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.

Comments

  1. I don't understand or necessarily agree with everything that Blattman is saying, but I agree with his basic point that international trade offers a way to adapt to certain types of crop yield variability.

    I've made this basic point in a recent paper ... When one region has a crop failure, spatial arbitrage reallocates supplies from regions of abundance, thereby minimizing the fluctuation of prices:

    "Yield Variability and Agricultural Trade"
    http://people.oregonstate.edu/~reimerj/DOCUMENT/2009_Reimer_Li_ARER.pdf

    However, the assumption that liberalization has come to agriculture is misplaced.... trade costs remain exceptionally high in this sector, which makes spatial arbitrage very limited...

    "Trade Costs and the Gains from Trade in Crop Agriculture"
    http://people.oregonstate.edu/~reimerj/DOCUMENT/2010_Reimer_Li_AJAE.pdf

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