In my last post, I said that governments wont open up the free trade of food because domestic prices would increase, leading to discontent. But perhaps, I should make the point a bit stronger. Domestic consumers will starve.

Here’s Bryan Caplan, from his book The Myth of the Rational Voter:

“Maybe the rich are less protectionist because they are more rational; or perhaps income is a proxy for education or intelligence, and these make people more rational.”

Umm…maybe the rich are less protectionist because they’re the least likely to starve.

Final word from Daniel Davies (again), from the comments on Tyler’s response to Dani Rodrik:

[Just what is it that "we know reasonably well" that would indicate that a freer market in rice would raise its real price? Did you not agree in your own posting that freer trade would increase global supplies? How does this lead to a higher real price?]

Barkley, the World Bank estimates that Dani references are the best empirical work we have on this (rather important) question and they look pretty sound.

The global supply of rice is limited in the short term to the crop. Over the course of more than one growing season (a period of time during which it’s entirely possible to starve to death), freer trade in rice would tend to increase the supply. However, it is entirely possible for the following three states of affairs to hold simultaneously:

1) A larger global rice crop
2) A lower global price of rice in PPP terms.
3) In rice-producing countries, a higher relative cost of rice in terms of average wages.

(3) is clearly the problem, because it will lead to states of affairs where workers can’t afford to buy enough rice to eat. Which is what we call a “food crisis”, which was the whole motivating point.

Dani’s point is very clear here and quite obviously correct. An increase in the supply of rice doesn’t guarantee an increase in the ability of poor people to buy it. If rice is more expensive on the world market than it is in India, then if India opens up trade in rice, then the price of rice in India is going to go up. If Indonesia bans trade in rice, then the local price of rice is lower than it would be if Indonesian rice-growers were able to sell to Japanese rice-eaters instead of local peasants.

We might all, as Dani says, “want there to be free trade in rice”, but you pick your year for this sort of liberalisation, and you don’t pick a year in which the “adjustment issues” could involve hundreds of thousands of deaths from starvation.