Avoiding a 'Soylent Green' Future

Basic economics says concerns about rising food prices are misplaced.

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Here is something to keep in mind concerning the sudden Soylent Green hysteria about rising food prices: Resources are limited only by the imagination and creativity of people operating in a free marketplace. Peak oil? Maybe. Peak energy? No way. Likewise, I don't think that McDonald's selling vat-grown burgers and algae fries is in our future. And neither does University of Chicago economist and Nobel laureate Gary Becker, who makes some sensible points in his blog (boldface by me):

An analogy is often drawn with oil prices since both have risen rapidly during past couple of years, and there is much fear by oil importing countries that oil prices will continue to go up during the next few years.... However, the analogy to oil is seriously flawed. Whatever happens to oil prices, there are grounds for much greater optimism about food prices. Any increase in the production of oil is limited by its fixed availability at different locations on earth. The supply responses to higher prices of agricultural production will be much greater than that of oil production for two fundamental reasons. The first is that only a small fraction of potential arable land is used for farming because the growth of cities and suburbia has led to mass conversions to other purposes of land formerly used to grow foods. Persistent high and climbing prices of grains and other foods will induce conversion of some of this land back to farming.

The second reason for optimism relates to the lower productivity of food production in the poorer parts of the world relative to the United States and other developed countries. Higher food prices will induce an increase in productivity in developing nations by encouraging greater use of machinery, fertilizers, and other forms of capital. It will also encourage consolidation of some agricultural holdings into the hands of more efficient farmers. Efficiency in oil production is more uniform in different parts of the world than is food production since the major energy international conglomerates produce all over the globe, including many poorer nations.


TAGS:
economics

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