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The problem with the food supply is that there is a long funnel that the demand feedback has to go in order to change it. If your community suddenly realizes i

The problem with the food supply is that there is a long funnel that the demand feedback has to go in order to change it. If your community suddenly realizes it needs more food, there is no way that the food can come to existence in days or even weeks. To some degree, other communities will be more willing to sell more of their food surplus to you if prices go up (after of days or weeks of delay to have the whole thing sorted out), and that would pick up some of the slack. But in the short and middle term, what will happen is that the poor will simply get priced out of the market. An intelligent policy would be to provide a food buffer, a margin of safety, that gives the price signal enough time to travel through the markets. In this case, you get the benefits of a free market, but prevent the worst side effects of it.

barrkel 17y ago
And this is why futures markets make sense. If a (food) insurance seller wants to hedge their risk, they could purchase futures, driving up the price of those futures; and a way to arbitrage an increase in price between today's price and a future price is to store it (i.e. your buffer). For example, the first forward contracts on the Chicago Board of Trade, the oldest futures exchange, were food contracts. But none of these mechanisms have a necessary requirement for governmental policy intervention, save perhaps collective purchasing of insurance.
- crpatino 17y ago
  Thank you, barrkel. I have been thinking hard at your response, and I don't think I can offer a complete comment on it. I think these market mechanisms solve part of the problem, and at least do better than the current policies of USDA. However, your proposal is far from perfect and has it's own set of problems. For one, your average granny on social security is unlikely to buy any futures; and the people who does is likely to come and profiteer on her. Still, that is better than starving to death. I have read Pollan's Omnivore Dilemma, and found his description of New Deal agriculture policies very interesting. I encourage you to have a look and compare those with the ones in effect today.

barrkel 17y ago

And this is why futures markets make sense. If a (food) insurance seller wants to hedge their risk, they could purchase futures, driving up the price of those futures; and a way to arbitrage an increase in price between today's price and a future price is to store it (i.e. your buffer). For example, the first forward contracts on the Chicago Board of Trade, the oldest futures exchange, were food contracts. But none of these mechanisms have a necessary requirement for governmental policy intervention, save perhaps collective purchasing of insurance.

crpatino 17y ago
Thank you, barrkel. I have been thinking hard at your response, and I don't think I can offer a complete comment on it. I think these market mechanisms solve part of the problem, and at least do better than the current policies of USDA. However, your proposal is far from perfect and has it's own set of problems. For one, your average granny on social security is unlikely to buy any futures; and the people who does is likely to come and profiteer on her. Still, that is better than starving to death. I have read Pollan's Omnivore Dilemma, and found his description of New Deal agriculture policies very interesting. I encourage you to have a look and compare those with the ones in effect today.