Anarchy and Development: An Application of the Theory of Second Best
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Showing posts with label globalization. Show all posts
Showing posts with label globalization. Show all posts
Friday, August 7, 2009
Monday, May 5, 2008
Agricultural Subsidies
The impact of agricultural subsidies on welfare, both domestically and internationally, was a key topic discussed May 2-4, 2008 at The Understanding Liberty and Choice: Free Trade, Globalization, and Economic Development. This joint FTE and Liberty Fund colloquium discussed the neo classical view of trade as well as contemporary views of trade. Two of the texts - In Defense of Globalization and The Travels of a T Shirt in the Global Economy included analysis of the impact of subsidy in the agricultural sector.
This analysis was extended on the Becker-Posner Blog. On May 4, Posner wrote:
There is no justification for the Farm Bill in terms of social welfare. The agriculture industry does not exhibit the symptoms, such as large fixed costs, that make unregulated competition problematic in some industries, such as the airline industry, about which Becker and I blogged recently. It is true that crops are vulnerable to disease, drought, floods, and other natural disasters, but the global insurance industry insures against such disasters, and in addition large agricultural enterprises can reduce the risk of such disasters by diversifying crops and by owning farm land in different parts of the nation and the world. If a farm enterprise grows soybeans in different regions, a soybean blight in one region, by reducing the supply of soybeans, will increase the price of soybeans, so the enterprise will be hedged, at least partially, against the risk of disaster. Supply fluctuations due to natural disaster create instability in farm prices, but farmers can hedge against such instability by purchasing future or forward contracts. There is no "market failure" problem that would justify regulating the farm industry. All the subsidies should be repealed.
http://www.becker-posner-blog.com/archives/2008/05/the_outlandish.html
Becker responded:
Posner presents evidence on the sizable subsidies received by American farmers from the federal government of the United States. However, the US is not unique, for every rich country including France, Germany, Great Britain, and Japan, heavily subsidizes their farmers, no matter how small the agricultural sectors. In fact, some of these other countries subsidize farmers more generously than even the United States. On the surface, this universal tendency for rich countries to subsidize farming, no matter how different are the details of their political systems, is a paradox. For since only a small fraction of the populations of these countries work in agriculture, farmers cannot contribute much to any majority voting coalition.
http://www.becker-posner-blog.com/archives/2008/05/farm_subsidies.html
This analysis was extended on the Becker-Posner Blog. On May 4, Posner wrote:
There is no justification for the Farm Bill in terms of social welfare. The agriculture industry does not exhibit the symptoms, such as large fixed costs, that make unregulated competition problematic in some industries, such as the airline industry, about which Becker and I blogged recently. It is true that crops are vulnerable to disease, drought, floods, and other natural disasters, but the global insurance industry insures against such disasters, and in addition large agricultural enterprises can reduce the risk of such disasters by diversifying crops and by owning farm land in different parts of the nation and the world. If a farm enterprise grows soybeans in different regions, a soybean blight in one region, by reducing the supply of soybeans, will increase the price of soybeans, so the enterprise will be hedged, at least partially, against the risk of disaster. Supply fluctuations due to natural disaster create instability in farm prices, but farmers can hedge against such instability by purchasing future or forward contracts. There is no "market failure" problem that would justify regulating the farm industry. All the subsidies should be repealed.
http://www.becker-posner-blog.com/archives/2008/05/the_outlandish.html
Becker responded:
Posner presents evidence on the sizable subsidies received by American farmers from the federal government of the United States. However, the US is not unique, for every rich country including France, Germany, Great Britain, and Japan, heavily subsidizes their farmers, no matter how small the agricultural sectors. In fact, some of these other countries subsidize farmers more generously than even the United States. On the surface, this universal tendency for rich countries to subsidize farming, no matter how different are the details of their political systems, is a paradox. For since only a small fraction of the populations of these countries work in agriculture, farmers cannot contribute much to any majority voting coalition.
http://www.becker-posner-blog.com/archives/2008/05/farm_subsidies.html
Thursday, May 1, 2008
Free Trade, Globalization, and Economic Development
The series of joint FTE and Liberty Fund colloquium continues in May with:
Understanding Liberty and Choice: Free Trade, Globalization, and Economic Development.
As with the previous colloquium, the unique characteristics of the FTE and Liberty Fund approaches will be integrated. The keynote speaker, Pietra Rivoli will bring her expertise to our discussion which is centered around a number of readings including her acclaimed book - The Travels of a T Shirt in the Global Economy.
Looking forward to our discussions in May. Please feel free to post questions, comments or resources here that are relevant to our meeting.
Click here for a look at the full conference schedule as well as our readings.
Understanding Liberty and Choice: Free Trade, Globalization, and Economic Development.
As with the previous colloquium, the unique characteristics of the FTE and Liberty Fund approaches will be integrated. The keynote speaker, Pietra Rivoli will bring her expertise to our discussion which is centered around a number of readings including her acclaimed book - The Travels of a T Shirt in the Global Economy.
Looking forward to our discussions in May. Please feel free to post questions, comments or resources here that are relevant to our meeting.
Click here for a look at the full conference schedule as well as our readings.
Monday, April 28, 2008
International Economics and Trade
As part of my continuing professional development this summer I will be completing 3 online graduate classes - one of which is BU 631 International Economics and Trade. My first assignment in this class is a summary of Ricardo's Comparative Advantage.
David Ricardo in the preface to On the Principles of Political Economy and Taxation to writes:
"The real price of every thing," says Adam Smith, "what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it, and who wants to dispose of it, or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people." (http://www.econlib.org/library/Ricardo/ricP.html)
Ricardo goes on to develop one of the more profound contributions to social thought in his explication of value and the basis of exchange or the “toil and trouble which he can save to himself,” which is the famous comparative advantage. In chapter 7, Ricardo asserts the advantages of free trade in both the international and domestic arenas and them provides his numerical example, frequently included in introductory textbooks.
Analysis of comparative advantage over at 26econ
Other Resources
Sunday, April 27, 2008
Freer Trade Could Fill the World’s Rice Bowl
In today's NY Times:
The damage that trade restrictions cause is probably most evident in the case of rice. Although rice is the major foodstuff for about half of the world, it is highly protected and regulated. Only about 5 to 7 percent of the world’s rice production is traded across borders; that’s unusually low for an agricultural commodity.
RISING food prices mean hunger for millions and also political unrest, as has already been seen in Haiti, Egypt and Ivory Coast. Yes, more expensive energy and bad weather are partly at fault, but the real question is why adjustment hasn’t been easier. A big problem is that the world doesn’t have enough trade in foodstuffs.
The damage that trade restrictions cause is probably most evident in the case of rice. Although rice is the major foodstuff for about half of the world, it is highly protected and regulated. Only about 5 to 7 percent of the world’s rice production is traded across borders; that’s unusually low for an agricultural commodity.
Trade and the impact of change
In preparation for the joint FTE/Liberty Fund conference - Free Trade, Globalization, and Economic Development I have been rereading Dr. Rivoli's The Travels of a T-Shirt in the Global Economy 
in which she cites her colleague:
"Does the world really need another book about globalization?" Jagdish Bhagwati asks in the introduction to his recent book on the topic.
The answer, in my view, is yes and in addition to Rivoli's book, we are reading Bhagwati's In Defense of Globalization.
Rivoli writes in the preface to her book:
Later writers -- perhaps most artfully Peter Dougherty -- have argued instead that "Economics is part of a larger civilizing project," in which markets depend for their very survival on various forms of the backlash. My T-shirt's story comes down on Dougherty's side: Neither the market nor the backlash alone presents much hope for the poor the world over who farm cotton or stitch T-shirts together, but in the unintentional conspiracy between the two sides there is promise.
My T-shirt's life suggests, however, that the importance of markets might be overstated by both globalizers and critics. While my T-shirt's life story is certainly influenced by competitive economic markets, the key events in the T-shirt's life are less about competitive markets than they are about politics, history, and creative maneuvers to avoid markets. Even those who laud the effects of highly competitive markets are loathe to experience them personally, so the winners at various stages of my T-shirt's life are adept not so much at competing in markets but at avoiding them. The effects of these avoidance maneuvers can have more damaging effects on the poor and powerless than market competition itself. In short, my T-shirt's story has turned out to be less about markets than I would have predicted, and more about the historical and political webs of intrigue in which the markets are embedded. In peeling the onion of my T-shirt's life -- especially as it relates to current debates -- I kept being led back to history and politics.
in which she cites her colleague:"Does the world really need another book about globalization?" Jagdish Bhagwati asks in the introduction to his recent book on the topic.
The answer, in my view, is yes and in addition to Rivoli's book, we are reading Bhagwati's In Defense of Globalization.
Rivoli writes in the preface to her book:
Later writers -- perhaps most artfully Peter Dougherty -- have argued instead that "Economics is part of a larger civilizing project," in which markets depend for their very survival on various forms of the backlash. My T-shirt's story comes down on Dougherty's side: Neither the market nor the backlash alone presents much hope for the poor the world over who farm cotton or stitch T-shirts together, but in the unintentional conspiracy between the two sides there is promise.
My T-shirt's life suggests, however, that the importance of markets might be overstated by both globalizers and critics. While my T-shirt's life story is certainly influenced by competitive economic markets, the key events in the T-shirt's life are less about competitive markets than they are about politics, history, and creative maneuvers to avoid markets. Even those who laud the effects of highly competitive markets are loathe to experience them personally, so the winners at various stages of my T-shirt's life are adept not so much at competing in markets but at avoiding them. The effects of these avoidance maneuvers can have more damaging effects on the poor and powerless than market competition itself. In short, my T-shirt's story has turned out to be less about markets than I would have predicted, and more about the historical and political webs of intrigue in which the markets are embedded. In peeling the onion of my T-shirt's life -- especially as it relates to current debates -- I kept being led back to history and politics.
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