Economics and its Consequences

I am a free market economist. I don’t believe that the market is some sort of a magic entity that allocates resources–rather, as a free marketer, I believe that the selective absence of government bureaucracy and authority produces a better outcome than intervention. This does not, however, guarantee a good outcome.

In the long term, food production and consumption are both somewhat elastic. Farmers can expand to more fields; and long term increases in the price of food are likely to reduce some of the demand for extra foodstuffs.

In the short term, food production and consumption are both somewhat inelastic. Harvests are yearly, and global shipments of food need not change immediately.

If you’re not an economist, don’t worry about the charts and try and follow along with the argument. If you are an economist, forget the charts.

What do the charts represent? To an economist, both of these charts represent the choices of a society. As the price (P) gets higher, less food is demanded (Q goes down). How does Q go down?

In the short term, Q is immediate changes in food demand. These include moving to cheaper foods which are less economically dear, reducing stock buildups, and starvation. Note that demand changes along the margin – those who are least willing or able to pay for their food stop buying it first.

If person A has $10,000 and person B has $1, it doesn’t matter if person B has a 100% interest in some good. Satisfying the mild preference of person A is worth more to the market than anything person B could want.

The market places more value on my iPod than your starvation.

(I should have probably warned you that I was heading there before I got there. Sorry about that.)

What do you do?