« Economic growth & family breakdown | Main | Time to abolish NICE? »

June 13, 2007

Comments

Meh

The largest "technical advance" in food production was the introduction of mineral-based fertilisers. It's sort of ironic that the biggest factor pushing food prices up at the moment is a rush to biofuels, to be used as a substitute for oil, the source of mineral based fertiliser production...

I won't say that "Ricardo was right" but many of the early economists had a much clearer view of "limited resources" than modern economists. There is no reason to suppose that the food production capacity of the Earth is unlimited, and as we approach that limit, it will become a constraint.

Food and water aren't particularly substitutable and thus are examples of things that neo-classical economics understands only poorly.

Having said all that, there is enormous potential for rationalisation in our food production and consumption, so I doubt we'll hit the limit just yet. Marketistas would even no doubt suggest that rising prices are the functional incentive for the rationalisations to come.

guest

Because wages couldn't fall - they were set by subsistence needs - this, he forecast, would lead to a squeeze on profits generally

The problem with this view is that profits in Ricardo's system are the same as the interest rate, i.e. the rate of time preference. It's not clear why an increase in land rents should change the time orientation of the economy: in more modern theories, the cost increase is mostly borne by wages.

dearieme

When lawns are converted into tattie patches, then will I believe it.

Max

It's a good argument for veganism and urban roof-top gardens!

Mark Wadsworth

Fully agree that we should have Ricardo on our bank notes (he was English but son of Jewish refugees from Portugal and married a lapsed Quaker, so pretty multicultural) as opposed to Smith who was ... er ... Scottish.

I am however not happy with this though; "urban sprawl in developing economies is reducing farmland"

Firstly even in supposedly densely populated UK, about 90% of land is still farmland, forests etc.

Secondly, our GDP per acre of developed land is about £200,000 (£1.2 trillion divided by 6 million acres developed incl. residential land, I hope I've got the right number of zeroes) whereas agricultural output per acre is only a few hundred £.

So I arrive at entirely the opposite conclusion, so what if food becomes more expensive (it only makes up 8% of household spending anyway)?

If using land for non-agricultural purposes increases income there from by the factor of 1,000, in relative terms, this makes food CHEAPER.

Mr. Econotarian

Get back to me when the EU and US stop their mixture of subsidies and tariffs on agriculture.

Jack Sparrow

This is the kind of thing where no one really knows the answers. What makes technological growth interesting is that we don't really know whats going to be the next big thing! Thats why the risks and payoffs are so interesting.

Paul Romer(father of endogenous technical change) wrote an article about it. Here is the link.

http://www.stanford.edu/~promer/EconomicGrowth.pdf

-To the author, I really like this post, if you think that the article is worth your time could you please comment about it. Thanks.

Jack Sparrow

Because of future unpredictability, we can have other problems eating us up too. Global warming is just one of them, unexpected gametheoretic situations like the Cuban missile crisis can be more troublesome.

Simstim

For historical reasons (i.e. for the vast majority of history when the vast majority of food was grown locally), most cities are in locations surrounded by fine farmland. Thus, excluding the development of urban areas in barren areas, the growth of urban/suburban areas encompasses prime agricultural land (e.g. London, Cairo, Shanghai, or Los Angeles).

Tim Worstall

"Of course, Ricardo's been wrong for most of the last 190 years. But this was for reasons he described - technical progress in agriculture and the use of fertile overseas land.
But the latter process at least might be drawing to an end."

Indeed, but as far as I know there's been no global increase in farmland in use in the past few decades (more Amazon and Cerrado being used being more than offset by reductions in rich country farmlands), while agricultural productivity has been going up by 1% pa.

So technology has been the dominant part, any reason to think that's going to stop?

jameshigham

The situation here is also jaw dropping where prices have skyrocketted but the pension has risen by less.

Pension - 87% increase in two years. Good?
Flat prices - 425% in two years
Milk - 340% in two years.

The comments to this entry are closed.

blogs I like

Blog powered by Typepad