The Economics of Food

I think most people have heard of The Dismal Prophecy of Malthus. (though Economics was termed the ‘dismal science’ for different reasons) Writing in the late eighteenth century, T.Malthus argued that the human population was doomed because the population was growing faster than the ability to grow food. He argued the simple equation of rising population and static land mass meant the world would soon be facing a shortage of food, high prices and famine. Malthus saw this as an inevitability. Yet 150 years on, his prophecy’s look ridiculously pessimistic. Despite, rapid population growth, food supply has, until now, more than kept pace with rising demand. In fact, places like the EU were producing so much surplus food we had the much publicised butter mountains and milk lakes e.t.c.

What Malthus failed to appreciate was that food production was not limited to the amount of fertile land. Relatively modest improvements in technology, and farming techniques could significantly boost food production.

Despite frequent dire warnings, since the time of Malthus, the impending  food crisis had never really materialised (with regional exceptions). Yet, just because Malthusian fears have proved wrong in the past, doesn’t meant that it will always be the case.

• Firstly, population growth continues a pace. Every year the global population rises by an estimated 60-70 million people. (another Britain to put it into perspective)
• At the same time, the amount of fertile land is under threat from a combination of global warming and desertification.
• Also the marginal gains from better technology are starting to diminish. Like anything, the use of artificial fertilisers are subject to diminishing returns. There is only so many chemicals you can use before you reach a plateau of rising production.

It is true, that the world’s capacity to produce food is still way off its maximum.

• Many countries such as India and Africa have not yet adopted many of the simplest technologies to improve food production.
• There is also the contentious issue of GM crops. GM food has potentially many problems, but, also the potential to significantly increase crop yields. A real shortage of food, could well make GM food more likely to occur.
• There is also the possibility of the world shifting to a less intensive food diet – a shift from a meat diet to vegetarian diet would require much less resources.
• Also, as food shortages lead to higher prices (as long as government don’t distort markets by subsidising cheap food), there will be greater economic incentives for countries to increase food production.

See also:

• Dealing with food scarcity
• The Real Economic Crisis – Food