Tuesday 3 June 2008

Economic illiterate of the day (2)

Q: The price of commodity X has trebled. Your country, a developing country, is one of the world's largest producers/exporters of that commodity. What do you do:

A: Encourage your farmers to make as much Commodity X as they can while the sun shines and to export as much as possible, boosting your country's balance of payments and enriching your country?

B: Prohibit exports?

Follow-up Q: You're the Prime Minister of a rich Western country, who wants to help the developing world. The price that those countries can charge for their exports trebles. Do you:

A: Point out that these price movements will increase the incomes of those developing countries relative to rich, Western countries, and obviate the need for aid payments?

B: Wring your hands and say that "the spiraling prices threaten to plunge millions back into poverty and reverse progress on alleviating misery in the developing world"? (hint: see first link above).

Follow-up, follow-up Q: You've studied Politics, Philosophy & Economics at a top British university, and you are hoping to become Prime Minister of a rich, Western country. Do you:

A: Remember that you came out worst in the previous round of this competition and point out that consumption and spending patterns will change to adapt to new price levels, crudely paraphrased thusly: claim that people in the West will need to eat less meat -- and consume, or waste, less food in general. (hint: see first link above)?

2 comments:

Snafu said...

Who benefits from spiralling food prices in agrarian third world countries? The man in the field or the aid agency!?!

Mark Wadsworth said...

The landowner, actually.