I would say NO: prices are rising, and the market is telling us to drive smaller cars, drive less, and get efficient. My question: if we allow the government to set up a monstrous rationing scheme, what results can we expect? Higher prices and lower supplies? Of huge corruption (like when the mafia sold gas ration coupons during WWII)?
The Invisible Hand is going fap fap fap fap while watching his favorite porn, high prices and inelastic demand double-teaming everyday folks.
I think it would depend on the details of the “massive rationing scheme”. Usually, though, rationing means a fixed price and limited supply. Did you have something else in mind?
First of all, the existence of a cartel controlling much of the production means that this isn’t a classical market.
Second, the invisible hand as it were only responds to immediate conditions, and doesn’t care who gets slapped by it. Food shortages -> people without starve -> reduction in population -> food surplus is a perfectly reasonable series of events in the classical economics model - but we might not really want that to happen.
The lesson isn’t to put in rationing now, or subsidies a la the Chinese and McCain. (What is a gas tax holiday but a subsidy?) It is that the market doesn’t look ahead, but government can. The lesson should be that we should have increased incentives for conservation even before the market called for them, to reduce the chances of ever getting into this mess.
Wow, so people are going to be starving to death because of higher food prices if we don’t get some government intervention pronto?
How about this model? Food shortages -> Higher food prices -> Larger profits for food producers -> Increased food production as more people try to capture those profits -> Lower food prices -> Food surplus.
It takes more time for a crop to grow than for a human to starve to death.
So how many Frenchmen are on the verge of starvation due to higher food prices?
Try reading some history, and get back to me on how many people starved to death since, say, 1000 CE? Does the term “Irish Potato Famine” mean anything to you? The invisible hand predates Adam Smith, and the fact is that in a world with a pure capitalist economy people starve.
For most of history, larger food production was impossible, since people maximized food production to the level technology and resources permitted anyway. How is the poor African farmer eking out a living on a plot that is too small without the money for modern fertilizer and modern tools going to maximize his food production? The answer has been that he either starves or gives up and goes to a city where he lives in a slum.
BTW, even in the US food stamps began after CBS found lots of hungry people in Appalachia. The invisible hand works perfectly so long as you don’t care about the human cost.
That’s ridiculous. Capitalism does not cause starvation. Yes, people have starved in the past, but by your own admission they starved because they were poor, not because of Capitalism. The Invisible Hand does not guarantee wealth for all - it just guarantees that whatever wealth a society has will be distributed based on transactions that force everyone to work to everyone else’s needs and desires.
But if you’ve got one apple and ten people, you can organize yourself around capitalism or create an anarcho-syndicalist commune, and it won’t make a difference. People are going to be hungry.
If you look at the causes of most famines in the past, they are due to either government action (the famine in the Ukraine, and in fact the Irish potato famine), or natural famines where food supply was simply not available in enough quantity due to drought, pestilence, or other problems. Simply put, if a population is already existing through subsistence farming, it doesn’t take much of a blow to the crop yields to cause starvation.
The Irish potato famine was not a failure of capitalism. Ireland was largely controlled by Britain, and a lot of Irish property was held by absentee British royalty and neglected. When the Irish people complained, the British promised to take care of the problem, and never did. Then the British government announced a ‘laissez-faire’ policy, but continued to export grain out of Ireland while the people starved. Until that point, the government had put relief works in place, which displaced other solutions, then stopped them when a new administration was elected. During the famine, grain was still exported to Britain, and Britain refused to open the Irish ports to imports of food until the problem was severe - then they started a public works program and imported food they selected, but which wasn’t easy to consume.
It was anything but a free market.
Notice I said pure capitalism. A capitalist society with food stamps is still capitalist. But suffering is an indirect result of the economic swings that we can expect from any reasonably capitalist society (or any society, for that matter.) The difference. and this is where the invisible hand breaks down, is government intervention to alleviate the suffering.
The Ukraine famine was closer to genocide, and not in a capitalist society in any case. The Irish famine was due to government inaction, not government action. The government did not introduce the blight. The reason for government inaction was not love of pure capitalism, true, but it does illustrate what can happen when the government does not intervene.
First, government intervention to redistribute food can certainly reduce the number of people dying in a famine. Second, government intervention before a famine can reduce the likelihood of one. Drought might be reduced by creating reservoirs and redistributing water, like we do already. Pestilence can be reduced by government pest eradication programs. Pests don’t respect property lines, so this is a reasonable government program. None of this stuff is likely to happen without some form of government doing it. I don’t doubt you’re in favor of all of this, but it shows that the invisible hand is not adequate to produce an optimal economy with a minimum number of people being ground in the gears.
All true. Clearly, as we see in Sudan, governments can make things much worse. But Lemur866 does not appear to believe in famines.
As a less provocative example, take unemployment insurance. It is absolutely essential to allow companies to fire people when circumstances warrant it, and we know that as the economy evolves the buggy whip makers will be out of work. In the long run this freedom causes the economy to grow. I suspect you agree. But should those affected be out on the street with nothing, or should companies and society as a whole reduce profits slightly in order to reduce the impact of those suffering for the greater good?
Capitalism has nothing to do with it. People have starved throughout human history…and will continue to do so as long as there are thugs with guns willing to sacrifice their own people for the good of themselves. As a percentage of population (you can’t do it by numbers alone since the worlds population is so much higher than it’s ever been), do you think that more or less starve world wide today than in the past?
Do you know of a better system for the majority? Or maybe a better question would be…WHY do people in Appalachia go hungry in the US? There is a reason and it has nothing to do with either visible or invisible hands. Why do YOU think they go hungry there though? Malice of the wealthy? Disregard of the ‘human cost’? Some other factor?
To the OP:
We can expect a revisit to the 70’s gas lines and fuel shortages.
Hardly. In fact, I think that the mere fact that gas prices have only really started to rise high (relatively) in the US in the last year or so and yet we are ALREADY seeing such a huge shift should be confirming to people just how well the market DOES react to such a ‘crisis’. Two years ago, how many hybrid commercials do you remember on TV? Today? Two years ago, what kind of vehicles were being advertised on TV? Today? Two years ago, how much focus on our carbon foot print was there by the general public? Today?
We are taking the first steps toward a fairly radical social shift in our perceptions of fuel efficiency and carbon foot print, in renewable energy and environmental awareness…and we are doing it simply because the price of gas has gone up a friggin buck in the last year. We aren’t even close to the levels of price the Euro’s have been paying for years…yet look at how far the US has shifted in the last year because of a stinkin dollar (aprox.) per gallon rise in price!
No…the market hasn’t failed us. People just want silver bullet ‘solutions’ to what they think is a ‘crisis’, and they think the only way to do it is to have the government dictate them by fiat from Washington. As if that’s worked well historically…here or in other countries.
-XT
Why Frenchmen? The poster you were responding to when you explained how the “invisible hand” would solve the issue of food shortage without anybody dying of hunger didn’t refer to western nations.
clairobscur, why do people starve? WHERE do they starve? Is it because of capitalism? Lack of food? The price of food? When food prices were lower, did less people starve? Why or why not?
(I think the ‘Frenchman’ thingy is because he was responding to you…and you are, after all, from France. :))
-XT
But if you get ten apples and ten people, the system will make a difference. A capitalism system certainly doesn’t guarantee that each person will get an apple, rather than 5 persons getting two apples and five others none at all. It might give an incentive to plant another apple-tree, but when it will give apples, the five losers will be long dead.
And when you’ve got 10 people and nine apples, a few different things could happen.
The 10 compete and the 9 with the best combination of luck and foresight get an apple and the tenth dies. The 9 recall the event as “that time the invisible hand worked everything out.”
Or, the 10 compete as above, and the nine with the apples are foresighted and empathetic enough to give a bit of their apple to the tenth, the tenth survives to be able to buy the 9’s stuff later on. They all later remember this as “that time the invisible hand worked everything out”–because turns out they all actually read Adam Smith and know that he thinks this kind of thing is part of how the “invisible hand” works.
Well anyway, I ramble. My point is, yes, the “invisible hand” “works everything out” but we can have an effect on whether it works things out “the hard way” or “the easy way.” It’s not like the invisible hand is the hand of some transcendently just and immovable God. The invisible hand is us.
-Kris
Of course, the hard-hearted capitalist who steps over starving orphans on his way to deposit his money into the bank is a favorite image. Without the sacred government to intervene in the market, you all believe we’d have starving people everywhere.
What causes famines in the modern era is not capitalism. No one starves in the first world. Compare the famines in North Korea during the 90s with the crop failures in South Korea. Two countries side by side experienced the same weather conditions and the same crop failures. In one country people starved to death. In the other country people paid slightly higher prices for food. In Ethiopia there was a famine where people starved to death. Why did that happen? Drought? Sure there was a drought. But the mass starvation was caused by the war, and farmers literally fled their fields in fear of their lives. Is a farmer chased off his struggling farm by revolutionaries carrying AK47s a victim of too much reliance on the invisible hand?
I’m not opposed to giving food aid to starving people. But why do people starve? What do you expect the result would be if we measured the people who have starved because they have too much capitalism and compared that to the people who have starved because they have too little capitalism?
There’s a misconception that capitalism means no government. But of course, when there is no government what you have is not capitalism but anarchy, the war of all against all. And eventually some people band together and figure out that taking food from other people at gunpoint is easier than farming, and then we have feudalism. Unless the farmers have some way to stop the bandits from taking food at gunpoint there cannot be capitalism. Unless a farmer who has traded a 4 chickens today for one goat tomorrow can force the other farmer to pay tomorrow there cannot be capitalism.
Capitalism doesn’t magically prevent people from starving to death. If an asteroid hits the Earth tomorrow and dust clouds destroy all crops for a year, we’re going to have famine capitalism or no. But food prices increasing even by double digits does not a famine create. The interesting thing about the food crisis is that it isn’t accompanied by widespread crop failures, it isn’t accompanied by massive increases in the human population. We have the same amount of food we did last year. So the problem isn’t too little food to feed the world’s population.
People aren’t going to starve in France or the US or South Korea because of higher food prices. Subsistence farmers around the world aren’t going to starve because of higher food prices because subsistence farmers farm for subsistence, they grow most of the food they eat…and higher crop prices are, get this, good for farmers. High food prices mean increased food production next year. The contention that we’ll see massive starvation which will lower the demand for food to a price where starving people can afford food again is just silly. It ain’t gonna happen, and you all know it.
Well sure. Except we’re not in a situation where there are 10 people but only 9 apples. We’re in a situation where we’ve got 10 people and 100 apples.
Yes, sorry, I didn’t mean to imply otherwise.
(Though–to be clear, what we’ve got is more like a situation where you’ve got 10 people, a hundred apples, 1 of those people in posession of sixty-five of those apples, 7 more of the people in posession of five apples each, and two people with no apples. But I don’t want to put a fine point on this. 
I was in my first post making a more general point in response to the general premise presupposed in the OP and discussed in subsequent posts.)
-FrL-
The main insight of Adam Smith is that it doesn’t matter that the apple grower doesn’t provide us with apples out of the (possibly nonexistant) goodness of his heart. He provides us with apples because he wants to get paid. More people around the world today are fed because of the greed of capitalist farmers than because of the altruism of philanthropists. If we had to rely on philanthropy for our daily bread we would all soon be starving. When we rely on the greed of others to provide us our daily bread we paradoxically find that we’re swimming in bread.
You should read an interesting book called, IIRC “The Little Ice Age.” It is about climate changes in Europe and their impact - none human induced, by the way. The warming around 1,000 CE was the reason the Vikings could inhabit Greenland. When the weather turned colder, there were famines and people starved. Thugs with guns had nothing to do with it.
The number of people starving today is immaterial, as the invisible hand did not start operating in 1776. That technology has led to better food production just reduces the requirement for government intervention, it does not eliminate it. Fewer people starving comes from both technology and the fact that we and our governments no longer consider it acceptable for people to starve.
Perhaps you are mistaking me for a socialist? Real socialism (not scary socialism as in “socialized” medicine) is not a good economic system. When we talk invisible hand, we’re talking how the pure marketplace will produce the best results without intelligent intervention. All I’m saying is that this has a human cost, which the invisible hand cares nothing about. Are you denying this human cost?
As in the unemployment example, I’m not saying that evil creates this human cost. Certainly famine due to climate is not the result of evil, nor is unemployment due to new technology. But a hungry unemployed person is just as hungry no matter if his plight is the result of a predatory capitalist or a CEO who reduces staff only as a last resort.
So, are you saying that capitalism doesn’t have human cost, or just that you don’t care about it?