Left Flank

Brad DeLong pits Megan McArdle against Greg Clark on the odds, that food prices will cut global economic growth. DeLong backed Clark's optimism about "...the race between technological improvement and growing demand...". Still, the price of rice continues to rise.

It seems DeLong was right. Technological improvement might save the day.

As far as I can tell it hasn't hit the English-speaking media yet, but researchers in Chile announced this week (warning: links in Spanish) the discovery of a new genetically engineered variety of rice that can be cooked with 1/4 the amount of water needed for normal rice.

Here's the official University of Santiago release, reviewing the new strain of rice and also the crush of press interest since the first reports on Monday. The project was cosponsored by Chile's governmental Foundation for Agricultural Innovation, which is sponsoring a number of other projects to help increase Chile's agricultural output.

In the context of the ongoing global food crisis, the discovery won't provide more rice, even if widely adapted. But it could reduce the costs of cooking rice in terms of both water and fuel used to heat the water, giving poor consumers a partial break. In Chile alone, economists have estimated the jump in food prices could raise the poverty rate at least 2%.

This isn't the same sort of innovation as dwarf wheat, so what Gary Gardner argues, still goes: "What's needed is a new model of prosperity that meets people's needs within the boundaries set by nature. It's what we call sustainable development. Embrace it and we can bury Malthus for good. Ignore it and we'll find that Malthus was simply ahead of his time."

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?

Are there no magic economic bullets? It's an econ debate (don't yawn)! In the red corner , Tyler Cowen embraces the magic of free trade:

The reality is that many of today's commodity shortages, including that for oil, occur because ever more production and trade take place in relatively inefficient and inflexible countries. We're accustomed to the response times of Silicon Valley, but when it comes to commodities production, many of the relevant institutions abroad have only one foot in the modern age. In other words, the world's commodities table is very far from flat.

Many poor countries, including some in Africa, could be growing much more rice than they do now. The major culprits include corruption in the rice supply chain, poorly conceived irrigation systems, terrible or even nonexistent roads, insecure property rights, ill-considered land reforms, and price controls on rice.

The ability of a country to grow rice depends not just on its weather, but also on its institutions. Burma, now Myanmar, was once the world's leading rice exporter, but it is now an economic basket case and many of its people go hungry.

Of course, wealthy countries are partly at fault, too. Japan, South Korea and Taiwan all protect their native rice farmers; you'll even see rice being grown in Spain and Italy, aided by European Union subsidies and protectionism. The United States spends billions subsidizing domestic rice farmers.

In the short run, these domestic rice producers mean less demand pressure on the world market, which might seem like a good thing. But, again, the longer-term effects are pernicious.

In the blue corner, Dani Rodrik disputes Cowen's faith:

...Cowen argues that freer trade in food commodities such as rice would boost global supplies and help reduce prices.  He is probably right about the first, but not about the second. The effect of freer trade on domestic food prices depends on whether a country is a food importer or exporter.  Freer trade would reduce prices of food (relative to other prices) only in countries that are food importers.  Food exporters would experience a rise in the relative price of food, and there is simply no way of escaping that reality. 

Trade works by relieving the relative scarcity of goods.  The key here is the term "relative."  Food importing countries are food scarce countries, and as they open up to trade, the relative price of food falls.  But if you are Thailand or Argentina, where other goods are scarce relative to food, freer trade means higher relative prices of food, not lower.  And all the induced efficiency benefits and short- vs. long-run effects that Cowen talks about have no bearing on this conclusion: in the end some countries have to be net importers, and others net exporters.

This is why I don't take Matthew Yglesias for my economics policy recommendations. Rodrik has a knack for making economics simple, without hiding the difference between presupposition and reality.

(I've spent most of the day it seems making dumplings, upgrading WordPress, and watching Super Tuesday returns. I plan to write reviews as I promised.)

Happy New Year's Eve of the Rat! Along with ddeok mandu guk, my family eats plenty of kimchi dumplings for New Year's Day breakfast. So, here we are all helping my mother-in-law prepare for tomorrow.

Panama City's Steve Davis makes global trade work for him, but is such harvesting ecologically sustainable? He is just satisfying the Chinese appetite at the cost of long-term marine populations?

"What we know about them wouldn't fill but about half a page in a one-page book," he said, with a wry grin.

But what he does know is that they are a good way to make money, especially at a time when Asian imports are keeping wholesale shrimp prices low. A day's work and about $70 in fuel can bring in $1,000 worth of jellyfish, he said.

Though they don't sting, they are slimy, and their mucus-like covering will cause a burning sensation if it gets in your eyes, Davis said.

Another worker with a forklift loaded the bins into a pair of waiting tractor-trailers. The jellyfish go to a processing plant in Georgia, where they are dried out, and the salt is removed. Then, they are packed into 50,000-pound containers for shipping to China and Japan, Newton said.

He retrieved a plastic bag from his truck to show to curious visitors. Inside were three yellowish wafers about 5 inches across.

"They're all protein and taste like whatever you put on them," he said.

According to the state Department of Agriculture and Consumer Services, the dried jellyfish are popular in Asia as salad toppers, or with cooked vegetables. A four-ounce serving contains 30 calories, 8 grams of protein and 120 milligrams of sodium.

I trust Steve will keep the secret to himself!