markets. Nor can I see why anyone should always assume market solutions are the best solutions. Cannot roll the universe into a ball.

    The difference between myself and Lorenzo is that he has a caricature image of greenies whereas I’ve met enough of ém to know that is just a generalisation worthy of instant dismissal. It would be like me labellling libertarianism as a bunch of free market nutters. Some undoubtedly are but libertarianism is a very broad church and many people might be surprised to learn just how broad environmentalism is.

    Externalities is just a word, if we and corporations recognised the value of environmental management there wouldn’t be a problem with environmental related externalities. Call it was it is: destruction of the environment. In this context referring to this issue as just another example of externalities is akin to the way researchers write “we sacrificied the animal”. … Hiding the truth, environmental degradation is often a direct consequence of people chasing after their self interest, of putting profits before people, and more often than a stark indicator of our cognitive limitations and if there is one savant like gift we all possess it is rationalisation.

  75. JC
    Posted September 28, 2010 at 1:16 pm | Permalink

    You make some good points, John H.

    especially this…”The Green Party are disturbing” :-)

    Look , to be honest I don’t see anything with these farmers markets and in fact they display all the characteristics of libertarianism and adopting free markets to choose an alternative course.

    Eventually it will probably fail because it’s based on flimsy evidence and people will wake up to themselves. However this doesn’t detract one iota from the principles I support in people being free to choose.

    And if it does fail it won’t be altogether a bad or a good thing as markets are basically a platform for experimentation.

  76. Posted September 28, 2010 at 4:14 pm | Permalink

    Dave, far more successful in reducing poverty in the US than anything LBJ did were the Clinton welfare reforms. Indeed, there is a strong case that LBJ’s ‘War on Poverty’ destroyed the inner cities (much of this is documented by the likes of Tim Harford in The Logic of Life). That said, ‘the War on Drugs’ played (and still plays) a significant part.

    Imagine if someone were honest enough to admit that they were passing a law under which 75% of those incarcerated would be of one race and one gender. That is what the War on Drugs has done to African-American males.

  77. Posted September 28, 2010 at 5:29 pm | Permalink

    JH@73

    I haven’t seen anything explicit where they repudiate capitalism

    No, of course not. It is just that property ownership and private action are perennially seen as problems and regulation and control seen as solutions.

    Since concern has been expressed in this thread on the plight of farmers, consider how much their lives have been complicated, their property rights degraded and their income possibilities restricted by having official discretions foisted on them on “environmental” grounds. The control on tree felling, for example, which the Victorian government has been forced to ease because it patently increased bushfire risks.

    Externalities is not “just a word”, it is a reality about how the world works. This notion of “if we just had the right intentions” is puerile. With the best will in the world, people do not pay as much attention to effects where they do not bear any consequences as when they do. That is what externalities are, and they matter. Indeed, they are absolutely central to the issue of environmental degradation. If you do not understand that, you do not understand the issue.

    DB@72 LBJ’s “war on poverty” coincided with the prolonged drop in the poverty rate in the US coming to a screeching halt, even slightly reversing. It is NOT an encouraging example.

    As for the “War on Drugs”, what SL said.

  78. mel
    Posted September 28, 2010 at 5:47 pm | Permalink

    Lorenzo says:

    “And, as it happens, I did not support the privatisation of the power-lines — that being the monopoly bit which is such a simple operation we can leave it to the government. Though, on the evidence, it would not have improved the bushfire risk management if the government had kept them.”

    False.

    “Maintenance of country power lines blew out from being checked every three years to five years after the state’s power network was privatised in 1999.” http://www.theage.com.au/victoria/mass-class-action-on-bushfires-20100618-ymx1.html

    Two-thirds of the lives lost on Black Saturday were lost because of fires caused by power lines.

  79. Henry2
    Posted September 28, 2010 at 6:15 pm | Permalink

    I’ve picked on the local food movement in this piece, but it strikes me that many environmental proposals will have a similar effect: that is, they will make the poorest poorer in absolute, not just relative terms.

    Totally off topic, but something that is definately destined to make the poorest poor is the increase in tobacco taxes.
    Tobacco is a drug, and for those down on their luck, its probably harder to kick than for those of us who have a decent life in prospect.
    Even if it wasnt a majority of the poorest in society that smoke, the tax would still be regressive because it would barely affect the buying habits of the rich.
    It seems that when you have a limited income the addictions get fed first, then the motor car and finally the kids, the parents and the landlord in no particular order.
    If tobacco is so bad it should be sold on prescription only with proof of addiction being the only grounds for prescribing.

    Regards,

    Frank

  80. Posted September 28, 2010 at 6:36 pm | Permalink

    If tobacco is so bad it should be sold on prescription only with proof of addiction being the only grounds for prescribing.

    Tobacco is bad for you but – Hell no!

  81. Posted September 28, 2010 at 7:01 pm | Permalink

    sl@76: I was less forceful than usual about the cause of the drop in unemployment, and “war on abstract nouns” gives a clue as to my general attitude to auch sloganeering. The “war on drugs” has /always/ been, by any metric apart from number of persons incarcerated, a total failure… Politicians being much like Monty Python’s “it’s only a flesh wound” knight.

    Perhaps command economies during crises work because people cannot avoid recognizing the problem, cannot deny “we are all in this together”. The “war on drugs” is /not/ a real crisis that threatens survival, but many think that food supply, climate and population may create a real crisis, which is why this thread is a hot one.

    Perhaps command or decentralized decisions only work when the public sense of crisis mirrors reality. An Orwellian or Stalinesque “perpetual war”, a false crisis to suit a regime wanting improper command will, and deserves to, cause systemic failure. Doubtless some view climate panic as such a false panic, although without a central regime driving it. Similarly, false security, with a let-it-be attitude because a crisis is not recognized, also leads to disaster.

    JC@75 said that “markets are basically a platform for experimentation”. I say (and it’s a pun folks, for IT geeks, no fightin’ words intended) you don’t run experiments in production.

  82. Posted September 29, 2010 at 7:16 am | Permalink

    Mel@78
    (1) A statement of claim by one side in a legal dispute is not proof: until tested, it may not even be evidence.
    (2) The maintenance or otherwise of the powerlines is not the only relevant cause. I refer you back to the point about requiring legal permission for people clearing/cutting trees on their property
    (3) A problem in the Kinglake fires was the failure to reduce fire hazards along the roads: indisputably public property.

  83. Posted September 29, 2010 at 7:27 am | Permalink

    DB@81

    you don’t run experiments in production

    On the contrary, that is precisely where you run experiments. Your entire existence, as does everyone’s, rests on the results of past experiments in production. Starting with hunting and gathering, moving on to farming …

    Perhaps command or decentralized decisions only work when the public sense of crisis mirrors reality.

    Could we move on from intentions making all the difference?

    Unless one is an anarchocapitalist who also wishes to abolish the employment contract, command mechanisms are going to be used for SOME things. The question is where and when they work, and that is a question beyond intentions. I am sure having sense of common purpose helps, having a sense of legitimate authority helps, but there is a whole lot more to be said.

    Just to make things more complicated, there are few certainties in any of this. There are a lot of probabilities, including strong probabilitiess. But public policy is always about playing the odds.

    Which is where (micro) economics helps, because it is rather good at generating “robust predictions of general tendency”, in the words of a senior econocrat.

  84. Miss Candy
    Posted September 29, 2010 at 9:09 am | Permalink

    As always with arguments that have been colonised by protoeconomists, we’re making some big assumptions here. Those of us who are into local and organic farming are not necessarily protectionists.

    My primary concern with free market food production is regulation. Here in Australia I at least have some say in the quality of food regulation and some trust in enforcement mechanisms.

    In other jurisdictions, there is not nearly the quality of either regulation or enforcement of consumer goods (as we have seen in numerous examples of kids toys being withdrawn from the market). Why should we expect the same for food?

    What bleach is being used for Chinese garlic? What genetically modified content exists in imported vegies?

    This is a matter which does and should affect the food trade. I don’t think we should assume that all food production is equal, and that *is* an issue on the side of local production.

  85. Miss Candy
    Posted September 29, 2010 at 9:12 am | Permalink

    The other point you seem to have overlooked SL is the difference between prosperity and wellbeing. Macroeconomics is moving rapidly from measures of wealth to measures of wellbeing, questioning the assumption that the two are directly proportional.

    There is plenty of evidence now to show that, beyond a certain baseline prosperity for all, wellbeing is reduced where the gap between rich and poor is wider.

  86. Jacques Chester
    Posted September 29, 2010 at 9:20 am | Permalink

    There is plenty of evidence now to show that, beyond a certain baseline prosperity for all, wellbeing is reduced where the gap between rich and poor is wider.

    Sure, gains from status and all that. But you assume that equalisation is possible. Realistically, serious attempts to do so destroy the baseline, which is worse than putting up from losses of wellbeing due to inequality.

  87. mel
    Posted September 29, 2010 at 2:54 pm | Permalink

    “There is plenty of evidence now to show that, beyond a certain baseline prosperity for all, wellbeing is reduced where the gap between rich and poor is wider.”

    Don’t blokes lower down in the social pecking order produce less testosterone?

    We are social animals, we can’t help but compare ourselves to the Jones’s. Libertarianism needs to acknowledge this issue.

  88. Posted September 29, 2010 at 3:44 pm | Permalink

    Don’t blokes lower down in the social pecking order produce less testosterone?.

    Yes, such relationships do exist. Social ranking impacts physiology. Cortisol, the main stress hormone, is higher for those lower on the social scale. T does rise with rising social status. There can even be changes in a dopamine receptor that is strongly implicated in addiction(DRD2). All can be seen in humans and other primates, if not most mammals.

    The problem isn’t inequality. Inequality is a good thing because humans can’t function in a “we’re all equal” society. a few hundred millionj odd years of evolutionary history has seen to that. The problem is the breadth of inequality and in the West that has been growing. That growth is a problem.

  89. Posted September 29, 2010 at 4:15 pm | Permalink

    I guess I didn’t put my point well.

    Societies where everyone is povvo will have lower overall wellbeing than those where everyone is at least not povvo.

    Clearer?

  90. JC
    Posted September 29, 2010 at 5:20 pm | Permalink

    Libertarianism needs to acknowledge this issue.

    What economic policies would you enact for hurt feelings Mel?

  91. Posted September 29, 2010 at 5:22 pm | Permalink

    JC, if you keep misusing the blockquote button, I will be forced to yell “Ni” at you.

  92. Posted September 29, 2010 at 5:32 pm | Permalink

    Do be aware that in terms of inequality, the major issue is still between countries, not within them.

    This was something researchers who made much of arguments about relative wealth were forced to admit. Fortunately for us, Nobel Laureate Daniel Kahneman is a very honest scholar, and admits that much ‘happiness’ research simply fails to take into account the difference that straight economic growth makes for the poor. See:

    http://www.edge.org/q2008/q08_17.html#kahneman

  93. Miss Candy
    Posted September 30, 2010 at 10:45 am | Permalink

    Jacques – I did say “beyond a certain baseline”… I’m not saying that if everyone’s babies are dying of hunger you’d be happier than someone whose kid is healthy but the next door neighbours have a pool.

    SL – I think that the gross disparity between countries means that there is no “baseline” of prosperity achieved yet. But I think my point still stands. Don’t assume a link between raw prosperity and wellbeing.

    I guess my point is that economic prosperity shouldn’t be the primary focus of these discussions – wellbeing should, which includes prosperity but accounts for more difficult measures such as capabilities (let’s not get all Sen and Nussbaum yet or we could be here all day).

  94. Jacques Chester
    Posted September 30, 2010 at 11:16 am | Permalink

    Miss C;

    I think SL and I understand that inequality has costs. The point is that if you try too hard to obtain equality, you will lose the baseline and still be stuck with an unequal society. This is pretty much the experience of every serious attempt at levelling society in history.

    Those who are prepared to give up inequality to obtain happiness often find that they will receive neither, to paraphrase Franklin.

    By contrast, while markets breed inequality, as a side effect they raise the baseline for everyone.

  95. mel
    Posted September 30, 2010 at 12:52 pm | Permalink

    #93 SL- very interesting. Thanks.

  96. Posted September 30, 2010 at 6:56 pm | Permalink

    Increases in income and wealth inequality in the Western world is an issue fraught with measurement and other analytical problems.

    First of all, life-cycle inequality has been increasing. There are more poor university students in their 20s who become high income professionals in their 40s. This is a form of inequality that no one should worry about, but does affect the statistics.

    Second, expanding women’s role in the workforce increases household inequality, as high income women marry high income men and low income women marry low income men (or do not marry, since the pool of available men fails to meet their standards). This form of inequality may have issues, but it is not obvious what should be done about it.

    Third, importing lots of developing world migrants increases income inequality, if their skill levels are significantly below the average of the resident population.

    So, increasing higher education, increasing women’s economic power and high levels of migration from the developing world all increase income inequality.

    I believe the phrase that applies in this situation is “unintended consequences”. But for progressive folk to beat their breast about increased inequality as some “sin” of capitalism when the actual long term effect of capitalism has been to decrease inequality within societies (in the mid C19th, the British elite lived about 17 years longer than poor Brits: the difference is now about a year) and it is policies they have been keen on (for good reasons, one has to say) which have acted to increase inequality is a tad annoying.

  97. Posted September 30, 2010 at 7:09 pm | Permalink

    Don’t assume a link between raw prosperity and wellbeing.

    Kahneman’s point is that there is a very powerful link between raw prosperity and wellbeing, and that the link is one of the strongest (0.4) in social science.

    Anyone who opines about ‘wellbeing’ simply has to take this into account.

  98. Posted September 30, 2010 at 7:39 pm | Permalink

    Beginning in the economic expansion of the early 1990s, Saez argues, the economy began to favor the top tiers American earners, but much of the country missed was left behind. “The top 1 percent incomes captured half of the overall economic growth over the period 1993-2007,” Saes writes.

    This is a problem and it is not confined to the USA. Ideally we should witness at spreading of wealth but the trend is the opposite.

  99. Posted October 1, 2010 at 4:45 am | Permalink

    JH@99 This post, by my favourite economic blogger, expresses nicely a lot of the measurement and analytical problems about income and wealth inequality.

    A period of rapid technological change also encourages increase in income inequality, as those with scarce new skills in demand gain an income premium. Again, not clear that that we should do much about the underlying driver.

    Also, an era of globalisation will increase income inequality, since those who profit from rising incomes outside one’s own country will also gain a disproportionate advantage. Since that same process has seen a massive drop in global poverty, also not clear that we should do much about the underlying driver.

    All things considered, it is more remarkable how little income equality has increased.

  100. Posted October 1, 2010 at 4:58 am | Permalink

    On inequality, in the UK, under which government did the very poorest do worse? The Conservative Government of 1979 – 1997 or the Blair Government of 1997 – 2008?

    Answer here. (How the overall comparison would do if you took the data up to 2010 is an interesting question.)

  101. Posted October 1, 2010 at 7:35 am | Permalink

    Favourite economic blogger, expresses nicely a lot of the measurement and analytical problems about income and wealth inequality.

    Shoot the messenger strategy. Yet time and again studies find rising inequality. Not particularly interested in general arguments addressing specific studies. Without a demonstrable connection between the two I cannot heed such analyses.

  102. mel
    Posted October 1, 2010 at 12:49 pm | Permalink

    The rising tides lifts all boats claim is not entirely true.

    If you live on a fixed income in a boom town like Perth, you can find yourself priced out of the rental market. When I was in Perth a couple of years back I recall reading about pensioners being forced to relocate to areas far removed from services because they could no longer afford the rent or because the landlord wanted to renovate the granny flat into something that would attract a high income renter.

  103. mel
    Posted October 1, 2010 at 1:02 pm | Permalink

    Another point, the game of capitalism is rigged in favour of the capitalist and against the ordinary worker in numerous ways.

    As an example, if a limited liability company goes bust the stock owners only lose their investment. Moreover, the liquidator will pay out creditors (other capitalists) before workers, who are at the bottom of the pile.

    I’m not arguing against LLCs, they are a necessary part of capitalism, but let’s not kid ourselves about the system not being rigged and therefore the reasonableness of income transfers from capital to labour.

  104. Posted October 1, 2010 at 1:25 pm | Permalink

    M@103

    If you live on a fixed income in a boom town like Perth, you can find yourself priced out of the rental market. When I was in Perth a couple of years back I recall reading about pensioners being forced to relocate to areas far removed from services because they could no longer afford the rent or because the landlord wanted to renovate the granny flat into something that would attract a high income renter.

    It is really pointless treating “capitalism” as an undifferentiated lump in such cases. Rising rental prices in metropolitan Australia flow directly from the government regulating land use. If housing supply could respond directly to housing demand, there would be much less of a problem. Instead, it is controlled by official discretions which, surprise, surprise, operate in favour of the politically connected – in this case, incumbent home owners.

    M@104

    Another point, the game of capitalism is rigged in favour of the capitalist and against the ordinary worker in numerous ways.

    The scarcer factor of production always has an advantage. When capital was not very important, so the land/population ratio was what mattered, landlords had lots of power. As capital became more important, landlords lost power.

    As capital becomes more plentiful, labour becomes relatively more scarce and so better rewarded. Capitalism produces the most prosperous and longest-lived workers because it is the best system for producing and using capital, thereby making labour comparatively scarce, so more valuable, so more prosperous.

    So, you “zero sum” “rigged” analysis (particularly “income transfers from capital to labour”) does not really work, certainly not as macro long-term analysis.

  105. desipis
    Posted October 1, 2010 at 1:56 pm | Permalink

    Rising rental prices in metropolitan Australia flow directly from the government regulating land use.

    The government regulates land use for a reason. That generally the free market would produce undesirable outcomes if land use was unregulated. It’s a complex issue and not caused (or solved) by any particular ideology.

    As capital becomes more plentiful, labour becomes relatively more scarce and so better rewarded.

    Unless the capital coordinates in ways that manipulate the market to sufficiently disadvantage labour.

  106. su
    Posted October 1, 2010 at 2:12 pm | Permalink

    If you live on a fixed income in a boom town like Perth, you can find yourself priced out of the rental market

    I think the drop in housing affordability is one of the reasons why even though the minimum wage has gone up in real terms, the poor are still getting poorer in Australia and this holds outside of the Major Metropolitans too. However it isn’t just housing, I found a receipt for a dental appointment I attended when I was 5 yrs old – a consult cost $4.68 which according to the RBA is $39.77 in today’s money. A consult costs upwards of twice that today. We were pretty close to the bottom of the pile when I was a kid but we attended doctors and dentists regularly. It is much, much, more difficult to pay for basic health care on a minimum wage today.

  107. Jacques Chester
    Posted October 1, 2010 at 2:28 pm | Permalink

    su;

    I don’t think you can lay the blame of costs arising with one of the most highly regulated and supply-controlled professions at the feet of the free market.

  108. Jacques Chester
    Posted October 1, 2010 at 2:31 pm | Permalink

    The government regulates land use for a reason. That generally the free market would produce undesirable outcomes if land use was unregulated.

    Yet the costs of the intervention are very high (housing bubbles, high rents and losses due to less-desirable uses of land) and very widely spread across the community. So long as land use does not cause truly nasty externalities (pollution, for instance), why regulate its use? Many of the world’s greatest cities grew with no such planning.

    My own opinion is that urban planning should get as far as laying out a grid and rights of way for public purposes and then pissing off and letting ordinary people and the businesses decide where they’re best suited.

  109. su
    Posted October 1, 2010 at 2:48 pm | Permalink

    I was blaming the dentists themselves rather than the free market but is it the case that dentistry is more regulated today than when it was affordable in the seventies? By supply side do you mean university places?

  110. conrad
    Posted October 1, 2010 at 3:56 pm | Permalink

    “I don’t think you can lay the blame of costs arising with one of the most highly regulated and supply-controlled professions at the feet of the free market.”

    I’m not sure that’s true of dentists Jacques — in fact I believe the group that all the dentists belong too actually told the government we need more dentists etc. in a way that the AMA never does. My guess is that su is correct — it’s probably exceptionally expensive to train dentists (clinical placements, staff you can’t afford to pay, infrastructure etc.), and so my guess is that the lack of supply is probably thanks to government rules on universities and not the dentists creating an AMA style mafia.

  111. mel
    Posted October 1, 2010 at 5:10 pm | Permalink

    #105 – Not even in the right ball park, Lorenzo.

    Re Melbourne:

    “As at June 2007 there was an estimated lot construction potential in metropolitan Melbourne of approximately 239,000 lots – Melbourne’s growth area municipalities have a potential supply of approximately 168,000 broadhectare lots of which 46% (77,000) are currently zoned for residential development purposes. ”

    http://www.dpcd.vic.gov.au/home/publications-and-research/urban-and-regional-research/housing-and-residential-land/metropolitan-residential-land-and-dwelling-supply

    It is well reported that developers bank land and release it on a slow drip feed to ensure scarcity is maintained. Developers are holding onto land that they have no intention of developing for many years, as per the above link.

    We also have a fair idea what unregulated urban development is like because we have plenty of historical examples as well as more contemporaneous developing world examples, none of which are particularly pleasant.

    Having said that heritage and preservation regs shit me, but no government could ditch them entirely and stay in office.

  112. Posted October 1, 2010 at 5:13 pm | Permalink

    Another point, the game of capitalism is rigged in favour of the capitalist and against the ordinary worker in numerous ways.

    As a friend of mine recently said, “The purpose of government is to keep the rich rich and stop the poor killing them.”

  113. mel
    Posted October 1, 2010 at 5:14 pm | Permalink

    Jacques:

    “My own opinion is that urban planning should get as far as laying out a grid and rights of way for public purposes and then pissing off and letting ordinary people and the businesses decide where they’re best suited.”

    Right, so you’d be happy if I built an offal processing plant next to your house, thereby reducing its value overnight by 50%.

    It ain’t that easy.

  114. Posted October 1, 2010 at 5:21 pm | Permalink

    It ain’t that easy.

    I live on the Gold Coast where the council was quite happy to let developers have their way. The place is a mess and the transport issues can never be solved because no-one ever bothered to plan ahead for population increases. The problem is not unique to the Gold Coast.

    I have never been able to understand the theoretic underpinnings for the assertion that if you just let people “do their thing” all will work out wonderfully well.

  115. desipis
    Posted October 1, 2010 at 8:38 pm | Permalink

    I have never been able to understand the theoretic underpinnings for the assertion that if you just let people “do their thing” all will work out wonderfully well.

    I guess it’s like religious practices or traditions in general. They seem to have worked in the past and have some semblance of truth in them but there’s a lack of complete understanding of why they work. It all ends up leading to an assumption of universal truth.

  116. Posted October 2, 2010 at 12:32 am | Permalink

    Since Lorenzo is probably out of a Friday evening, I’ll just link to one of his posts on housing policy and why he argues the way he does:

    http://lorenzo-thinkingoutaloud.blogspot.com/2010/05/housing-price-madness-of-restrictive.html

    He has written widely on the topic; relevant posts are available here:

    http://lorenzo-thinkingoutaloud.blogspot.com/search/label/housing

  117. Posted October 2, 2010 at 4:44 am | Permalink

    M@112

    It is well reported that developers bank land and release it on a slow drip feed to ensure scarcity is maintained. Developers are holding onto land that they have no intention of developing for many years, as per the above link.

    Sigh. Let us concentrate on that term “land release”. Why do you think developers can do that? Because “land release” exists in the first place. Regulation directs them to which land they can buy to get such a “lock”. Really, I do know what I am talking about.

    M@@114 The common law was coping with intra-property effects long before we picked up stupid and destructive British post-war land control rules. Texas manages to have perfectly functional large cities with no zoning laws at all. Developers offer covenants, which the courts uphold, so you get competition in local rules.

    JH@115

    I live on the Gold Coast where the council was quite happy to let developers have their way. The place is a mess and the transport issues can never be solved because no-one ever bothered to plan ahead for population increases. The problem is not unique to the Gold Coast.

    If you think the Gold Coast is a case of “let her rip” free market land use, then you have not studied the relevant regulatory structure.

    There is of course bad urban planning. Urban planning that concentrates, for example, on all the games of “regulatory approval” and not on intelligent provision of infrastructure. Developers LOVE land use regulation, because it gives them a nice easy target to manipulate, and raises entry costs, reducing competition.

    Apart from anything else, why do you think local government is the most corruption-ridden government? All those nice juicy regulatory discretions.

    Sydney and Melbourne have some of the most expensive housing in the Anglosphere: our housing prices have reached madness levels precisely because people have been sold the idea that the country in the developed world with the lowest population density somehow needs its land use “managed” by oh-so-wise officials.

    On bushfire risks, for example, since local council planners will only approve what they are comfortable with (basically, brick veneer), attempts to experiment with housing design to make them more bushfire resistant are stymied.

  118. Posted October 2, 2010 at 4:47 am | Permalink

    People, one of the basic things to get your analytical head around is that bad or destructive regulation, or simply the downsides of regulation, ALWAYS show up in market effects. So one cannot just infer from those market effects that it is “a problem of the free market”. One has to go back to the regulatory structure and consider its implications.

  119. Posted October 2, 2010 at 7:06 am | Permalink

    Lorenzo@119

    Lorenzo (and elsewhere, repeatedly, SL) make a good point about bad regulation, but I’d include in that things like the housing bonus.

    I remember The Age reporting that when they’ve been introduced in recent years, average auction prices increased the very next Saturday by the size of the new bonus and then some – so, as cash was not being paid, the bonus actually made housing more unaffordable.

    Lorenzo is spot on about the Oz housing bubble. But it’s a politically expedient bubble. A housing bubble (once home “ownership”, even with negative equity gets above a particular frequency) makes people feel wealthier even if there is no actual improvement in amenity, and political parties in power /love/ that idea.

    Mind you, McMansions with ballooning per-capita floorspace have a bit to do with the problem to, as does negative gearing.

    Mind you, the Geoffrey-Rush-keep-Camberwell-exactly-the-same movement, and others like it, movements loved by many in the latte set, are doing /just/ as much damage.

    There are probably a bucket load of parallels between food and housing mismanagement… And I bet you could include pathologies of plenty: diabetes 2 and mcmansion suburbs with no libraries, schools or shops within walking distance being examples.

    For housing (getting on my rock-proof asbestos suit) a per-capita-cap on floor space, at say average levels of 50s/60s/70s seems a way of limiting demand and lowering prices that cannot be labelled cruel except to land developers and corrupt/lazy politicians at every level.

  120. Posted October 2, 2010 at 7:40 am | Permalink

    DB@120 You won’t get any argument from me about the stupidity of using taxpayer money to fuel demand in a supply-constrained market.

    And yes, the regulation is driven by political expedience. As John Howard used to grin and say (until some of the realities seeped in) “no one has ever complained to me about increases in the value of their house”. To his credit, Peter Costello was one of the first pollies to start suggesting something might be amiss. (But see previous comment about using taxpayer money to raise demand in a supply-constrained market.)

    For those interested, a useful economic history of the (fairly disreputable) history of zoning the US is here also available via Google Documents. The author has a free copy of an earlier draft via his university homepage. He suggests insurance as an alternate solution to the noxious-neighbours-reducing-home-value problem.

  121. Posted October 2, 2010 at 8:01 am | Permalink

    For a left-libertarian philosopher who has posted recently on the wrongs of inequality, see here.

  122. desipis
    Posted October 2, 2010 at 8:17 am | Permalink

    People, one of the basic things to get your analytical head around is that bad or destructive regulation, or simply the downsides of regulation, ALWAYS show up in market effects.

    I guess it comes down to whether its bad regulation relative to some imaginary ideal outcome, or bad relative to the outcomes of an unregulated market.

  123. mel
    Posted October 2, 2010 at 12:17 pm | Permalink

    Lorenzo:

    “Sigh. Let us concentrate on that term “land release”. Why do you think developers can do that? Because “land release” exists in the first place. Regulation directs them to which land they can buy to get such a “lock”. Really, I do know what I am talking about.”

    Sigh. A developer can’t simply buy farmer Magoo’s paddock and put houses on it far from roads, schools, power, sewerage etc.. Obviously the Government has to establish growth corridors.

    Melbourne has something like 17 year worth undeveloped urban land at the moment. That is more than enough. What is probably needed is a big new tax on banked land.

    Lorenzo:

    “People, one of the basic things to get your analytical head around is that bad or destructive regulation, or simply the downsides of regulation, ALWAYS show up in market effects.”

    Obviously dude, but the idea that having no regulations at all is a quick fix is fanciful as well as ahistorical.

    We need regulations, they should be as few and as simple as possible and they should use market mechanisms as appropriate.

  124. Posted October 2, 2010 at 3:10 pm | Permalink

    If you think the Gold Coast is a case of “let her rip” free market land use, then you have not studied the relevant regulatory structure.

    I’ve worked with property developers on the Gold Coast. They have advised me that land banking is a common practice, pointing me to large tracts of land that are banked. Land banking makes perfect business sense, a way of maximising profits by keeping up demand. So from a libertarian perspective land banking should be a good thing.

    Of course the regulatory structure has problems. So does modern medicine but I’m not about to throw the baby out with the bathwater.

    Libertarians perform a valuable service in pointing out the dangers of regulation but look foolish when they extend to this argument to a generalised attack on regulation. Essentially that is the same logic those in alternative medicine use to attack conventional medicine .

  125. Posted October 3, 2010 at 5:06 am | Permalink

    Mel@124 Why don’t you read the posts of mine SL directed you to? In particular, this one and this one. No, government does not have to designate “growth corridors” by controlling whether land can be used for housing or not, as both Texas and Germany demonstrate. Provision of infrastructure does not require such zoning. It merely requires that governments respond to where growth is happening.

    One of the many aspects which drive up the price of Oz housing is the effective elimination of the previous possibility of buying and building of unserviced blocks. That allowed people to enter the housing market more cheaply.

    The requirement now that the cost of infrastructure be effectively bad upfront is even more stupid, as infrastructure is the sort of thing that SHOULD be paid over time, since future users benefit from it. It is all about raising barriers to market entry, thereby advantaging incumbents.

    I repeat, in a land-plentiful country such as Australia, “land banking” on the scale you point to is a product of regulation.

    JH@125 and Mel@124: An attack on land use regulation as official discretions controlling market entry is not an attack on all law: there are no anarchocapitalists here, that I am aware of. It is particularly not when I can point to jurisdictions which do not control land use in that way and are perfectly functional (e.g. Texas and Germany). Indeed, their housing markets are far more functional than ours (Australia’s, Britain’s, California’s etc), that is the point.

  126. Posted October 3, 2010 at 5:07 am | Permalink

    D@123 Or bad compared to other markets one can point to, which the relevant posts of mine do.

  127. mel
    Posted October 6, 2010 at 11:35 am | Permalink

    Lorenzo, your articles are uninteresting and rather lazy.

    House prices are a product of many things and in Australia negative gearing is one of the big ones that your articles overlook. Something like 40% of home loans now go to speculators for God’s sake, thanks to neg gearing.

    “I repeat, in a land-plentiful country such as Australia, “land banking” on the scale you point to is a product of regulation.”

    And it could be easily solved by taxing banked land so that land banking becomes an expensive proposition.

  128. mel
    Posted October 6, 2010 at 11:42 am | Permalink

    Lorenzo , you prize goose, I also found this after one minute’s googling:

    “A serious problem is that Germany’s population has been shrinking since 2002, by an average of 50,000 persons per year. Also the population is getting older, and the ageing trend will continue till 2030. Retired people on shrinking pensions are not likely to buy new houses, or move to better flats.”

    Also this:

    “After Germany’s re-unification in 1990, the Neue Bundesländer (New Federal Countries) and East Berlin saw much new residential building. A major incentive was tax write-offs for the construction of large-scale rental dwellings. Completions rose from 257,000 units in 1990, to an average of 500,000 units between 1995 and 2000.”

    So the population of Germany is old and shrinking and moving into nursing homes at the same time as the government has fueled a massive increase in unit construction with tax write-offs. No wonder house prices are so fecking low!!

    http://www.globalpropertyguide.com/Europe/Germany/Price-History

    Sorry mate, but you are now in my “not to be taken seriously” book.

  129. JC
    Posted October 6, 2010 at 12:27 pm | Permalink

    House prices are a product of many things and in Australia negative gearing is one of the big ones that your articles overlook. Something like 40% of home loans now go to speculators for God’s sake, thanks to neg gearing.

    Mel..negative gearing increases the supply of housing not reduce it. Please

  130. mel
    Posted October 6, 2010 at 12:53 pm | Permalink

    “Mel..negative gearing increases the supply of housing not reduce it. Please”

    Not by 40%, or even half that much. Therefore it drives up prices.

  131. Posted October 6, 2010 at 12:53 pm | Permalink

    Mel@128: Since I was looking at German and British patterns OVER SEVERAL DECADES, population trends over the past 8 years are hardly of much moment. Also, if you had read what I wrote, you will note that I pointed out that housing prices (as measured by ratio of median house price to median household income) in the US were not at all correlated with population growth. In particular, Texas has higher rates of population growth than Australia, has a higher proportion of its population in its 5 largest metro areas, higher average incomes and housing prices which a third to a half that of metropolitan Australia’s (by the same measure of prices as that above). It is also rather smaller than Australia — so should be “easier” for land banking. That does not happen, since people can build just about anywhere, so any developer who tried it would simply be “outflanked”. Hence my point about regulation and land-banking.

    Please try and get your head around what I am actually saying.

    As for housing prices being “product of many things”: no, like other prices, they are a product of supply and demand. If you restrict supply and pump up demand, prices will go up.

    This is, after all, your claim about land banking. (Which, as it happens, is sort of what happened in Ireland — a much smaller country one, might note, with highly concentrated landownership.)

    JC@130 Negative gearing may encourage investment in housing, but does not, of itself, increase the supply of housing in total (since it does not change the effect of official discretions) — though it may increase the stock of housing available for rent, so creating some downward pressure on rents.

  132. Posted October 6, 2010 at 12:54 pm | Permalink

    JC@130 Negative gearing reduces the cost of supplying rental properties, to just clarify my last point.

  133. Posted October 6, 2010 at 1:17 pm | Permalink

    Mel: if developers are “landbanking” in the way you suggest, then it is action in restraint of trade and one can sic the Trades Practices Act and the ICCC on to them.

    BTW I agree with taxing the unimproved value of land, but it would be a very clumsy way of stopping land-banking, giving how high the rates would have to be to work, other folk own land and trying to define land-banking for some specific tax would be a fascinating exercise. Simpler to adopt the Texan/German system.

  134. JC
    Posted October 6, 2010 at 2:29 pm | Permalink

    Mel

    Two extensive research reports by two I-banks found there were two issues.

    supply of land is restricted and that our population growth the highest rate in the western world has contributed to the shortage.

    If you think they are wrong you can have their research which is around 40 pages long and explain where you think they are wrong.

    Both argue that there isn’t a bubble at all and the price rise is due to those two factors.

    Lorenzo..

    Negative gearing increase housing stock. Yield factor is the primary driver in terms of the stock owned for rental or ownership. negative gearing cannot cause a rise in price.

  135. mel
    Posted October 6, 2010 at 3:21 pm | Permalink

    JC-

    Why waste our time by referring to two banks you refuse to identify and a report you don’t link to?

    Look, you are Australia’s least competent economics commentator by a country mile. Remember how you said we weren’t going to have a GFC when even Mr Magoo had sufficient vision to withdraw his money from US subprime related financial products.

    But seriously, if you think buying second houses (95% of neg geared lending) increased housing stock in equal measure that’s fine.

    Presumably you also think every second hand car purchase causes a new car to materialise from the ether.

  136. JC
    Posted October 6, 2010 at 3:50 pm | Permalink

    I can’t link them because they’re behind a firewall, Mel. However if you want them just holler and I would be happy to send them to you some time..

    The two I-banks were Credit Suisse and Morgan Stanely.

    Thanks for the compliment Mel. We get some predictions right and some wrong.

    I really don’t know how else it can be explained to you but negative gearing does NOT restrict supply: in fact it increases it and yield would ultimately determine where it’s distributed … either to the owner or rental market.

    If you’re analogizing the example of the second hand car market to the real estate market you’re simply wrong again.

    But let me help you….If you had said we imported second hand cars then of course the supply of cars would increase and affect the demand supply curve. The difference is that new housing is created

    Mel, try and behave yourself on this exalted site and stop it with the snarks as it’s not in keeping with what the gals want to create.

  137. mel
    Posted October 6, 2010 at 4:18 pm | Permalink

    This economist and most others I’ve read disagree- http://www.unconventionaleconomist.com/2010/06/negative-gearing-exposed.html

    I have no interest in what wingnut economists have to say.

  138. JC
    Posted October 6, 2010 at 5:41 pm | Permalink

    I have no interest in what wingnut economists have to say.

    Mel, this is a perfect illustration how you get into trouble and the historical fact that when you do you go nutzoid and get extremely bitter.

    You post a link to the Economist and mention other economists presumably Keynesian zombies like Bernie Keen and then say:

    “I have no interest in what wingnut economists have to say”.

    Do you see now how you always end up in the same cul de sac of “unreason”.

    …..and by the way, yes I am aware of the Economist’s position regarding our stretched PE in the real estate market.

    Getting back to the original issue, which is that the reason we have high prices is a little more complex than they seem and negative gearing is not one of them.

    Negative gearing creates supply, not the opposite.

  139. Posted October 6, 2010 at 6:00 pm | Permalink

    JC & Mel: whatever the ins and outs about negative gearing, it cannot raise the price unless supply is blocked from responding to the increased demand. You could pile as much negative gearing as you like into Germany or Texas, it would not raise prices since supply would simply respond.

  140. JC
    Posted October 6, 2010 at 6:35 pm | Permalink

    Lorenzo:

    Can I ask why you’re directing that to me and the Melster?

    Have I suggested anything of the sort?

  141. Posted October 7, 2010 at 4:01 am | Permalink

    JC: No, but I was suggesting a point that gets beyond where you two were arguing back to the wider issue.

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