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China fact of the day
Hunan rice is a Giffen good? And maybe wheat flour in Gansu?
I am shocked to see this paper (Mark Thoma comments). Future world powers should not have Giffen goods, much less two of them.
Addendum: David Leonhardt reports on a different kind of upward-sloping demand curve.
Posted by Tyler Cowen on July 11, 2007 at 06:42 AM in Data Source | Permalink
Comments
It's Gansu, not Hansu.
Boycott China Over Hunan Rice!
Posted by: hanmeng at Jul 11, 2007 9:12:34 AM
Thanks, corrected...
Posted by: Tyler Cowen at Jul 11, 2007 9:23:35 AM
http://www.nytimes.com/2007/07/11/education/11economics.html?_r=1&oref=slogin
Off-topic: what about Patricia Cohen's article?
Posted by: Captain Hook at Jul 11, 2007 9:38:44 AM
(I didn't bother reading the paper, but...) what's the surprise here? The operative word in "future world powers" is "future", not "power". People in the countryside are still extremely poor.
Posted by: Micke at Jul 11, 2007 10:33:07 AM
I could imagine rice and flour being Giffen goods in China about a thousand years ago or so when China was a world power, at least as much as any country was.
Posted by: sort_of_knowledgable at Jul 11, 2007 11:21:29 AM
I have a question. It's often argued that there are no real world examples of Giffen goods. But isn't fine art clearly a Giffen good? There is no demand for any of my drawings of dogs in blue crayon on coctail napkins. Right now they are worthless or marginally worthless. However, if died a spectacular death on national TV and my estate sold one of these blue dog drawings for $100,000, the demand would go up from zero to quite significant. The mere fact one sold for $100k makes the next one worth something in the $100k price range, if not more. And it doesn't even take the artist dying a notable death to cause one's art to sell for high prices. Once an artist starts to sell his or her work for high prices, demand for his/her work increases solely due to the rise in price. That's a pure Giffen good. So why is fine art (the 'fineness' of it is dictated by the price!) not considered a Giffen good? Or is it?
Posted by: bruce at Jul 12, 2007 12:07:04 AM
From the linked Wikipedia article...
In order to be a true Giffen good, price must be the only thing that changes to get a change in quantity demand, and conspicuous consumption does not enter the picture (such a situation would indicate a Veblen good).
Posted by: MikeP at Jul 12, 2007 2:11:23 AM
Bruce,
I may be incorrect here (and therefore in need of more studying so I don't fail my comps) but I believe that the Giffen good case requires preferences to be held constant, and that it does not apply to conspicuous consumption. It seems to me that your horrible, notable death may change preferences greatly. Flashy cars, fancy art, and expensive jewelery all derive their value largely from their large price tag, and the signals about status and power this sends to others, and thus are not considered candidates for Giffen Goods (Giffen goods must be inferior goods; consumption falls as incomes rise).
Posted by: Jim Outen at Jul 12, 2007 3:00:33 AM
bruce, if you really think it works like that, hire a rich person to pay a high price for your first
painting and pay him back with revenues from subsequent paintings (which would be very high). I don't think
it will work.
I sympathize of course. The art community *is* inscrutable and prone to manias and self-congratulation.
There's no rhyme or reason to it, and it can't be rooked like you've described.
A better suggestion might be to hire three respected art critics to view the first painting with an
"untainted" forth. Have your cohorts pretend to praise the work, tricking the fourth. Then add another
untainted critic to the group, removing "convinced" ones as desired. Would that make your work suddenly
valuable? I wonder...
Posted by: Person at Jul 12, 2007 5:28:47 PM
There are giffen goods even in the U.S. I would like to imagine. Think of
hamburger meat for some people....
If they consume hamburger 6 nights a week and steak 1 night a week,
and the price of beef goes up, then they will consumer more hamburger.
That is, the price increased, but they consume more.
I could be off here...
Posted by: J at Jul 16, 2007 4:51:10 PM
Posted by: 鑽石 at Apr 2, 2008 9:09:32 PM
