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Economics Economy: Solutions for rising food price?, We need more farmer not economist

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ru40342
post Aug 6 2011, 06:12 PM

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QUOTE(LionheartTwb @ Mar 25 2011, 08:27 PM)
Base on this statement: We need more farmers, not economists, how can we face the problem of the rising of global food price?
What can we do other than producing more supply of food?

As in this case what i know is the demand for the food globally is rising and that is most probably why the price is rising.
So one way to do is to increase the supply of the food. But what else? (also please correct me if i wrong)

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This is my microeconomies term paper and it is annoyingly hard for me as I m just newbie to economy.

I think of other solutions like setting ceiling price or apply technology in production of food but these methods are not related the the statement "We Need More Farmer, Not Economist" !
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Well, fyi, more than 300 years ago, economists such as Smith and Malthus already figured that out. Higher demand in the short run will cause the market price to increase. In the long term, higher price will attract supplier to enter the market and price should be stabilized.

The problem with rising food price is not only caused by higher demand results from increasing world population. The other reason is speculation in the tradable agriculture commodities market. Food prices nowadays are not directly determined by demand and supply in the goods market but demand and supply in the capital market (derivative market).

Price control will never help as it will only create problems such as shortage and surplus. By applying price ceiling, technically, we are artificially lower the price of agricultural productions and in the long run, it will discourage new farmers from entering to primary sector or limit the size of production for current farmers. Supply and quantity supplied, in that case, will not grow to curb the problem of rising food price.

Technology most certainly can help increase the output in the primary sector. However, the main problem of technology is that it is painful slow in development. That's why economists assume that technology is fixed in the short run. Dynamics in economy (constant change of demand and supply) completely outpace advancement in technology making it hard in solving the rising food price problem.

To solve this problem, we must first understand the problem and economists are most likely the one that really understand the problem. So yes, I agree, we do need more farmers. However, we will have more farmers if food price continue to rise. That doesn't necessary mean food price will be stabilized as in capital market, speculating activity may still push food prices to increase further. The same scenario happened in the precious metal markets as well.

Hope that helps

 

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