Left Flank

Peter at The Duck reminds readers of the larger cycle leading to higher food prices worldwide.

To recap, this implicates:

• Global Warming causing a drought
• High oil prices, raising costs for farmers, shippers, and sellers
• Ethanol and bio-fuels (meant to reduce the first two) sucking corn off the market
• Farm subsidies distorting food prices
• Lack of open markets
• Development in large countries (China, India) leading to increased meat consumption
• Integrated global commodities markets, allowing for speculation

Add in Australia's water pricing policies.

So, I assume the solution will be just as complicated. That hasn't stopped Tyler Cowen form trying to advocate one: «...governments are making matters worse by constraining what farmers can store and export.»

Yet, Dani Rodrik comes along and complicates the picture again.

I am puzzled more generally by how the commentary on the world food crisis misses this basic point. It's all about how the price rise is an unmitigated disaster for the world's poor, with nary a comment on the fact that some of the beneficiaries are also among the world's poorest. (Some of you will say that all the price increase is absorbed by margins, with little of it showing at the farm gate--but I doubt that is true.) The panic on the part of governments is understandable. They are much more sensitive to the urban poor, who can create greater havoc than the rural poor. But what about the rest of us?

So, that's the new way to change the world? Laziness? Self-indulgence? Check out Jared Diamond!

I wonder how far trademark American frugality lasts when vacation choices include one's lawn and walking. How will American households make ends meet?

Just to be clear, the other typical escape route—to save less—is already closed off. In the fourth quarter of 2007, the personal saving rate was zero percent.

This leaves very few other areas where consumers can make sacrifices to accommodate the pressures from higher prices at the pump. Traditionally, more spending on gasoline was also associated with less spending on cars. People are already buying fewer cars and smaller cars as the cost of driving goes up rapidly. And eventually, families will spend less on gasoline simply because there are fewer jobs to drive to.

With all of these added pressures, many more families will find themselves in an untenable financial situation. This will be especially true for lower-income and moderate-income families who spend disproportionate shares of their income on gasoline and fuel. These also tend to be the same families who feel the brunt of an economic slowdown first.

But, how will those patriotically energy-saving stand up long enough to vote for John McCain?