"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?"

Saturday, May 7, 2011

Tying it Together

Just a thought tying our two current topics (global food security, extreme events) together with another common theme, market economics.

Robin Hanson points out maneuvers by large players to push out small players in aviation and previously in entertainment. The entertainment one seems particularly egregious because it violates both the principles of the left (watch out for the little guy) AND the principles of the right (allow the market to allocate resources).

There's no direct market manipulation in climate change, of course, just a desperate preservation of a market failure that evolved inadvertently (the climate externalities of energy). But consider the big guy/small guy implications if we are in kick-world and not nudge-world. Individual crops will fail.

Consider this year. Much of the upper midwest is a month behind because of flooding; given their short growing season this is a serious impact; meanwhile we in Texas and the Greater Texas Area (really there's not an accepted name for the southern semi-arid plains; following on the cloying example of Chicago radio stations perhaps we should call it Texasland) are entering the summer drier than we usually leave it. It's hard to imagine North America pulling its weight in crop production this year.

This is really bad for the family farm; a spectacularly bad couple of years can ruin a farmer. But it is good news for agribusiness (in the same way that peak oil is terrific news for oil companies); a business which owns agricultural property in many climate zones has only advantages of scale in nudge-world. But in kick-world their advantages become huge: they are immune to the failure of particular corps in particular places because some other place will have a bumper crop, and in the event of a shortage, the unit price will go up yielding them more profit.

Now, I for one come from many generations of city and town dwellers. My ancestors were not allowed to own land. Any sentiment I have about rural lifestyles is purely Holywood-driven. In practice I know less about it than almost anyone I know. But apple pie on the windowsill and high school football teams going into the next county on an old school bus and fishing in the stream and all that even has some secondhand sentimental appeal for me. For people to whom it is real, having it threatened is serious business, and that explains part of the intensity of their opposition to many public policies that I think are necessary and even exciting. But they are hosed, you know. It's not liberalism that is squeezing them, though they certainly notice the pinch at tax time. It's corporatism, and to a great extent, the corporate-inspired spin on their beliefs.

If under climate change kick-world wins out over nudge-world, it will be all the worse. Individual farms will be at a severe disadvantage versus agribusiness. If I did have any attachment to farming I would look at forming tight financial cooperatives across very wide regions. American farmers are especially advantaged in this strategy since their country spans so many climate zones.

1 comment:

Jim Bouldin said...

Hopefully we won't witness a repeat of what happened from the mid 30s to mid 70s. I have no data, or knowledge of, the spatial distribution of land parcels of agronomic agribusinesses, which would largely determine the likelihood of your hypothesis.