Archive for January, 2015

Agriculture and Food

Russ Roberts

As a self identifying Libertarian one of my intellectual guides is Russ Roberts. Russ is a fellow at Stanford’s Hoover Institution and a former Professor of Economics at George Mason University. He is a brilliant author and a prolific blogger at CafeHayek.com. He also greats me every Monday morning. Every Monday, Russ releases the latest installment of his EconTalk Podcast series. It is one of the highlights of my week.

In his podcasts he interviews leading thinkers from all over the political spectrum, all walks of life and the four corners of the world. Although Russ does not shy away from conflict or disagreeing with his guest, they are always very civil and thought provoking conversations.

This past Monday Russ interviewed Greg Page the former CEO of Cargill to mostly discuss the Food and Agriculture industries. Snoozefest right? This is the twenty first century, the tech century and he’s talking about agriculture.  Are you kidding me! If you think this sounds like the waste of an hour you would be very wrong.

In the discussion Mr. Page laid waste to two very important issues in the current Washington debate. He tackled the conflict between government direction of markets and using prices to guide markets and the flawed logic of most of the arguments of the greens.

After discussing the complexity and the interconnectedness of the food supply chain Mr. Page described how price swings based on a local event like the severe weather in the US Midwest in 2012 can cause players all across the world to modify their behaviors.   It might be farmers in the outback of Brazil or shippers in China. Price signals cause subtle changes across the supply chain and across the world that no government could possibly direct.

The discussion of the environment encompassed the complex trade offs involved in every decision that typically are over simplified in the common debate. When Locovores focus on an artificial radius[1] from which to consume they ignore the consequences of producing food that others have a comparative advantage or ignore the cost of distributing small batches in an inefficient pickup truck versus large batches in a tractor trailer. They may also ignore the trade offs between the use of land versus the use of fertilizer to achieve the same output. The other common tradeoff was how by going organic the farmer requires the use of more tilling to keep weeds down which uses more fuel.

Among the two most colorful real world examples that Mr. Page and Mr. Roberts discussed were how as the price of fertilizer increased from $200 per ton to $900 farmers made investments in technology to allow for more consistent planting and growing of their product. This technology included precision depth and spacing of the planting as well as sophisticated soil analysis to assure optimum growing conditions.   These cost of these technologies allowed for savings in fertilizer costs. The second one was how as grain costs went up a trade off was made to invest in improved housing for chickens. This improvement in the environment to keep the chickens at closer to the optimal temperature was made so that they did not need as much feed to live and produce eggs.  The additional capital and operational costs of the improved housing are offset by the reduction in feed costs.

Who knew? Our world is so complex that one central authority could not possibly direct all of the decisions to make a market work efficiently. As Mr. Page said in the podcast, these decisions need to be made over the kitchen table.

Do your self a favor and make Russ Roberts part of your Monday routine.

[1] In New York City regulations initially required someone to be within 150 miles to be eligible to sell at a farmers market. They raised this to 400 (Western Pennsylvania) to increase supply and assortment.

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