Monday, July 9, 2007

Ethanol good for poor?

From the "there's two sides to every story" desk:

Slate has a piece on ethanol's potential upside for developing nations. Very much in the spirit of Kirwan's work on subsidies for US exports...every nation has both consumers and producers. If the consumers are hurt (prices are high), chances are the producers are happy. If the producers are hurt (prices are driven down), chances are the consumers like the low prices. Anyway.
http://www.slate.com/id/2169867/nav/tap1/

2 comments:

tfitzgerald said...

My question is perhaps more fundamental than the cute philosophical dichotomy outlined here (George Bush and Fidel Castro disagree about something--bestill my fibrillating heart...). The article (and apparently Kirwan) rightly points out that the impact on the Third World may be positive if production of biofuels is possible. The tacit assumption is that the institutional structure is such that poor producers will be residual claimant to biofuel crops.

Empirical economists make a living by demonstrating what has happened, either in support or refutation of theory. One of the fundamental questions at play in this debate is: what effect do biofuel programs have on the food market? It strikes me that the tools that would normally be employed are not very adequate to this task. Inflation numbers exclude energy. CPIs often exclude food. Getting a real measure of price trends is hard. So is ethanol policy leading to more expensive food? Or are higher fuel prices to blame (as suggested here: http://bozemandailychronicle.com/articles/2007/06/26/news/000food.txt)among many other reasons? Given the data that are (and aren't) collected, how sure can we be of the empirics?

Higgins said...

Thought I already posted this, but I guess it didn't stick.

I think you make a good point about the difficulties of measuring price changes. Who works on such a measure? Must be someone.

But Kirwan's work on distortionary subsidies and how it relates to a point this guy made is simpler than all this. If prices are artificially inflated, domestic consumers in an LDC will be harmed by domestic producers will be happy. Other way round for an artificial price decrease (say from subsidized exports from one of the big boys).