Marginal Revolution

Who Owns Antiquity?

If by chance a scholar came across the Rosetta Stone in a private collection, she would be discouraged from publishing it in today's leading English-language, archaeological journals.  Those journals have policies against serving as "the initial place of publication or pronouncement" of any unprovenanced object acquired by an individual or institution after December 30, 1970, unless it was in a collection prior to that date, or there is evidence that it was legally exported from its country of origin...Not being acquired or published, and thus neither studied nor deciphered, the Rosetta Stone would be a mere curiosity, Egyptology as we know it would not exist...

That is from James Cuno's excellent Who Owns Antiquity: Museums and the Battle Over Our Ancient Heritage.  The book criticizes nationalistic identity politics, calls for measures to broaden international access to antiquities, and argues that museums should again be allowed to acquire undocumented antiquities.  In other words he favors a cosmopolitan, property rights approach.  Here is the book's web page.  Here is an interview, with incisive questions.

Collier on the Food Crisis

Paul Collier's The Bottom Billion was my pick for best economics book last year (not written by a dear friend), it was smart, hard-hitting and unconventional.  Collier hasn't lost his touch as a great comment, more like an op-ed, on the food crisis over at Martin Wolf's Economic Forum illustrates.

The remedy to high food prices is to increase food supply, something that is entirely feasible. The most realistic way to raise global supply is to replicate the Brazilian model of large, technologically sophisticated agro-companies supplying for the world market.... There are still many areas of the world that have good land which could be used far more productively if it was properly managed by large companies...

Unfortunately, large-scale commercial agriculture is unromantic. We laud the production style of the peasant: environmentally sustainable and human in scale. In respect of manufacturing and services we grew out of this fantasy years ago, but in agriculture it continues to contaminate our policies. In Europe and Japan huge public resources have been devoted to propping up small farms. The best that can be said for these policies is that we can afford them. In Africa, which cannot afford them, development agencies have oriented their entire efforts on agricultural development to peasant style production. As a result, Africa has less large-scale commercial agriculture than it had fifty years ago. Unfortunately, peasant farming is generally not well-suited to innovation and investment: the result has been that African agriculture has fallen further and further behind the advancing productivity frontier of the globalized commercial model.

Read the whole thing.  Many more oxen are gored.

An interesting view on bank regulation

It starts with this:

...there are few crises I have known from the inside that would not have happened if only there was more disclosure. People knew that sub-prime was a poor risk – it is called sub-prime, after all.

Then it moves here:

The alternative model rests on three pillars. The first recognises that the biggest source of market and systemic failure is the economic cycle and so regulation cannot be blind and deaf to the cycle – it must put it close to the centre. Charles Goodhart and I have proposed contra-cyclical charges – capital charges that rise as the market price of risk falls as measured by financial market prices – and a good starting point for implementation of such charges is the Spanish system of dynamic provisioning (Goodhart and Persaud 2008).

The second pillar focuses regulation on systemically important distinctions, such as maturity mismatches and leverage, and not on out-dated distinctions between banks and non-banks. Institutions without leverage or mismatch should be lightly regulated – if at all – and in particular would not be required to adhere to short term rules such as mark-to-market accounting or market-price risk sensitivity that contribute to market dislocation. Bankers will argue against this, saying that it creates an unlevel playing field, but financial markets are based on diversity, not homogeneity. Incentivising long-term investors to behave long-term will mean that there will be more buyers when banks are forced to sell.

The third pillar is requiring banks to pay an insurance premium to tax payers against the risk that the tax payer will be required to bail them out. If such a market could be created, it would not only incentivise good banking and push the focus of regulation away from process to outcomes, but it would provide an incentive for banks to be less systemic. Today, banks have an incentive to be more systemic as a bail out is then guaranteed. The right response to Citibank’s routine failure to anticipate its credit risks is not for it to keep on getting bigger so that it can remain too big to fail, but for it to whither away under rising insurance premiums paid to tax payers.

Carbon tax splat

A few of you asked me for more commentary on this linked article.  Will is on board but I think it is provocative but unconvincing.  Here are a few points: oddly, the author doesn't mention the strongest argument against such a tax, namely that the Chinese and others may not follow suit.  I don't worry much about one-time compliance costs if energy improvements bring a sounder long-run state of affairs; admittedly a big if.  The side deals from a tax will be bad and I expect an inefficient version of whatever happens; that said this does not disfavor reform vs. the status quo since the status quo has very bad side deals too; whether those side deals get worse, or by how much, depends on how the counterfactual is specified.  Under some scenarios the side deals in fact get better.  Uncertainty alone does not favor inaction, rather it favors action as a kind of insurance policy against very bad outcomes.  And uncertainty about long chains of causation most definitely does not, per se, favor reliance on market prices, rather it favors agnosticism about market vs. government.  Waiting does seem very costly to me; read Six Degrees.  I am far from convinced that the Nordhaus model is the best way to think about the costs of warming.  The author of the post is at his best when arguing: "a tax is unlikely to work," at his weakest when arguing "this means the best course of action is no tax at all."

The bottom line is that the whole thing is likely to end very badly for at least one billion of the world's people, no matter what we do within the feasible set.  In the meantime we can tell them they ought to get richer, and of course they should, but that's hardly a solution either.

Assorted links

1. Interesting arguments against a carbon tax

2. What are the longest drives on Google Maps?

3. Who is Lane Kenworthy?

4. Gas tax incidence

Markets in everything, Thorstein Veblen edition

A watch that doesn't tell time.  Oh, it costs $300,000.  And:

He added that anyone can buy a watch that tells time — only a truly discerning customer can buy one that doesn’t.

And here’s the best part: The watch sold out within 48 hours of its launch.

I thank Darren Klein for the pointer.

Addendum: I am reminded of Borges on Veblen: "When, many years ago, I happened to read this book, I thought it was a satire.  I later learned it was the first work of an illustrious sociologist."

Should smart men prefer the fiction of the past?

Razib thinks so:

I think that it is somewhat peculiar that many of us find fiction from the past more engaging than popular contemporary works. Aupelius' Golden Ass gets my attention; most contemporary fiction does not.  I am arguing here that this is partly due to the fact that in the past those who read copiously were, on average, much more like me than they were like the typical human. Not only were readers by and large men (usually of some means and comfort), but they were often also disproportionately eggheads who were eccentric by their nature. How many elite scholars were there such as Claudius who were not attracted to the public life of politics and do not appear in the annals of history? With the printing press, cheaper paper, and the rise of mass literacy, things changed, the distribution of taste shifted.  And so did the distribution of genres.

Read the whole thing.  I believe that literary "market taste" was closest to mine in the 1920s, a remarkable decade that saw the publication of major works by Proust, Mann, Joyce, Rilke, Kafka, and numerous other masterpieces.  That may be more a "spirit of the times" effect than an audience composition effect, since I prefer it to earlier and more elite periods as well.  (Or maybe only by then did fiction get dumbed down to my level!)

When it comes to Roman literature there is also a significant selection effect, namely what later manuscript collectors thought was worth preserving and protecting.  Many novels were written during Roman times, but not many of them have come down to us and thus the average quality of Roman literature may look artificially high, just as the average quality of today's literary menagerie looks artificially low.

Charles Tilly dies at 78

Here is one obituary.  Tilly was a historical sociologist but he had an influence on economic history as well, including the New Institutional Economics:

Dr. Tilly mined immense piles of original documents for raw data and contemporary accounts — including municipal archives, unpublished letters and diaries — that he used to develop theories applicable to many contexts. A particular interest was the development of the nation state in Europe, which he suggested was partly a military innovation. In his 1990 book “Coercion, Capital, and European States, AD 990-1990” (Blackwell), he argued that the increasingly large costs of gunpowder and large armies required big, powerful nation states with the power to tax.

In 1985, he gave early indications of his argument that war made states in an article that said nation states, with their monopolies on violence, function like gangsters’ protection rackets. He said that governments emphasize, create and stimulate external threats, then ask their citizens to pay for defense.

I think of his mid-career work as being most important, such as his The Formation of National States in Western Europe.  In any case America has lost one of its leading social scientists.  Wikipedia offers good links.  Here is Tilly on how to do social science work, recommended.

Make dentistry cheaper

Can you see what is coming?:

But to the Alaska Dental Society and the American Dental Association, the clinic is a place where the rules of dentistry are flouted daily. The dental groups object not because of any evidence that the clinic provides substandard care, but because it is run by Aurora Johnson, who is not a dentist. After two years of training in a program unique to Alaska, Ms. Johnson performs basic dental work like drilling and filling cavities.

Here is much more.  Get this:

The number of dentists in the United States has been roughly flat since 1990 and is forecast to decline over the next decade. A study last year from the Centers for Disease Control showed that Americans’ dental health was worsening for the first time since statistics began to be kept.

In Alaska, the A.D.A. and the state’s dental society had filed a lawsuit to block the program that trained people like Ms. Johnson, who are called dental therapists. The groups dropped the suit last summer after a state court judge issued a ruling critical of the dentists. But the A.D.A. continues to oppose allowing therapists to operate anywhere in the lower 49 states. Currently, therapists are allowed to practice only in Alaska, and only on Alaska Natives.

The opposition to therapists follows decades of efforts by state dental boards, which are dominated by dentists, to block hygienists from providing care without being supervised by dentists.

The dental associations say they simply want to be sure that patients do not receive substandard care. But some dentists in public health programs contend that dentists in private practice consider therapists low-cost competition. In Alaska, the federally financed program that supplies care to Alaska Natives pays therapists about $60,000 a year, one-half to one-third of what dentists typically earn.

The Alaska program is small, with fewer than a dozen therapists practicing so far. But the early results are promising, according to dental health experts who are studying the program.

As someone who has spent a lot of time at the dentist, I very much like the assistants and I think of the dentist himself as a kind of middle-level manager and salesman.

I thank Greg Rehmke for the pointer.

Eminent Domain and Civil Rights

“[t]he burden of eminent domain has and will continue to fall disproportionately upon racial and ethnic minorities, the elderly, and economically disadvantaged.” Unfettered eminent domain authority, the NAACP concluded, is a “license for government to coerce individuals on behalf of society’s strongest interests.”

That is the NAACP quoted in an op-ed by David Beito and GMU law prof Ilya Somin. 

Hat tip to The Beacon.

In case you weren't paying attention...

James Joyce, Ulysses, Kindle edition, $3.19.  Free shipping, too. 

Is the book market going the way of the music market, where there is a systematic redistribution of the surplus toward suppliers of the hardware rather than suppliers of the content?

Exporting Electrons

Everyone knows that Caterpillar is an exporter.  But last week Google reported record profits and Google stock rose nearly twenty percent.  Why were profits up?  Google's foreign revenues shot head of its U.S. revenues because of a weaker dollar.  Google is an exporter.  Who knew?  And what does Google export?  Patterns of electrons.

Thanks to David Levy for discussion.

How to behave when you're old

Bryan Caplan presents us with his dilemma:

When I'm old, I want to be the octogenarian that the Young Turks come to with their crazy new ideas. I don't want to be the senior professor that the whippersnapper assistant profs avoid. Above all else, I never want to be a lunch tax - I like lunch too much.

Unfortunately, by the time I'm 80 I'll probably be too befuddled to figure out how to do any of this. So I want to figure it out now, tape it on my office wall, and refer to it when the time is ripe.

...Not mentioning any names, what are the biggest social mistakes elderly faculty make? What are some simple strategies for them to ingratiate themselves to the next generation? If you've got some good advice, I'll thank you when I'm 80. If I remember!

I remain a fan of Richard Posner's book on old age, one of his best.  I ask Bryan: would he still take the advice that his 12-year-old self might have taped to a door?  Neurological changes aside, the elderly simply have less incentive to be deferential and to court their younger colleagues; Aristotle knew this too.

Bryan's best lunchtime bet is that, when he is eighty, I am still around at ninety.

An alternative strategy is to find -- today -- the eighty-year olds who are still fascinating and run your new ideas by them.  Most of them will gladly receive you.  I used to fly out to Ann Arbor occasionally to meet with the great Marvin Becker, but in general I haven't done much of this in my life.  Call that my failing but it's another reason why so many eighty-year-olds don't bother to appeal to Young Turks as a constituency.

Overall I am struck by how little beneficial trade there is between the generations.  I find this one of the most striking stylized facts of the social sciences; one simple model is that people don't want to leave groups that produce fun and high relative status for them, and that is what switching across the generations usually entails.

Do you all have any other advice for Bryan?

Markets in everything

Coprolite.  It's cheaper than fossils, for obvious reasons.

Sentences of interest

The libertarian point is that the illegality and attendant marginalization of polygamy pushes it into isolated, authoritarian, quasi-state cult compounds where these kinds of crimes are most likely to take place.

That's Will Wilkinson and the point reminds me of recent party debates on drug legalization.  I don't mind legalizing polygamy (though I disapprove of the practice), but would such legalization prevent an FLDS type of episode?  Maybe the goals of the perpetrators are rape, abuse, and power-mad intimidation, rather than polygamy per se ("polygamy: merely a means to an end.")  In that case polygamy legalization won't limit their ability to set up isolated, authoritarian, quasi-state cult compounds for their nefarious purposes. 

Alternatively, if illicit polygamy is a marketing point that draws people to the compound in the first place, legalization may well help.  Oddly legalization helps most when the religious belief (in polygamy) is relatively sincere and the abuse accumulates through evolutionary processes of increasingly bestial behavior; legalization helps least when the religious belief in polygamy is for cynical reasons of control and could easily be replaced by some other marketing point.

Limited Liability

I will pinch hit for Tyler on a few questions of interest to readers beginning with, "What's up with limited liability corporations?"  A common libertarian argument is that groups do not possess rights beyond those of individuals.  If it is wrong for A, B and C to steal from D then it is wrong for A, B and C to call themselves a government and tax D. Similarly, we might ask if A, B and C must pay for any injuries that they negligently cause D then how can they justly combine together to form a corporation and limit their liability?  For this reason a consistent libertarian like Murray Rothbard rejects limited liability in tort as illegitimate.  (Critics of limited liability from the left, however, do not seem to carry their argument over to taxation.)

Do note that limited liability in tort is the crux.  Limited liability of shareholders to creditors is innocuous because this is just a matter of contract and regardless of the default law can be modified.

The economic argument against limited liability (JSTOR) is that it socializes risk.  But many people on both the right and the left think that limited liability is the acme of capitalism (see the extension for some quotes) without which capital markets would fall apart - thus at least some people think limited liability is important and necessary.

Empirical research, however, indicates that limited liability is just not that big a deal.  British firms had unlimited liability until 1855, California firms had unlimited liability until 1931, banks had double liability until the 1930s and American Express had unlimited liability until 1965.  None of this seemed to matter very much.

One reason why unlimited liability may not matter very much is that most of the time capital more than covers tort risk so unlimited liability is usually moot.  Insurance requirements, Basel-like capital requirements and other such laws cover externality problems when this is not the case.  Most of the time we are not on the bubble where tort does pay and even on the bubble managers can be found criminally liable for truly egregious torts.

Even in an enhanced tort risk environment unlimited liability may not be worth the candle because it can be gamed - assets can be shuffled around to judgment proof investors, and firms can decentralize.

Unlimited liability also raises transaction costs.  In a joint and several regime, for example, Bill Gates would be liable for all tort expenditures simply by owning one share of a corporation - that makes Bill Gates less likely to invest and more concerned with who else owns shares in the corporation.  And which shareholders should pay, the ones who own the stock when the tort claim is brought or the ones who owned the shares when the tort happened?  These problems can be solved but is it worth the hassle?

In my view, the bottom line is that limited liability lowers transaction costs and has few negative effects in part because torts usually do not bankrupt firms and other institutions (such as insurance) substitute for unlimited liability and in part because the advantages of unlimited liability would mostly be gamed away in anycase.

Addendum: Bainbridge has more.

“The limited liability corporation is the greatest single discovery of modern times. Even steam and electricity are less important than the limited liability company”.

Professor Butler President of Columbia University, 1911.

"This limited liability corporation is the bedrock of the market economy…And what do we, the citizenry, get in return for this generous public grant of limited liability? Originally, we told the corporation what to do. You are to deliver the goods and then go out of business. And then let humans live our lives. But corporations gained power, broke through democratic controls, and now roam around the world inflicting unspeakable damage on the earth."

Russell Mokhiber and Robert Weissman, Mother Jones 1999

What's a New York Times ad worth for a book?

Dani Rodrik tries an experiment:

Princeton University Press ran a small ad for my book last Sunday in the New York Times book review. I was curious if it would have any effect on sales, so I ran a little experiment.  I checked the book's sales ranking in amazon.com at periodic intervals starting on Saturday afternoon.

But the ad didn't matter so much (see also the comments on the post).  I would note a few points of speculation:

1. Below the top tier, a book can rise rapidly through the Amazon rankings without selling so many extra copies.

2. Amazon buyers are better educated and not representative of the market as a whole.

3. It is an open question whether the Amazon rankings are "honest," or strategically designed to sell what is hot at the moment, by making it look especially hot.

4. The best question to ask is: Is your book in Wal-Mart and Costco?

5. The next best metric is to check its location in Barnes and Noble.

6. Success of a book in Borders is less representative of overall success than it used to be; Borders (which is on the verge of going under, I might add) is now closer to an "indie" book store in many ways than it is to B&N.

Addendum: Chug writes in the comments: "display ads for books are not to sell books. they are for good relations between the publisher and the author...."

The McCain health care plan

Mr. McCain’s health plan centers on eliminating the tax breaks for employers who provide health insurance for their workers — a marked departure from the current system — and giving $5,000 tax credits to families to buy their own insurance. His goal in shifting from employer-based coverage to having people buy their own policies is to encourage competition and choice, and to drive down the costs of health insurance.

Here is more.  Portability is good but so many of the uninsured families do not pay $5000 in taxes.  Will this boil down to a subsidy to those who don't need it or to health insurance vouchers?  InTrade says there is a 39.6 percent chance we will find out.  And here is some vagueness:

Mr. McCain proposed that the federal government work with the states to cover those who cannot find insurance on the open market. With federal financial assistance, states would be encouraged to create high-risk pools that would contract with insurers to cover consumers who have been rejected on the open market.

Here is more detail; in part it sounds like revived HillaryCare (part I), but only for the high-risk cases rather than for the entire population.  The "notches" problem is obvious as people at the relevant margin hold out for the subsidized pool, thereby making the pool size larger and larger.

McCain also emphasizes lifestyle as a factor behind health; that's empirically important -- more so than health care -- but after cutting various stupid subsidies the government should not be the main driver there.  Megan McArdle comments overall.

Trade aside, so far I've yet to see many actual policy proposals from the McCain camp.  Mostly I've seen attempts to signal that they won't do anything too offensive to the party's right wing.  Very few of these trial balloons seem to be ideas that McCain had expressed much previous loyalty to.  I don't even think we should be analyzing these statements as policy proposals.  We should be wondering why the Republican Party has given up on the idea of policy proposals.

Roger Ebert is blogging

Here; I wonder if he still reads MR...

I thank Scott Cunningham for the pointer.

Back of the envelope

Is Wikipedia just the beginning?  Clay Shirky has turned off his TV and gotten down to work:

So if you take Wikipedia as a kind of unit, all of Wikipedia, the whole project--every page, every edit, every talk page, every line of code, in every language that Wikipedia exists in--that represents something like the cumulation of 100 million hours of human thought.  I worked this out with Martin Wattenberg at IBM; it's a back-of-the-envelope calculation, but it's the right order of magnitude, about 100 million hours of thought.

And television watching?  Two hundred billion hours, in the U.S. alone, every year. Put another way, now that we have a unit, that's 2,000 Wikipedia projects a year spent watching television.  Or put still another way, in the U.S., we spend 100 million hours every weekend, just watching the ads. This is a pretty big surplus. People asking, "Where do they find the time?" when they're looking at things like Wikipedia don't understand how tiny that entire project is, as a carve-out of this asset that's finally being dragged into what Tim calls an architecture of participation.

I thank Jules Sigall for the pointer.

Markets in everything, China fact of the day edition

Police in southern China have discovered a factory manufacturing Free Tibet flags, media reports say. The factory in Guangdong had been completing overseas orders for the flag of the Tibetan government-in-exile.

Here is the link, hat tip to Christopher Hayes.

Assorted links

1. The value of the marginal kid

2. New Mideast edition of the FT

3. Does resource wealth lead to tyranny?

4. Virginia Postrel and Grant McCracken on plagiarism and Virginia again

5. Is the "Great Filter" ahead us or behind us: Nick Bostrom roots against life on Mars

Collected advice for young economists

Lots of links, mostly excellent.  The Lucas research memoir was new to me.

Hat tip is to Craig Newmark.

Peter Thiel on the Great Bubble

One would not have thought it possible for the internet bubble of the late 1990s, the greatest boom in the history of the world, to be replaced within five years by a real estate bubble of even greater magnitude and worse stupidity. Under more normal circumstances, one would not have thought that the same mistake could happen twice in the lifetimes of the people involved...

The most straightforward explanation begins with the view that all of these bubbles are not truly separate, but instead represent different facets of a single Great Boom of unprecedented size and duration. As with the earlier bubbles of the modern age, the Great Boom has been based on a similar story of globalization, told and retold in different ways — and so we have seen a rotating series of local booms and bubbles as investors price a globally unified world through the prism of different markets.

Nevertheless, this Great Boom is also very different from all previous bubbles. This time around, globalization either will succeed and humanity will achieve a degree of freedom and prosperity that can scarcely be imagined, or globalization will fail and capitalism or even humanity itself may come to an end. The real alternative to good globalization is world war. And because of the nature of today ’s technology, such a war would be apocalyptic in the twenty-first century. Because there is not much time left, the Great Boom, taken as a whole, either is not a bubble at all, or it is the final and greatest bubble in history.

This also means that catastrophic risk has never been higher and the peso problem -- changing small probabilities of total collapse -- is screwing around with asset prices to an unprecedented degree.  Here is the full essay, which also has much of value on China, among other topics.  If nothing else, remember this:

...there is no good scenario for the world in which China fails.

And this:

...a long “China” position is not a forecast that financial globalization will succeed, but rather a bet that its internal contradictions will persist.

The hat tip is from wunderkind Ben Casnocha.

Markets in everything: reverse prostitution edition

Thousands of people in Africa will be paid to avoid unsafe sex, under a groundbreaking World Bank-backed experiment aimed at halting the spread of Aids.

The $1.8m trial – to be launched this year – will counsel 3,000 men and women aged 15-30 in southern rural Tanzania over three years, paying them on condition that periodic laboratory test results prove they have not contracted sexually transmitted infections.

The proposed payments of $45 equate to a quarter of annual income for some participants.

Here is the full story.  It is a joint private sector, public sector initiative, in case you were wondering.  I thank Johannes for the pointer.

How good would the abolition of zoning in New York City be?

Yes, I am opposed to many forms of zoning.  Without zoning our cities would be denser, more eco-friendly, cheaper to live in, more able to produce economies of agglomeration, and more immigrants would benefit from American prosperity.  Matt Yglesias periodically has good posts on this topic. 

More specifically, Manhattan would look more like Sao Paulo, with a true forest of skyscrapers instead of the current puny and indeed embarrassing line-up.  Many of these towers would be residential, as they are in Sao Paulo.  Many problems of cities, including congestion, would of course become worse.  Overall I see the gain as real but a small one, at least relative to gdp.

A key question is what zoning means.  Let's say you wanted to set up a shack on the sidewalk and live in it; should that be allowed?  How about a modest apartment building but without a water connection?  Should Manhattan really become like Sao Paulo?  Only in extreme cases would I wish to waive such infrastructure requirements for the housing stock.  And if you agree with me on that one, then you don't want to get rid of most zoning either.

Fried Rice

Dani Rodrik offers some criticisms of my piece on free trade in rice:

Cowen argues that freer trade in food commodities such as rice would boost global supplies and help reduce prices.  He is probably right about the first, but not about the second.

Angus offers some good responses plus see the comments section on my blog and his.  I'm with the guy who wrote: "I read the piece, Cowen never commits the fallacy."  Adam Smith weighs in too.

I'll put the rest under the fold...

The main point of my piece is that inter- and intra-national restrictions on trade in rice are bad, not that free trade reduces the price of rice for everyone.  Consider a simple analogy: if the quality of Interstate 95 declined, the price of barbecue in North Carolina might fall, namely because people like me wouldn't drive to go eat there.  Yet few people would argue that a nation can do better feeding itself by lowering the quality of its roads or for that matter littering its harbor with dangerous rocks or for that matter imposing export restrictions.  It doesn't knock down the trade argument, as an empirical claim, to cite the existence of pecuniary externalities.

Maybe Rodrik has in mind the commonly-heard argument that eliminating the agricultural subsidies of rich countries would produce vast benefits for poor countries.  I've criticized that claim myself; my column is careful to argue that the poor countries are the worst protectionists, often internally as well as externally.

Here is a related part of Rodrik's critique:

Freer trade would reduce prices of food (relative to other prices) only in countries that are food importers.  Food exporters would experience a rise in the relative price of food, and there is simply no way of escaping that reality.

The great strength of Rodrik's work is how much he stresses the context-dependent nature of economic arguments and how "one size fits all" is often an oversimplification.  So beware when anyone writes "there is simply no way of escaping that reality."  Increasing returns are one way of escaping that reality.  Would the price of cars be lower in Japan today, if the Japanese had placed heavy export restrictions on Toyota autos?  Probably not.  (Constant returns, by the way, are another means of escaping from that reality.)  Now rice production may or may not be subject to increasing returns, but surely rice trade is a positive-sum game and also has broadly pro-egalitarian effects.

Trade really is an issue where a) economists have something to say and b) human lives are on the line.  If Rodrik wishes to argue, "Indonesia should ban the export of rice," then by all means he should just come right out and say so.  Let's have that debate.  But if not, I wonder if he could see his way toward using his considerable influence and writing eight simple words:

"The world should have free trade in rice."

Markets in Everything: Want Ads for Hit Men

One of Mexico's biggest drug cartels has launched a brazen recruiting campaign, putting up fliers and banners promising good pay, free cars and better food to army soldiers who join the cartel's elite band of hit men.

From USA Today.  Hat tip to Peter Gordon.

Freer trade could fill the world's rice bowl

Here is my latest New York Times column.  Here is the conclusion:

Lately, it’s become fashionable to assert that, in this time of financial market turmoil, the market-oriented teachings of Milton Friedman belong more to the past than to the future. The sadder truth is that when it comes to food production — arguably the most important of all human activities — Mr. Friedman’s free-trade ideas still haven’t seen the light of day.

Here is the most interesting paragraph:

The reality is that many of today’s commodity shortages, including that for oil, occur because ever more production and trade take place in relatively inefficient and inflexible countries. We’re accustomed to the response times of Silicon Valley, but when it comes to commodities production, many of the relevant institutions abroad have only one foot in the modern age. In other words, the world’s commodities table is very far from flat.

Here is the most tragic part of the piece:

Poor rice yields are not the major problem. The United Nations Food and Agriculture Organization estimates that global rice production increased by 1 percent last year and says that it is expected to increase 1.8 percent this year. That’s not impressive, but it shouldn’t cause starvation.

The more telling figure is that over the next year, international trade in rice is expected to decline more than 3 percent, when it should be expanding. The decline is attributable mainly to recent restrictions on rice exports in rice-producing countries like India, Indonesia, Vietnam, China, Cambodia and Egypt. 

Addendum: Also from today's NYT, read this supporting article, which covers grain in Argentina.  And from Duke, here is a related piece on Africa.

The 6yr old Reports

Yesterday I went to a party at Robin Hanson's.  Megan McArdle, Bryan Caplan, Will Wilkinson, Tyler and many others were in attendance, as was my 6-year old. 

"How was the party?," my wife asked the 6-year old.

"It was like this," he answered, "Blah, blah, blog.  My blog, blah, blah, blah.  Blog, blah, blog."

Tyler's more enthusiastic report is below.