Routledge Handbook of Food and Nutrition Security by

Language: eng
Format: azw3
ISBN: 9781317596240
Publisher: Taylor and Francis
Published: 2016-03-31T04:00:00+00:00

But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task, if in tempestuous seasons they can only tell us, that when the storm is long past, the ocean is flat again.

(Keynes 2013)

These various economic theories have provided powerful insights into how to understand the social–material world that concerns economics. All have been influential at different times and in different ways. But in the early twenty-first century, as noted above, it is the thinking of the neo-classical economists that dominates international trade practice and theory. This school was given new impetus by Milton Friedman and his highly influential Chicago School of Economics, which in turn informed the policies of both Prime Minister Margaret Thatcher and President Ronald Reagan in 1980s Britain and the United States respectively. Neo-classical economists argue for free trade and open markets as the public policy objectives that will best maximize wealth and human well-being.

Many economists accept the importance of neo-classical economics but few treat it as gospel. The economist Alan Blinder makes an analogy with Galileo and his claim that a feather and a brick will fall from a great height and land at the same time: Galileo was right, and his insight tells us something important about how our universe works. But it does not mean that you can expect to actually drop a brick and a feather and see them land together; they only behave this way in a vacuum, in other words, in a highly controlled and artificial environment (Blinder 2014). The same is true of the invisible hand: it is a powerful metaphor that can help make sense of what is happening in the market, but there are many sources of friction and the ideal is not always evident in what the observer sees.

To create the equivalent of a frictionless universe for a neo-classical economist, buyers and sellers must have perfect information about supply and demand. There must be no barriers for new entrants to the market. Production inputs, including labour and capital, should be perfectly free to move from one sector of the economy to another, and across borders if the system includes international trade. The theory assumes decisions to buy or sell are based on ‘rational self-interest’, such that all actors are maximizing their utility (i.e., getting as much as they can of what they want for the least cost).

It is obvious that the world people inhabit is far from this ideal and filled with many kinds of friction. The usefulness of the theory is thereby curtailed. Blinder lists a number of ways that real markets fall short of the idealized model. The more we learn about human behaviour, the more complex ‘rational self-interest’ turns out to be (Timmer 2012; Tversky and Kahneman 1981). Market competition is far from perfect (monopolies and oligopolies are not uncommon). There are numerous ‘externalities’ – the costs the market price leaves out, including environmental damage and cultural significance.

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