If UC Berkeley undergraduates where U Chicago professors, and vice versa

I found Brad Delong's midterm exam for Econ 1 very interesting.  After reading it and pondering the answers I expect he was looking for, the following questions came to mind:

1) How well would economics professors at the University of Chicago do on Brad Delong's exam?

2) How well would UC Berkeley professors do on a University of Chicago principles of economics exam?

3) If I were to give an exam like Brad Delong's in a principles of economics class here at NCSU, what proportion of my students would drop the class?  Of those that didn't drop, how well would they do relative to Delong's students at UC Berkeley.(**)

4) Would the answers to questions 1-3 make a typical undergraduate student curious, motivated, indifferent, or completely disillusioned?

(**) Berkeley students are probably a more motivated and prepared than NCSU students, but the larger difference here may be that at Berkeley students have to do very well in Econ 1 to be accepted into either the economics major or business major.

Carter on 60 minutes

I'm watching Jimmy Carter on 60 minutes.  His candor and honesty is... refreshing.

I don't get the Fed's supposed commitment problem

I've long been a proponent of the idea of inflation targeting by the Fed as a strategy for stimulating demand and reflating our moribund economy (for examples, see here, here and here)

Why isn't the Fed doing it already?

Today Tyler Cowen writes that the obstacles are mainly political.  My brief take on what Cowen is writing here is that the Fed's commitment to higher inflation needs to be credible for it to work, and if the Fed commits to higher inflation, some politicians will cry foul, which could not only compromise their commitment to sustained higher inflation, but ultimately threaten the Fed's authority and independence.

But politicians are always crying foul about the Fed's actions.  And if the Fed can't do what it should be doing, then its authority is already compromised.

Mark Thoma also emphasizes the commitment problem:

As for Tyler's (and others') call for monetary policy instead of fiscal policy, here's the problem. It relies upon changing expectations of future inflation (which changes the real interest rate). You have to get people to believe that the Fed will actually be willing to create inflation in the future when it comes time to do so. However, it's unlikely that it will be optimal for the Fed to cause inflation when the time comes. Because of that, the best policy is to promise that you'll create inflation, then renege on the promise when it comes time to follow through. Since people know that, and expect the Fed will not actually carry through, it's hard to get them to change their expectations now. All that credibility the Fed has built up and protected concerning their inflation fighting credentials works against them here.

I confess that I just don't get it.  I don't see why the Fed commiting to a 3 percent inflation target isn't credible.  As far as I can tell, a 3-percent long-run target is probably closer to optimal than the current 2-percent target anyway, even if the economy weren't depressed.  And since the Fed will want to have credibility the next time it makes a move, what is the incentive to deviate from their commitment post-reinflation?

Maybe the Fed fears powerful political forces.  But somehow Cowen's political argument strikes me as too nuanced. 

To the extent that politics are playing a role here, I expect the motives are more base than what Cowen describes.  On the one hand there is pure ideology.  Ideology of what I'm not sure, but some on the open market committee want to raise rates now because they fear too much inflation and too much easy credit, that our problems are structural, etc.  None of this makes sense to me, but I believe these guys believe what they are saying.  On the other hand there is the obvious fact that a bad economy is good for Republicans and not-so-good for Democrats.  Of course, if political power changes in November, maybe the political calculation for policy will change as well.  While I'm sure the folks on the open market committee try hard not to let their politics influence Fed policy, they are also human like the rest of us.

But I still don't get the commitment problem.

I actually think the Fed will ultimately target a higher inflation rate.  It's just going to take awhile.  Confirming Obama's three new nominees to the OMC will help to get us there.

The right way to evaluate teacher performance

There is much written and talked about when it comes to evaluating and compensating teachers based on student performance on standardized tests.  Those in favor of the approach emphasize the importance of incentives and culling of bad teachers and rewarding of really good ones.  Those opposed emphasize natural variation in student background and skills, that standardized tests can be a poor reflection of actual learning, that teachers will teach to the test instead of developing a broader, deeper curriculum, and possible cheating by teachers.

There are simple solutions to these problems:

1) Evaluate students based on performance on standardized tests in the subsequent grade or class.
2) Randomly assign students to teachers.
3) Use student performance in the previous class as a baseline, so that only "value added" measures of student performance are attributed to any given teacher.

These aren't my ideas, but I rarely see them talked or written about, especially by widely recognized leaders of school reform, like Michelle Rhee and Bill Gates.

(1) Makes it nearly impossible for teachers to cheat and removes nearly all incentive to "teach to the test," unless there are true long-term benefits to such a strategy.  A broader curriculum may facilitate the kind of deep learning that shows up on standardized tests in subsequent years, even if the test is imperfect.

(2) Helps for evaluation purposes, since all baselines will typically be the same up to a random error that can be quantified.  Perhaps more importantly, it instills a level of fairness, so that kids of the most over-bearing parents don't always get the best teachers.  This could present a challenge if there are benefits from tracking students by level or ability.  I'm a little dubious about the benefits of tracking.  (I'd be curious to see good evidence on this--does it exist?)  My anecdotal experience is that tracking is done for the benefit of a few parents who want special treatment for their kids, and by veteran teachers who want their pick of students. But if there are true benefits to tracking, random assignment could still work so long as the tracks weren't so small that a single teacher was responsible for an entire track.

(3) While random assignment of students would facilitate unbiased teacher assessment, using past student performance as a baseline,  the so-called "value added method," could make assessments more accurate.  Or, if random assignment in (2) weren't possible, the value added approach may serve as a substitute. The hyperlink goes to a story where value-added measures for individual teachers were published in the LA Times, which was understandably controversial.  Such measures need not be made public for individual teachers, but can and should be made public for informative aggregates, like school and grade-level.  And individual measures can and should be used for incentive pay, and for publicly acknowledging the very best teachers.

So, why aren't we doing these things already?

Yglesias on the inevitability of Big Food

Matthew Yglesias:

THE INEVITABILITY OF BIG

I’m glad that Tom Philpott took the bait on my praise of chain restaurants and went in with a bit of snark:

A few weeks ago, Think Progress star blogger Matt Yglesias penned a paean to mediocre strip-mall chain restaurants, calling for “more Olive Gardens” and deeming the the faux-fancy steakhouse chain Capital Grille “excellent.” So impressed is Yglesias by the food system that he would apparently like to model the education system after it!

Well that’s not really what I said about education, and the Capital Grille is neither mediocre nor located primarily in strip malls. I’ve been to locations in downtown DC and downtown Pittsburg, and their Porcini-Rubbed Delmonico is both delicious and—at $45 a pop—seems genuinely fancy to me.

But the real point I want to make is that if we ever see the kind of changes in agriculture and food consumption that Philpott and I would like to see—something healthier and more ecologically sustainable—it’s likely to happen largely through the mechanism of chains and branding. As long as technology keeps advancing, human time and human labor will keep getting more valuable. That means that people will increasingly want someone else to do their food preparation for them, and also that innovations that allow food prep to be done with less labor power will be more and more rewarded. That means chains and franchises that can rationalize the production process and who have sufficient scale to reap the rewards of investing in organizational innovation

From a public health standpoint, there’s a lot to like about chains. Since they have scale and standardization, you can get them to disclose nutritional information and many already do so to at least some extent voluntarily. What’s more, there’s nothing impossible in principle with the idea of a chain serving organic food—I get salads from these guys all the time. And with large chains and brands it’s actually feasible to monitor the claims people are making about their supply chain. It’s pretty well known at this point that a lot of “big organic” stuff is in many ways fraudulent, but the whole reason we know that is that we’re talking about large-scale producers whose operations people took the time to look into.

None of this is to say that people should be dupes for the status quo. It’s mere to observe that there’s a certain inevitability about important things happening at large scales. What’s more, insofar as good things happen at small scales, the best thing that could happen next is for them to scale up and get bigger. New ideas tend to start small, and when the status quo is bad that means you’ll often find good ideas at small shops. But to change the world, you need some combination of changing big institutions and turning good institutions into small ones.

Yep.  I'm (usually) not a fan of McDonald's.  But their meat is really safe.  Elise Golan, a leading expert on the economics of food safety at USDA, once told me that McDonald's has meat standards that far exceed anything USDA requires (and often does not enforce).  That's due to McDonald's size and a valuable brand name to protect.

You're still more likely to find me at the little hole in the wall with surprisingly good ethnic food.  But I eat lots of sushi too.  I guess that makes me a risk taker.

Fenty, Gray, Rhee and DC's schools

Way off topic, but a personal interest of mine, which makes it on topic:

It looks like Gray has beat out incumbent Fenty in the DC mayoral primary, which, in DC, is all that matters.   Everyone said that Fenty's reelection prospects came down to the schools, schools and schools.  And there were lots of reports about how everyone loved Rhee (the new hard-headed chancellor of public schools that Fenty appointed) and that the schools were doing a lot better.

The strange thing is that over 80 percent of the whites in DC voted for Fenty and over 80 percent of the blacks in DC voted for Gray (both Fenty and Gray are themselves black).  Also, some 80 percent of the public school kids are black.  So, if the election was about the schools, and the schools are doing so much better, why aren't black parents happy about it?

Obviously the blacks aren't happy about Fenty.  That could be for reasons besides the schools.  It could also be that people are less happy than reported about the job Rhee is doing with the schools.  I lean toward the latter explanation.  I'm not particularly impressed with the statistics that have been reported showing improvement.  A lot of the apparent improvement, I fear, is coming from changes in the composition in students, particularly a reduction in the number of special needs students and an increase in the percent of white students (see here).  What we need are "value added" statistics, like the infamous stats reported in the LA Times, preferably broken out by Ward.  I think those statistics, if they were available, might tell us a lot about why the DC mayoral election went down the way it did.

Update:  Matthew Yglesias has interesting things to say about the DC election and school reform.  And the statistic (which seems to contradict my own supposition) that 62 percent of parents with kids in the public schools supported Fenty, surprises me.  My impression has been that Rhee has catered a lot more to the few public schools with white kids but that black parents were unimpressed.  I think the broader lesson is less about the big-picture approach that Fenty and Rhee took with school reform--accountability, good performance measures, incentive pay and all that.  It's more about the lousy way they implemented the new policies.  Clarity and transparency were lacking.  The details of implementation seemed rushed and poorly thought out.  Rhee seemed far more dedicated to selling herself to the national media than to actually managing the school system.

Feedlot antibiotic use: Smart for one, dumb for all

It seems the FDA is finally going to crack down on feedlot antibiotic use.

Rampant antibiotic use, both for humans and especially for animals in confined feedlot operations, always struck me as a classic prionser's dilemma.

For those who don't know, the prisoner's dilemma is the canonical example of a kind of market failure where individual incentives lead to a socially bad outcome.  Hence, "smart for one and dumb for all," a line taken from Frank and Bernanke's principles of economics book.  My favorite example from their book is helmet use in hockey.  Most individual players will choose not to where a helmet if given the choice. But most are willing to vote for rule requiring mandatory helmet use by all players.  Why?  Because, no matter what other players are doing, not wearing a helmet may give a marginal advantage to the player not wearing the helmet, by making himself appear tougher or improving comfort, visibility or freedom of movement.  Thus, without a rule,  no one wears a helmet, which obviates any advantage but makes the game very dangerous.  With a helmet rule, everyone is better off, because no competitive advantage is conferred but everyone is safer.

So, in today's headline case it's always best for a feedlot owner to give his livestock lots of antibiotics, whether or not other livestock producers do the same.  But if all producers use antibiotics, we breed resistant superbacteria that can make a lot of livestock super sick  (people, too). 

I'd be surprised if the livestock industry has much to lose from new regulations and they potentially have a lot to gain, since it reduces the chance a superbug will kill off a lot of animals.  One way or another I expect they'll figure out a substitute.  And since all producers will face higher costs, they will be compensated for their costs in the form of retail prices.  So, producers will benefit from making the industry as a whole less susceptible to superbugs, and besides it's meat and dairy consumers that will ultimately foot the bill for the new regulations.

Since the basic economic analysis suggests producers have little to lose from the new regulations and perhaps a lot to gain, why do they resist these kinds of regulations so vigorously?

I don't know.  But I've got two guesses.  First, maybe individual producers imagine they will individually be effected by the regulations while their competitors are not effected.  That is, they are so used to taking prices as given that they just don't see that the regulation doesn't confer a competitive disadvantage to them (except, perhaps, relative to foreign producers--but that's a small deal in this case).  Second, it could be the livestock industry isn't really competitive, at least on the processing end.  I'm pretty sure that means livestock producers still have little to lose, but the big meat companies that process livestock products and distribute them may actually swallow a lot of the higher costs.  Moreover, the processors never bore much of the risk from a big feedlot disease outbreak.  So, my guess is that it's the processors that don't like the regulations, not the livestock producers, because the regulations will erode their market power.

Embracing industrial agriculture

Ezra Klein:

Jay Rayner offers some real talk on food production:

If we are to survive the coming food security storm, we will have to embrace unashamedly industrial methods of farming. We need to abandon the mythologies around agriculture, which take the wholesome marketing of high-end food brands at face value – farmer in smock, ear of corn, happy pig – and recognise that farming really is an industry, much like car manufacturing or steel forging, one which always works better on a mass scale, but which can still be managed sustainably.

Despite the dreams of many foodies, I can't think of a major industry that went from small, decentralized production methods to large, scaled industrial production -- and then back again. Are there any examples I'm missing? Maybe so. But for now, I think of the preference for farmers markets and small producers as being mainly important in sending certain signals about production methods and branding preferences to Big Ag than in actually creating some sort of viable alternative.

There will always be a niche for small, organic and local farm products.  I love to eat this kind of stuff too.  But I agree with Ezra Klein and Jay Rayner here: We're not going to solve the world's food problems with everyone eating local and everyone eating organic.  Indeed, that recipe is probably the opposite of sustainability, as I understand the term.

But I do think we can make large-scale industrial agriculture more healthful and environmentally friendly.  And the local/organic movement may be just the thing that pushes us in that direction.

NY Times: Not a Food Crisis

It is rare when I can agree entirely with a newspaper editorial page.  But today I can:

New York Times Editorial: 

Russia’s misguided decision to ban exports of wheat for the next 12 months has sent a destabilizing shock through agricultural markets, pushing prices of grains to their highest levels since 2007 and 2008, when food shortages sparked rioting around the world. The situation in poor grain-importing countries in Africa is tense. In Mozambique, the government backtracked on its decision to raise bread prices by 30 percent after riots in which more than a dozen people died. Still, the world need not experience another food crisis. 

This year’s cereal harvest was the third largest on record, according to the United Nations’ Food and Agriculture Organization. Cereal stocks are at their highest point in eight years. Though drought in Russia and other big wheat producers like Australia is likely to reduce output, wheat stocks should remain substantially above two years ago, when they plunged to their lowest levels in three decades.

The danger is that misguided policies could still produce a food shortage. The ban on wheat exports announced by Russia, the world’s fourth-biggest exporter, pushed prices way above what its drought would justify. Importing nations scrambled for other sources of supply.

Russia magnified the effect by asking Kazakhstan and Belarus to impose their own bans. If other big agricultural producers were to follow Russia’s example, they would worsen market instability and help spread hunger.

Russia should learn from the last food crisis, which was caused in part by a jump in demand by the biofuels industry and rising demand in developing countries. But it was exacerbated when about 30 countries imposed restrictions on the export of agricultural products. Importing countries stockpiled food, further reducing supplies.

This year, in India, which has had a wheat export ban for the last three years, a bumper crop has led the government to stockpile. Press reports say the grain is rotting in storage. Hoarding, by exporters and importers, will only increase prices further.

The concerns in Russia about its grain supplies are understandable, but it could still buy at reasonable prices on world markets — if it and other big food exporters agreed not to impose controls. That would help return stability to the markets, where countries could make up any temporary shortfalls.

The Food and Agriculture Organization will meet on Sept. 24 to discuss the volatility in grain markets. Some of the causes — like climate change — do not lend themselves to easy fixes. But if the agency could broker an agreement not to impose export controls, it would go a long way toward protecting food security.

Unfortunately, brokering such a deal will be difficult.   Even if  FAO can do it, markets would likely be skeptical that countries would abide by the deal the next time inventories are drawn down and a big shock hits.

What would it take to make such a deal credible?  I think it would need to include some kind of insurance to protect the most vulnerable countries in the event of a global commodity price spike or large local production shock.  To finance such insurance would require relatively rich nations to consume less when the crisis hits (i.e., face even higher commodity prices) so that vulnerable countries need not consume less.  That shouldn't be a problem because relatively rich countries have more than enough to eat. The real-world challenge of such an insurance agreement is making sure people in need actually receive the transfers when they need them.

SEDAC is relatively optimistic about crop yields under climate change

That's Socioeconomic Data and Applications Center at Columbia University.

They are optimistic--very optimistic--relative to our predictions, at least for corn and soybeans in the United States.  Our predictions are based on statistical analysis; theirs are based on yield simulation models.

They have also analyzed the whole world and have a cool interactive web page where you can see maps of their predictions.

Here's their map for corn.

75% of Japan's 1992-2007 decline relative to the U.S. is due to demographics

I have heard or read about this in passing but don't recall reading clear numbers to put it in perspective.  Until now.

Paul Krugman:

Using the Total Economy Database — another useful source — I find that from 1992 to 2007 (eve of the crisis), Japanese GDP per capita fell from 88 percent of US GDP per capita to 76 percent. That sounds bad, and it is. But about two-thirds of that decline can be explained by the aging of Japan’s population. According to the OECD factbook, in 1992 working-age adults were 69.7 percent of Japan’s population, compared with 65.5 in the US; by 2007, the Japanese number was down to 64, while the US number was up to 67.

But my math tells me this explains about three-quarters of the relative decline.  Output per working-age person in Japan fell from 82.7 percent of that in the US to 79.6 percent.  So, that's a relative decline of about three percentage points instead of 12.

Yes, I'm knit picking. It helps me to remember things like this.

A more careful analysis may lead to different numbers. One could take into account the whole life cycle of worker productivity in relation to the age distributions in the two countries.  One could get fancier still and account for the joint distribution of age and education. Would it be fair to assume education was exogenous to the relative decline?  Maybe not, but it would still be interesting.

"One purpose of studying economics is to avoid being fooled by economists"

This is a quote from Greg Mankiw channeling Joan Robinson.  His other pearls of wisdom can be found here.

home prices and inflation

David Leonhardt is the journalist to read about home prices.

But I've got a couple comments about his most recent contributions.

In this article Leonhardt is writing about the big, long-run uncertainties in the housing market.  He uses this to narrow his focus to fundamentals of demand and how demand changes with income.  If, as we grow richer, demand for homes grows faster than other kinds goods, then we may expect prices to rise a bit more than inflation, as they have in the past.  He draws interesting comparisons between homes and other kinds of goods.

My two main quibbles with all of this are:

(1) Supply matters too.  That is, the cost of building homes is likely to change as much as demand and income growth.  While it could go either way, building costs generally tend to decline, like everything else.  Bigger questions on the supply side have to do with congestion, transportation, where we work, etc., which ultimately drive the scarcity of land in places we want to live most.

(2) In the long run, supply and demand for housing ultimately drive rent.  But they don't necessarily drive home prices.  Or, at least rents, including expected future rents relative to other goods, are only part of it.  Prices also depend on how future rents are discounted to the present.

I think the second point must be on Leonardt's mind because he also just wrote a blog post seemingly arguing that interest rates don't have much to do with home prices.  Instead, he suggests psychology plays a role.  I'd argue that these two factors are not entirely separate.  The bubble probably got its start from low and persistently falling interest rates.  Then, perhaps, psychology took over.

It is important to account for the fact that home prices change slowly.  It's also important to account for anticipated inflation.  Most of the variation is Leonardt's plot of interest rates comes from changes in expected inflation.  This shouldn't have any real effect on home prices.  It's changes in real interest rates that matter most.  Real interest rates equal nominal rates minus expected inflation.

And then, we need to think about the fact that aggregate demand is an important factor driving inflation.  Thus, we often (but not always) see declining inflation and interest rates in times of declining demand (like today), and increasing inflation and interest rates in times of increasing demand.  So, in the 1980s interest rates were high because inflation was high, and inflation was high because demand was high.  So it wasn't so surprising to see home prices rising in a period of rising interest rates.  In contrast, during the big recent bubble, inflation expectations were pretty well anchored and interest rates were low and declining.  That is, real interest rates fell, and home prices boomed.

Anyway, I think Leonardt points out some interesting pieces here, but the larger uncertainties in the housing market have to do with inflation and interest rate expectations.  With disinflation and possible deflation looming, today's low prices and low interest rates are not the great deal they would be if inflation were expected to be in the old benchmark range of 2-3%.   Rents and prices for homes, like everything else, may fall further going forward.  Especially with housing, it's easy to see how this kind of deflation can lead to further contraction and recession.

Why you should be skeptical about Chis Blattman

Hat tip to R for pointing this out to me.

The usually smart and fun-to-read Chris Blattman:

Why you should be skeptical about food riots 

Much is being made of the food riots in Mozambique. The global food system and climate change are held to blame. Many predict a future of ever-increasing riots as climate shocks intensify.  

Here’s what a closer look at your economics and political science can tell you. 

Expect price volatility to fall over time. Globalization and growth should reduce price spikes in future. More countries are producing crops. Climate shocks in Argentina are not that tied to climate shocks in Russia or China, and so price volatility from supply shocks should be going down. Falling transport costs also mean that more substitutes are available, further reducing price volatility. So things should be getting better over time, not worse, especially if trade allows countries to diversify their diet. Envision a future of diminishing instability.  

Don’t forget the dogs that don’t bark. Grain prices are rising everywhere, yet most places do not riot. Why exactly are we blaming global grain prices?

....(it gets worse...)

Here Chris seems to talking as much about climate science as economics or politics.  He has also stepped onto a pet peeve of mine, common among some economists, which is ascribing personal views as truisms stemming from the branch of social sciences in which one specializes.  It's not quite as bad as Steven Levitt pontificating about global cooling, but it reeks of that kind of professional arrogance.  If you're an academic and are going to start asserting scientific truisms you need to be more specific about the underlying science.  Give us the meat, please.  About all I can imagine that sits beneath Chris's views here are extrapolation of commodity price trends.  Those trends, by the way, look almost purely random, not the sort of thing one is wise to prognosticate upon.(**)  But who knows.  He didn't tell us how or where economics and political science tells us all these things.

Now, it's true that there is more to food riots that high commodity prices.  It is also clear that good governance--that oh-so-elusive linchpin to well-functioning markets--is a critical component to stability and growth in developing countries.  But it's also clear that commodity prices matter a lot, and that food riots happen a lot more when commodity prices are high.  It was ugly in 2008. It was also ugly the last time prices spiked in the 70s.  And if prices remained high--something futures markets expected at that time--then I don't think Chris would have written what he wrote.

While there is significant debate and uncertainty about current trends in global hunger, it does appear extreme poverty, malnutrition and hunger are not declining as much as they once were, and may be getting worse. Is it coincidence this is happening during a period of time when commodity prices are not declining as they were?  Maybe, but I don't think so.

There is also informed speculation that climate change is causing real problems with food production in many countries.  Climate scientists say that exceptional monsoons in India may in fact be connected to the exceptional heat in Russia.  In the U.S., however, climate change has done little if anything to hurt production, so far.  Indeed, the weather has been strangely good.  But if current climate projections are correct, it doesn't look good.   And no country affects global commodity prices as much as the U.S. does.

Growth and trade are good for food prices and price volatility, and Chris says these will improve with time.  Maybe.  But in reality trade and growth ebb and flow.  And especially right now I'm a lot less optimistic than Chris.  But then Chris seems to be saying that growth and trade are causing more countries to produce more crops.  Isn't that the opposite of specialization?

But let's take the optimistic view of increased growth, trade and specialization as a truism (it isn't). Will this necessarily be a good thing?  Maybe.  I think basic economics indicates it would be, but this is also assuming growth and trade are themselves stable.  The story changes if we open up trade, poor countries specialize in non-food production, grow, and then we have a big production shock. Free trade policies can change quickly.  Food exporting countries may want to keep grain prices low domestically and ban exports.  This can lead to more export bans.  And hoarding.  And perhaps extraordinary vulnerability to countries that have specialized too much too quickly.

The one thing I'm convinced about when it comes to the effects of climate change effects on global agriculture:  it will cause big changes in geographic comparative advantages.  That is, it's going to shift where things are grown.  A lot.  It's also likely to change global quantities, but that's hard thing to put a finger on (ie., model convincingly).  With that much change going on, we should worry at least a little bit, and probably a whole lot, about how the kind of turmoil these changes will cause.  Loss of comparative advantage is just the kind of thing that brings about bad policy response.  So climate change may affect trade, in a bad way.

Personally I worry a lot about commodity price variability.  High prices clearly hurt the poorest of poor.  I don't know that prices will rise and that variability will increase, but I see these as distinct possibilities, and perhaps more likely than not.  Moreover, I know uncertainty about future prices is just tremendous.  And that much uncertainty means a distinct possibility of something truly horrific.

(**) In wonkish terms, commodity prices, almost all of them, appear to follow a random walk with a small negative drift that is not significantly different from zero.  There are a lot of deviations on this basic model, but nothing to change the conclusion that the long steady drift downward could have happened purely due to chance.  Uncertainty about the future is quite large.