Food Rationing in the U.S. Very Unlikely
In this article from the New York Sun on the current demand and supply of food in the U.S., the author, Josh Gerstein, seems to miss the “whys†and the “hows†that supply and demand ever come into balance in the first place. As every college student who has taken an introductory economics course should know, shortages are short lived and self correcting when prices are allowed to adjust. The prices of commodities increase in response to increases in demand and decrease in response to increases in supply. The price of the commodity, when it is allowed flexibility, performs the function of rationing the good according to its scarcity.
The price of rice, wheat, corn, and any other agricultural commodity, and anything else, for that matter, reflects the scarcity of the good, and will increase in the face of shortages, both by choking off the amount buyers seek to buy and by providing an incentive to sellers to increase production at the same time. This makes shortages short lived or self correcting. Rationing by price is already ongoing and is nothing new, not as Gerstein puts it: â€Many parts of America, long considered the breadbasket of the world, are now confronting a once unthinkable phenomenon: food rationing.†In other words, if he were speaking of price rationing, he would not have suggested that rationing has never happened.
Prices are incentives to both the buyers and the sellers. When buyers and sellers are out of sync with one another, the prices they face bring them back into harmony. If prices are kept artificially low by some legal limit on prices, buyers will no longer conserve nor will producers to seek to be increase production. Rationing of the WWII variety or the odd-even days of gasoline rationing in the 70s will only come about if there is a persistent shortage.
Shortages persist under three basic conditions: first, when there is some sort of price cap is placed on the commodity, second, when those who decide the price do not profit from the sale of the commodity, and finally, when there is only a single buyer of the good or service, as there is with nurses.
–MC
April 25th, 2008 at 2:43 pm
Dr C,
In the three cases of causal agents for shortages I do not understand the mechanism in the third, the Monopsony (single buyer).
When the Monopsony is transformed into competition for a finite resource by additional non-colluding buyers entering the market (an Oligopsony) a price response from the demand lead shortage can occur.
Of course if the additional buyer entries collude to create a form of consortium duopsonic buyers group, the buyer will continue to act like the coal miner’s hated “Company Store” in controlling the market from a strong buyer’s advantage.
Perhaps condition three was meant to reflect some other aspect of the licensing de facto Monopoly the medical industry faces?
All the best and great article!
Steve
May 2nd, 2008 at 3:53 am
The only real question in my mind is where, how, and how soon the die down begins. I think it will be a lot sooner than people think. World population really exploded when the “Green Revolution” began in farming and agriculture technology after World War II and took hold worldwide–espoused and promoted heavily by the United States. The problem with that technology is that it basically embraced non-renewable petroleum and mineral resources to achieve the spectacular increases in food production. That has not changed in all of the decades since–and now those resources are being rapidly depleted. In short, all of the population increase that all of the extra food production enabled was a one-shot deal made possible by the massive use of non-renewable resources. Once this runs out it will be bad. Sometimes i think America may be a little too nice and giving and this may bit us in the future.
May 2nd, 2008 at 3:53 am
The only real question in my mind is where, how, and how soon the die down begins. I think it will be a lot sooner than people think. World population really exploded when the “Green Revolution” began in farming and agriculture technology after World War II and took hold worldwide–espoused and promoted heavily by the United States. The problem with that technology is that it basically embraced non-renewable petroleum and mineral resources to achieve the spectacular increases in food production. That has not changed in all of the decades since–and now those resources are being rapidly depleted. In short, all of the population increase that all of the extra food production enabled was a one-shot deal made possible by the massive use of non-renewable resources. Once this runs out it will be bad. Sometimes i think America may be a little too nice and giving and this may bite us in the future.
June 26th, 2008 at 9:28 pm
I am in agreement with the theory that food rationing in the U.S. is very unlikely in the foreseen future. This is evident in the fact that the U.S. government pays farmers a subsidy for not planting crops in the fields that might produce a surplus. Even though the recent floods in the mid west will certainly create a short term shortage in production in wheat and corn, therefore driving these prices upward there is a surplus of these crops in storage. Also, modern technology used by farmers and the agricultural research have enhanced crop production per acre. An example would be the sugar cane research center in Houma led by Dr. Ben Lejurne continuously research and develop new strands of sugar cane which produce more sugar per acre increasing supply.
Brooke Hochstetler
Morris Coats 211 Econ Class
M-F 9:40-11:40