The evidence for a long-term economic decline

This blogger thinks the economy is into a long-term down trend. It could be that not everyone sees this; it may depend upon the color of hat you wear. If you are retired with a good defined benefit pension it may be more difficult to see a down trend than if you are a young person trying to find an unskilled job that pays enough to cover rent, food, entertainment and a little saving to get married and buy a house.

Some of the evidence relates to the resource base. There are lots of energy and mineral resources left on the planet. The problem is that we have used up the easiest accessible resources and what is left is difficult to extract and will take so much energy they are useless. Another type of evidence is geographic and long-term in nature. This includes famine, epidemic, uncontrolled migration, state failure and climate change.

dog-3277416_1920One of the difficulties is that we are used to seeing the economy as a straight line going up. Economics students learn about regression analysis which takes a number of data points and calculates the best straight line that indicates their direction. Using the slope of this line one can project the trend into the future. It is assumed the trend is up.

Another approach about which I did not learn until after I had completed my formal study of economics is fractal analysis. Fractals are lines that go up and down with a series of ups an downs within each. Like a seashore. Fractal analysis tries to identify major turning points in the ups and downs. The mathematics is not well-known. It involves the concept of fractal dimension which can be calculated by the formula two minus the Hurst exponent. If economists used this approach it would be much easier to accept the possibility our economy is going into a long-term down trend and their forecasts would be more accurate but not always what most people want to hear.

What then is the evidence for the long-term future?

In economic theory changes in prices are signals to producers to increase or decrease production. Increasing prices also indicate a shortage of a good and we have been experiencing a lot high prices for some basic goods. It may be that we need more information about prices relative to each other. Maybe our economic data collection has been to support our views on economic growth and is not sufficient to give us a clear picture of relative prices.

In recent discussions about energy a lot has been said about peak oil and solar. Maybe we do not have to worry about oil shortages because the cost of solar has been coming down and will soon be able to replace oil. This may well happen and it may have an interesting effect on economic decision-making. We as individuals will be able to make the basic decisions about solar use in place of bankers who now decide what oil projects go ahead and who gets to do them. The down side of this is that if a lot of oil infrastructure becomes obsolete and has to be written off a lot of the money supply will disappear and the lack of money will cause a lot of suffering to a lot of people.

In spite of all the talk about a service economy we still need lots of minerals for food, shelter and transportation. High prices indicate we have used up the most easily available mineral resources. The future may depend upon recycling and here the picture is cloudy. Recycling takes a lot of energy and the high cost may force us to reduce our use of minerals. Water is another issue. There are parts of the world where water shortages are becoming a serious problem.

Another indication of a declining economy is the trend to tiny houses, shared accommodation, young people continuing to live with their parents and even homelessness. It used to be that non-union working people could expect to live in a detached house with a front and back garden.

Most of the evidence for a down economy identified in the first part of this post has to do with the availability of energy and mineral resources. There are also some long-term geographic trends which could also cause mankind some serious problems.

The guideline here comes from a book by historian Ian Morris called Why the West Rules – For Now: The Patterns of History, and What They Reveal About the Future.

Morris’s book is a good summary of the long-term history of the world. Using evidence from a number of disciplines he shows how geography has influenced the rise and decline of civilizations. His perspective is much longer than most of us are familiar with.

He identifies what he calls the five horsemen of the apocalypse – famine, epidemic, uncontrolled migration, state failure and climate change and shows how these have combined to produce disastrous, centuries-long collapses and dark ages. Are we exempt from the consequences of these problems?

We are already familiar with these trends. The question is are they strong enough to cause us problems or are they gaining strength?  For me, a retired person living in Canada, they are mostly academic but for many people around the world they are very real and very serious.

Some people argue this planet is capable of providing enough food for the current population, especially if we reduce waste. Even so the situation is rather precarious and we should be paying a lot more attention to what is happening in agriculture. Monoculture, factory farming of animals and the use of pesticides could easily threaten our food supply.

The threat of epidemics is always with us and the more people are crowded onto this planet, the greater is the threat. We are lucky public health practitioners have been able to quickly control recent outbreaks.

Migration has been a big problem for Asia, Africa and Europe. It is also an enough of an issue for some Americans to want to build a fence and take children from their parents.

Climate change was a major issue until we realized how many plastic straws we are using. Stopping the use of plastic straws will be a lot easier than dealing with climate change but will not stop the changes from taking place. At least people will be doing something.

This blogger has found the concept of state failure difficult, fascinating and intriguing. It is a complex issue because justice is one of the most important functions of government. At the same time many people demand of government legislation that is exploitive because it restricts competition. This is a conflict of government responsibilities in which the exploiters tend to win. The balance between the two is by degrees and changes through time.

You will notice I said justice rather than law and order. I believe one of the indicators of state failure is that so many people, including The Economist and the Supreme Court of Canada, talk of law and order rather than justice. Law and order is easier to define and enforce. If some government were to pass legislation saying police are required to kill a thousand people at random each year, would we still be supporting law and order. The president of the United States has been quoted as encouraging police brutality and to me this sounds like encouraging them to kill at random. Maybe Trump is an indicator of American state failure.

There are lots of laws that are not just. Anything that tries to force the values, morals or religion of one group on everyone has to be unjust. There are lots of laws that are not written but which are enforced ruthlessly by the public, the media and the courts. For example, men are evil and any expression of male sexuality should be punished. Fathers are expected to walk away from their children without emotions. Men should not be emotional under any circumstances.

Governments like to reward their supporters and to purchase votes and/or support. It is easy to get governments to pass exploitive economic legislation and to get them to provide handouts to protect people from natural disasters and their own stupidity. A lot of government is supporting and encouraging special interests, often at the expense of everyone. Some people want minimum government but want their own interests protected,

As the economy goes more and more into decline it will be more and more difficult to provide handouts and this will be seen as state breakdown. Governments around the world are facing riots as fuel and food subsidies become difficult to maintain.

This conflict between justice and the exploitive demands of special interest may be pushing all governments into a state of failure.

In this post we have looked at a number of resource based and geographic indicators that the economy is on a down trend.

Here are some other indicators:

Unemployment

High public debt

The rise of radical left and radical right political movements

High interest rates

Non-performing loads held by banks

Falling standards of living – however one defines them

Expensive education

High crime rates

Crowded public transportation

Homeless people

People are losing confidence in their banks

Business people are will to exploit their customers for the sake of profit

Every time I read a news report at least one item supports the idea that the whole world is going into a long-term down trend. There are loads of problems with the resource base and if we go short we will not be able to sustain the standard of living to which we have become accustomed.

There are always positives and negatives. In terms of economic growth the negatives appear overwhelming. This guy has read about hunters and gatherers and believes it is possible for people to arrange their production of goods and services for long-term sustainability. It will require a major rethink of values. It will be a challenge.

 

 

 

 

This blogger thinks the economy is into a long-term down trend. It could be that not everyone sees this; it may depend upon the color of hat you wear. If you are retired with a good defined benefit pension it may be more difficult to see a downtrend than if you are a young person trying to find an unskilled job that pays enough to cover rent, food, entertainment and a little saving to get married and buy a house.

Some of the evidence relates to the resource base. There are lots of energy and mineral resources left on the planet. The problem is that we have used up the easiest accessible resources and what is left is difficult to extract and will take so much energy they are useless. Another type of evidence is geographic and long-term in nature. This includes famine, epidemic, uncontrolled migration, state failure and climate change.

One of the difficulties is that we are used to seeing the economy as a straight line going up. Economics students learn about regression analysis which takes a number of data points and calculates the best straight line that indicates their direction. Using the slope of this line one can project the trend into the future. It is assumed the trend is up.

Another approach about which I did not learn until after I had completed my formal study of economics is fractal analysis. Fractals are lines that go up and down with a series of ups an downs within each. Like a seashore. Fractal analysis tries to identify major turning points in the ups and downs. The mathematics is not well-known. It involves the concept of fractal dimension which can be calculated by the formula two minus the Hurst exponent. If economists used this approach it would be much easier to accept the possibility our economy is going into a long-term down trend and their forecasts would be more accurate but not always what most people want to hear.

What then is the evidence for the long-term future?

In economic theory changes in prices are signals to producers to increase or decrease production. Increasing prices also indicate a shortage of a good and we have been experieincing a lot high prices for some basic goods. It may be that we need more informtation about prices relative to each other. Maybe our economimc data colllection has been to support our views on economic growth and is not sufficient to giive us a clear picture of relative prices.

In recent discussions about energy a lot has been said about peak oil and solar. Maybe we do not have to worry about oil shortages because the cost of solar has been coming down and will soon be able to replace oil. This may well happen and it may have an interesting effect on economic decision making. We as indiivuduals will be able to make the basic decisons about solar use in place of bankers who now decide what oil projects go ahead and who gets to do them. The down side of this is that if a lot of oil infrastructure becomes obsolete and has to be written off a lot of the money supply will disappear and the lack of money will cause a lot of suffering to a lot of people.

In spite of all the talk about a service economy we still need lots of minerals for food, shelter and transporttation. High prices indicate we have used up the most easily available mineral resources. The future may depend upon recycling and here the picture is cloudy. Recycling takes a lot of energy and the high cost may force us to reduce our use of minerals. Water is another issu. There are parts of the world where water shortages are becoming a serious problem.

Another indication of a decling economy is the trend to tiny houses, shared accommodation, young people continuing to live with their parents and even homelessness. It used to be that non-union working people could expect to live in a detached house with a front and back garden.

Most of the evidence for a down economy identified in the first part of this post has to do with the availability of energy and mineral resources. There are also some long-term geographic trends which could also cause mankind some serious problems.

The guideline here comes from a book by historian Ian Morris called Why the West Rules – For Now: The Patterns of History, and What They Reveal About the Future.

Morris’s book is a good summary of the long-term history of the world. Using evidence from a number of disciplines he shows how geography has influenced the rise and decline of civilizations. His perspective is much longer than most of us are familiar with.

He identifies what he calls the five horsemen of the apocalypse – famine, epidemic, uncontrolled migration, state failure and climate change and shows how these have combined to produce disastrous, centuries-long collapses and dark ages. Are we exempt from the consequences of these problems?

We are already familiar with these trends. The question is are they strong enough to cause us problems or are they gaining strenth? For me, a retired person living in Canada, they are mostly academic but for many people around the world they are very real and very serious.

Some people argue this planet is capable of providing enough food for the current population, especially if we reduce waste. Even so the situation is rather precarious and we should be paying a lot more attention to what is happening in agriculture. Monoculture, factory farming of animals and the use of pesticides could easily threaten our food supply.

The threat of epidemics is always with us and the more people are crowded onto this planet, the greater is the threat. We are lucky public health practitioners have been able to quickly control recent outbreaks.

Migration has been a big problem for Asia, Africa and Europe. It is also an enough of an issue for some Americans to want to build a fence and take children from their parents.

Climate change was a major issue until we realized how many plastic straws we are using. Stopping the use of plastic straws will be a lot easier than dealing with climate change but will not stop the changes from taking place. At least people will be doing something.

This blogger has found the concept of state failure difficult, fascinating and intriguing. It is a complex issue because justice is one of the most important functions of government. At the same time many people demand of government legislation that is exploitive because it restricts competition. This is a conflict of governement responsibilities in which the exploiters tend to win. The balance between the two is by degrees and changes through time.

You will notice I said justice rather than law and order. I believe one of the indicators of state failure is that so many people, including The Economist and the Supreme Court of Canada, talk of law and order rather than justice. Law and order is easier to define and enforce. If some government were to pass legislation saying police are required to kill a thousand people at random each year, would we still be supporting law and order. The president of the United States has been quoted as encouraging police brutality and to me this sounds like encouraging them to kill at random. Maybe Trump is an indicator of American state failure.

There are lots of laws that are not just. Anything that tries to force the values, morals or religion of one group on everyone has to be unjust. There are lots of laws that are not written but which are enforced ruthlessly by the public, the media and the courts. For example, men are evil and any expression of male sexuality should be punished. Fathers are expected to walk away from their children without emotions. Men should not be emotional under any circumstances.

Governments like to reward their supporers and to purchase votes and/or support. It is easy to get govenrments to pass exploitive economic legislation and to get them to provide handouts to protect people from natural disasters and their own stupidity. A lot of government is supporting and encouraging special interests, often at the expense of everyone. Some people want minimum government but want their own interests protected,

As the economy goes more and more into decline it will be more and more difficult to provide handouts and this will be seen as state breakdown. Governments around the world are facing riots as fuel and food subidies become dificult to maintain.

This conflict between justice and the exploitive demands of special interest may pushing all governments into a state of failure.

In this post we have looked at a number of resource based and geographic indicators that the economy is on a down trend.

Here are some other indicators:

Unemployment

High public debt

The rise of radical left and radical right political movements

High interest rates

Non-performing loands held by banks

Falling standars of living – however one defines them

Expensive education

High crime rates

Crowded public transportation

Homeless people

People are losing confidence in their banks

Business people are will to exploit their customers for the sake of profit

Everytime I read a news report at least one item supports the idea that the whole world is going into a long-term down trend. There are loads of problems with the resource base and if we go short we will not be able to sustain the standard of living to which we have become accustomed.

There are always positives and negatives. In terms of economic growth the negatives appear overwhelming. This guy has read about hunters and gatherers and believes it is possible for people to arrange their production of goods and services for long-term sustainability. It will require a major rethink of values. It will be a challenge.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Food, glorious food

For some of us it is very easy to be complacent about food supply.  All his life this blogger has lived near an unlimited supply of food.  He now lives 20 minutes out-of-town and within an hour of at least a dozen supermarkets, all of which are always fully stocked with an excellent variety of foods.

I wish this were true for all the people on this planet and I hope it will remain true for the rest of time.  There are some reasons to be concerned.  Even with all this food available there are people here who rely on the local food bank to eat.  If our food factories were to break down a lot more people would go hungry.

Food is so important at least some people should be monitoring what is happening in the agriculture industry.  It is too important to leave to farmers who have interests that conflict with those of their customers.

Here are a few concerns about food production.

The industry is heavily subsidized, probably in so many ways nobody knows for certain the extent of the subsidies.  People living in rural areas sometimes have  disproportionate voting power and farm lobbies tend to be very powerful.  In any case most governments want a cheap food policy to avoid bread riots.  All the subsidies distort prices so that we make irrational buying decisions.  Last night this blogger probably would not have eaten fresh green beans from California or South America if we had to pay the full costs of growing and transporting them.  If agricultural subsidies were to be abolished food production would be more rational and efficient and some of us would make drastic changes to our diets

Another concern is that very few people know much about the sustainability of agricultural technology and those who do know are not always reassuring.  We know there is a lot of monoculture and a high use of artificial fertilizers and pesticides.  What would happen to our food supply if a financial breakdown were to mean farmers were not able to purchase their chemicals?   What is the true condition of the topsoil around the world?

Weather and climate change always has been and always will be an issue in agriculture.

From time to time somebody makes an issue of North American food waste with a claim that we waste enough food to reduce hunger around the world.  This could be true but there is the problem of getting the food to where it is needed.   Collection and transport would be expensive and trade works best when both parties have items of equal value to each other.

It is in the interests of all of us that agriculture be a viable and sustainable industry.  But there is an economic problem relating to the elasticity of the demand curve.  When the first hand-held calculators came out they were terribly expensive.   As the price came down more and more people were able to afford them  and manufacturers were able to make a profit with a small markup on lots of sales.  This is not true for agriculture.  Most of us eat the same amount of food regardless of the price.    So, if there is a bumper crop the price will go down even though sales will not go up.  Sometimes farmers are better off with a poor crop so that prices go up and their total income increases.

I’m not sure there is an answer to this problem that does not involve government interference in markets.  My preferred solution would be a universal income scheme which would include agricultural workers.  For a suggestion of how such a scheme might work I refer you to the essay “LETS go to market:  Dealing with the economic crisis” on this weblog.

As food is such an essential part of our lives we have a responsibility to ourselves to take an interest in the agriculture industry and monitor what is happening.

A road trip

This guy has just returned from a road trip to the eastern side of Saskatchewan ( city of Yorkton) on the Canadian prairies.  Through the mountains the scenery is spectacular but in some ways the prairies are more interesting as there is more human activity and many degrees of flatness. (There are extensive vistas from some of the high spots.)

Once upon a time as a reporter in a British Columbia fruit-growing community I decided I did not want to be a farmer.  When I got to university and studied economics I reaffirmed this decision.   But I do believe agriculture is too important to leave to people who make their living at it.  As we drove there were many questions about what I saw but it is hard to get answer when traveling at 100 km per hour.

1-DSCF5710DSCF5728The most obvious change is in the size of farms.  There are many abandoned farms sites, each one probably representing a broken dream.  With this there has been a change in the style and size of the grain elevators.  The pictures are of the old and new styles.

Coming home we took a secondary road and found that the road less traveled is sometimes less well maintained.  Driving on broken pavement and lots of potholes can be stressful.  When budgets are tight  it’s the major roads that get the money.

The seeds and the bees

The headline on this article in a Canadian farm newspaper looks like a technical matter involving corn yields and coating seeds with a pesticide.  However when one takes a closer look one finds that some people claim this pesticide is killing bees.  That may not be just a technical matter.

queenbeeAgricultural issues are too important to be left to people whose income depends upon maximizing production.

The Western Producer, a weekly newspaper for farmers in Western Canada has recently published a number of articles on the use of neonicotinoids on seeds.

Dairy farming: Canadian supply management and American subsidies.

Last night our community held the annual Robbie Burns dinner (a roast beef dinner with entertainment for ten dollars) and I sat next to a dairy farmer (from outside our community).

Canadian dairy farmers are protected  by marketing boards which enforce supply management.  All dairy farmers are required to sell their milk to a marketing board which says how much they can produce.  This supply management works to limit the amount of dairy products on the market and keeps prices up.  Dairy farmers generally appear to do well financially.

Gerald_G_Fast_Food_Drinks_FF_Menu_2Some Canadians object to supply management and claim our consumer dairy prices are the third highest in the world.  Prices in the United States tend to be about 50 per cent lower than  Canadian.  Some Canadians living close to the border have been known to purchase milk and cheese in the States.

When I asked this guy about subsidies for dairy farmers I was told Canadian farmers get none but Americans are subsidized by about 50 per cent.

I was aware American farming is heavily subsidized but have never really thought about the dairy industry.  This morning I googled “dairy subsidies” and it appears the guy was right.

So Canadians restrict competition with quotas and supply management and Americans keep prices down with subsidies.  I don’t eat much dairy so I have to prefer the Canadian way because my taxes are not going to dairy subsidies.

If Canadians were to get rid of supply management and Americans were to drop subsidies then dairy farmers would have to be competitive and work as efficiently as possible.  We would all be better off.  Subsidies should be given to consumes rather than producers.

Prices and running out of resources

When one takes an unconventional position it is comforting to find somebody who takes a similar stand.  Here’s an article by someone who is also concerned that we are running out of resources.

I like the following paragraph because it show that resource prices declined during a period of growth and then started to increase when growth slowed.  I think it  supports my claim that to have economic growth marginal cost has to be falling.  When marginal costs start rising new resource discoveries only slow the rate of decline.

The price index of 33 important commodities declined by 70% over the 100 years up to 2002 — an enormous help to industrialized countries in getting rich. Only one commodity, oil, had been flat until 1972 and then, with the advent of the Organization of the Petroleum Exporting Countries, it began to rise. But since 2002, prices of almost all the other commodities, plus oil, tripled in six years; all without a world war and without much comment. Even if prices fell tomorrow by 20% they would still on average have doubled in 10 years, the equivalent of a 7% annual rise.

This writer also points out there are threats to our food supply from climate change and the depletion of two non-renewable fertilizers – phosphorus (phosphate) and potassium (potash).   Agriculture is so important we need to be aware of what is happening on the farm or rather the factory farms.

 

 

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

Rounding up glyphosates

I had never heard of glyphosates until my wife brought home a copy of the Western Producer, a weekly newspaper for the farmers of Western Canada.

It turns out glyphosates are a herbicide also known as Roundup and used around the world.  The article which  caught my attention reported that the demand for this is expected to double over the next five years.

This herbicide is used because it is less toxic than the other alternatives.  However, some people, such as the Sierra Club Canada, have some concerns and point out the studies which say it is acceptable exclude any analysis of the other ingredients.  Another issues is that some weeds are developing a resistance to it.

Personally, I am not much interested in evaluating the technical features of this chemical but I also believe it is much too important to be left to people who make a living using it.

We should also recognize that with seven billion people to be fed there is a need for efficient industrial scale agriculture.

If you are interested here is the link to the Western Producer search results for glyphosates.

Two views of food supply

My daily observations in this small corner of the planet tell me this article which predicts “increasing food prices, leading to political instability, spreading hunger and, unless governments act, a catastrophic breakdown in food” is 100 per cent bull excrement.

I hope this is  right.

However, I have long worried that the North American food factory could easily break down in which case my daily observations would change quickly.

We tend to forget or ignore things which for us are not an immediate problem.  Agriculture and food are so important we should probably be paying a lot of attention to what is happening on the farm.  It is much too important to leave to those in the industry.

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

The economics of nature

I rather like to following quote, the first sentence in an editorial titled “The economics of nature”  on the website of The Hindu and dated October 22, 2012.

The strongest message to emerge from the global conference of the Convention on Biological Diversity in Hyderabad is that countries allowing their natural capital to be rapidly depleted and destroyed in pursuit of short-term goals are dangerously risking their future.

But the statement should include more than just biological diversity.  It should include all resources including energy and agricultural resources.

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

Agricultural pollution

This week’s Economist has an article on agricultural nutrient pollution in the Mississippi River.

The economics way to deal with agricultural pollution presents us with a dilemma.   The changes required are so radical the screaming from those affected would generate enough hot air to destroy the world from global warming.

I believe the price of any item should include the full costs of producing the item.  This way we can make purchasing decisions according to our own values.  This applies to food as well as everything else.

Therefore the costs of agricultural pollution should be paid by the producers and passed on to consumers.

In some cases it may be difficult to calculate the costs of pollution but we could start by eliminating all subsidies which would probably reduce a lot of pollution.  In any case subsidies should be given to consumers rather than producers.

If we had to pay the full costs of producing food, there would probably be some major changes in our eating habits to healthier foods and more home gardens.

Managing water shortages

Wow!  I’ve finally come across an article which takes a moderately realistic approach to the management of resource shortages, in this case water.and the effects of water shortages on food production.  Water and food are so important in our lives that one hopes lots of people will read this and that some of those people will be decision makers in the food/agriculture industry.

Topsoil and civilization

A book review in last week’s The Economist reminded me of the book Topsoil and Civilization by Tom Dale and Vernon Gill Carter and published in 1955.  These guys attempted to analyze the entire field of world history from the point of view of man’s relation to productive soil.

Their conclusion was that all previous civilizations have risen on virgin topsoil and have declined when the topsoil was depleted.  Their book was a plea for soil conservation in the United States because they feared to same was happening in North America.

This is a very  interesting book with what is probably a serious warning which we should heed.  It also points out a fundamental of economics that  to have civilization we need a surplus from primary producers..

You can get an electronic copy for free from The Soil and Health Library based in Australia.

This book was published 57 years ago and it appears history has proven them wrong.  It could also be “not yet.”

We have lived through the golden years of prosperity during which we put huge amounts of oil energy and technology into the topsoil.  Have these permanently restored the topsoil to its prime condition?  Also some parts of the world that depleted the topsoil have been able to exploit other energy and mineral resources untouched by earlier civilizations.

I urge you to read this book and then ask: Are we exempt?  Are things different this time?

Following are some quotes from Chapter one.

Civilized man was nearly always able to become master of his environment temporarily. His chief troubles came from his delusions
that his temporary mastership was permanent. He thought of himself as “master
of the world,” while failing to understand fully the laws of nature.

Let us put it this way: civilization is a condition
of mankind coacting with an environment in such a way that progress results. Regardless
of the forces that stimulate cultural progress, both civilization and the enjoyment
of civilization rest on a surplus production by those who supply the necessities
of life. By surplus production, we mean a surplus above the actual needs of the primary
producers. A surplus production of food, clothing, shelter, and other necessities
by farmers, herders, fishers, loggers, miners, hunters, trappers, and other primary
producers is necessary before civilization can start. Furthermore, such surplus production
must continue on a relatively stable basis if civilization is to keep advancing.
The primary producers must supply a surplus before artisans, designers, engineers,
scientists, philosophers, writers, artists, and other civilizers can exist and function.
Few people ever advanced civilization while they had to produce their own food, clothing,
and shelter directly from the earth.

A common error has been to consider these resources
as static. The proponents of the standard formula, “capital plus labor plus
raw materials plus management multiplied by technology equals production,” have
nearly always considered raw materials as a constant. But they are not constant.
Soil fertility, usable water, forests, grasslands, beneficial wildlife, and other
resources have not remained a fixed item in any region. They have decreased in most
areas occupied by civilized man. In many of the older countries they have almost
disappeared. And with their decrease has nearly always come a decline in civilization.

Food prices, speculators and marginal cost

Here’s a link to a rather lengthy article blaming high food costs on speculators and investors in industrial agriculture.  It discusses many of the problems currently facing agricutlure and the human suffering caused by high food prices around the world.

I don’t want to defend either group but here is an alternative theory that  high food prices can be explained by the economic principal that prices are equal to the marginal cost of producing the last item.

This principal can be illustrated with two examples – oil and telecommunications.

As the demand for oil has increased and the easily accesible oil has been extracted oil producers have sought out more difficult deposits. – and the price has gone up. If the price had not gone up or if governments had legislated  a top price,  producers would not extract the more expensive oil.  Therefore the cost of oil is equal to the cost of the last unit extracted.  The result has been windfall profits for all those producers who still have supplies of cheaper oil.

The opposite has happened in telecommunications.  As capacity has increased and costs have fallen the cost of making one more phone call is nearly zero.  In this case we have all benefited.

Agriculture is probably more like oil. As demand has increased farmers are using less productive land and more expensive inputs and costs are going up. As the marginal cost of the the last unit produced goes up so do all the prices and once again their are windfall profits.for somebody.

Food supply and pricing is complex – some people claim there is no shortage of food in the world. and it is hard to believe otherwise when one visits a supermarket or farmers market in British Columbia   But then we can afford to pay the cost of bringing food in from other places which many people on this planet cannot.

Agriculture is of course complicated by subsidies which distort prices and interfere with efficient operation of the market and this may be a big source of problems.

Now back to the article,

I suspect the authors of this article are using speculators and investors in industrial agriculture as scapegoats.  Generally it is easier to identify symptoms than it is problems and it is more satisfying to seek out scapegoats than solutions.

Speculators take the risk. of price movements.  When prices are going up there are fewer risks although generally prices go up and down even if there is a strong trend.   If they weren’t in the market then somebody else would take the risk and make the profits or losses

A taxing idea for weight loss

Here’s an article claiming strong support for a proposal to tax junk food and use the proceeds to subsidize healthy foods  as a way to help people lose weight.

How does one define junk food?  A vegan would likely consider meat  in that class.

As agriculture is heavily subsidized  the first thing would be to remove all subsidies from all food and see what happens to prices and eating habits.  It could be that junk foods are more heavily subsidized than healthy foods.

On selling wheat and the Canadian Wheat Board

I have mixed feelings about agricultural marketing boards.  On the one hand I like competition to keep consumer prices down and on the other hand through the millennia food producers have often lived at a subsistence level and that is not fair.

The Canadian government is going to strip the Canadian Wheat Board of its exclusive powers to sell wheat and barley.

The problem for marketing boards is that any producer who can sell outside the marketing board will be able to sell at a cheaper price and therefore sell more and presumably get a better return for his work.  But if everybody sells on the open market then prices for all will go down and all will be worse off – except for us consumers.

When we drive across the Canadian prairies and see the nice farm houses, it appears most of them are doing quite well although one wonders if some that may reflect subsidies.

There is a basic problem in agriculture around the elasticity of the demand curve.  If you are making electronic gadgets and bring the price down by making more of them you can hope to sell more and your overall profits will increase.

That doesn’t always work in agriculture because when the price goes down rather than buying more food we will likely buy electronic gadgets.  If a farmer has a poor crop the price will go up and we will pay the higher prices in order to continue eating.  In theory when farmers have a poor crop they can do better than with a good crop.

I really don’t want to be a farmer although I still think that under current economic conditions a market garden would be a good investment and a good career.

Why emerging economies are doing well

There’s a theory that civilizations rise with the exploitation of their topsoil and fall with its depletion.   Countries that are poor are poor because their ancestors have depleted the topsoil.  An article in The Economist about how well emerging economies are currently doing  appears to show this theory is wrong.      See the 1955 book Topsoil and Civilization by Vernon Gill Carter and Tom Dale.  Here us a review of that book.

Since the Industrial revolution civilizations have been based on minerals as well as agriculture.  Minerals in the form of energy and fertilizers have allowed us to increase agricultural productivity in our own and in the emerging econmies.  But what has all this done to the topsoil?  When we drive into town (or out of town) we see the farms and as  they look nice we take them for granted.

As the developed countries have industrialized we have used up a lot of our mineral resources so that it is now easier and cheaper to get them from  other places.  Thus the emerging economies are doing well.

Agriculture and environmental issues

Since writing the previous post I came across this article on environmental issues associated with agriculture.  There are even more reasons to be concerned although one must note agriculture is supporting more people than ever and at least some people are living longer than ever.

What’s happening in agriculture?

With supermarkets, big box stores, fast food outlets, convenience stores, farmers’ markets and Wal Mart all overflowing with food, some of us (especially those of us with access to the internet) tend to take food for granted and ignore what is happening on the farm.  But how would we fare if the North American food factory were to break down?  Famine is something that happens in far away places.

We like to think our’s is mostly a service and information economy.  However, we can put time and effort into these things only  because of efficiencies in agriculture.   When I studied European economic history, the prof  placed a lot of emphasisi on improvements in farming techniqes.  (He then went on to write an excellent book on the Industrial Revolution:  The British industrial revolution in global perspective by Robert C. Allen.  Cambridge University Press, 2009)

There are a number  of  potential problems in agriculture: monoculture,  topsoil depletion, soil erosion, climate change, short-term extreme weather, the use of chemicals and subsidies.  It may be that farmers, like the rest of us, act in their own short-term interests as opposed to the long-term interests of everyone.

It could be that these problems are a greater threat to us than other concerns such as nuclear war, environmental degradation or global warming.   We should be probably be paying more attention to what is happening on our farms and if necessary be prepared to put pressure on farmers to ensure the food supply does not come to a halt.

The strength of the economy

In the lead  to a report on Barack Obama’s speech at the University of Maryland the CBC quotes him as saying the strength of the economy will depend upon how the U.S. deals with its debt.  I couldn’t find any reference to that in the story but  whether or not he said it, I want to disagree.

The strength of the economy depends upon the quantity of goods and services which can be produced and that depends upon such things as the state of agriculture, the resource base and the energy required to extract  those resources.  Money is important because it facilitates the extraction of resources and the exchange of goods and services.

Following is the CBC’s lead in paragraph and here is the link to the actual report

U.S. President Barack Obama says the strength of the economy will depend on how the country deals with its massive $14.3 trillion debt — in remarks after the Senate rejected the Republican’s budget-cutting plan. 11:36 AM ET video

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