"System change is now inevitable. Either because we do something about it, or because we will be hit by climate change. '...

"We need to develop economic models that are fit for purpose. The current economic frameworks, the ones that dominate our governments, these frameworks... the current economic frameworks, the neoclassical, the market frameworks, can deal with small changes. It can tell you the difference, if a sock company puts up the price of socks, what the demand for socks will be. It cannot tell you about the sorts of system level changes we are talking about here. We would not use an understanding of laminar flow in fluid dynamics to understand turbulent flow. So why is it we are using marginal economics, small incremental change economics, to understand system level changes?"

Monday, April 7, 2008

Time to Reconsider Biofuels

Krugman is pretty damned harsh about biofuels, much as Time magazine was. Let's hope this is an overreaction and something can be salvaged.

The Royal Society has come out with what looks to be an authoritative report which is available.

Meanwhile, a quintuple whammy of financial volatility, increased energy prices, competitive bidding with biofuels, bad weather and increased demand for meat in growing economies, of which the first three trace and arguably the fourth trace directly to government errors in the west and especially the US, has sent grain prices soaring, abruptly causing protectionism in poorer food exporting countries and severe stresses in poorer food importing countries.

Update: In the comments, AdamW points to a UN report that worldwide grain production is at record high levels. This would seem to eliminate direct effects of climate change (e.g., Australian drought) as a major factor in the present price spike.

I find it really interesting that China's increasing prosperity is leading to increased misery elsewhere. This is consistent with the idea that the switch to a zero-sum game has already started.


James Annan said...

I'm a bit puzzled by this food price thing, specifically the claims that is it bad for the poor countries. I always had the impression that the poor countries were (generally speaking) the agricultural ones, and that the existing economic status quo of driving down global food prices (by developed countries subsidising and protecting their own agriculture) was *bad* for them, because it undercut their main industry and exports.

Put it another way, what are these poor food-importing countries who cannot afford grain, actually exporting to pay for their imports?

The truly impoverished must be substantially supported by aid, and subsistence and self-sufficient economies have no obvious need of global markets.

So what am I missing?

Michael Tobis said...

James, sometimes it seems to me that you overestimate the capacity of human social organization to adapt effectively. I think this accounts for much of the difference between our respective levels of optimism.

The fact that a country is subsidized does not necessarily imply that the subsidy will increase to that country as the cost of food imports increases, nor would that imply that such subsidies would be smoothly transferred to those most in need.

There have been rumblings in Mexico for a couple of years now about rising corn prices. Mexicans get many of their calories directly from corn so they have been the immediate (um, what's the opposite of beneficiary? maleficiary?) victims of the silly corn ethanol push in the US.

Note also that even without the current financial chaos, this is a period in which aid from the US only ratchets downward on the Puritan theory that whatever wealth you have is the wealth you deserve.

Ideally, everyone would eat, the cheapest food would be free, and the price of meat would go up such that the demand for cleared land remained constant.

We're a long way from a system like that. It's not necessary for anyone to starve, but that doesn't mean that nobody will.

David B. Benson said...

Many on many of the posts here:


directly address the role of responsible bioenergy, food and security in both for the poor.

Paul Krugman's TNYT piece yesterday but hinted at the interdependencies.

Dano said...

Let's talk about ag policy as well, where countries looking to get play in a global market play the same game as the US, in that industrial monoculture agriculture is privileged over, say, truck farming. Or we see in India and China where traditional systems make far less land per capita available.

And let's look at past ag policies that have degraded topsoil such that a family plot for food...

And so on.

And what mt said.



James Annan said...

Michael, I'm not sure it's optimism about effectiveness of adaptability, so much as blaming the consequences on the lack of adaptability rather than the favourite whipping-boy of climate change. Driving one less car (or even one million) won't do much for poor people in Haiti who can't afford food right now.

Dan Hughes said...

Pielke Jr has a post with informative links.

Dan hughes said...

And from CNN.

I don't know for what time period CNN links are good.

AdamW said...

It might be worth pointing out that the world cereal crop last year was a record high, and this year is (currently) expected to beat it.


This may be mentioned in some of the other links, but I thought it was worth highlighting.