Thursday, August 12, 2010

Really Bad Idea

Considering really bad ideas, how about regulating food markets. That is the call made by Joachim von Braun in the Financial Times.
The setting of prices at the main international commodity exchanges was significantly influenced by speculation that boosted prices. Not only are food and energy markets linked, but also food and financial markets have become intertwined – in short, the “financialisation” of food trade. There are increasing indications that some financial capital is shifting from speculation on housing and complex derivatives to commodities, including food. While the financial markets have recently been regulated to curb excessive speculation, commodity markets have remained largely untouched and are the open flank of the system attracting speculation.
Most food riots occur because governments suppress food prices and then under the press of shortages are forced to raise them. Most famines occur because governments regulate the transport of food.

What market imperfection requires food regulation?