This isn’t a particularly nuanced or balanced presentation of the outcomes of such a policy.
Any agricultural product with a long lag between planting and harvest ends up getting sucked into cycles of boom and bust, which are terribly destructive for all involved. The cycle goes like this:
Insufficient supply one year results in very high prices
Everyone and his grandmother decides to plant raisins
5 years pass
There’s a giant glut, and prices drop through the floor
All the raisin farmers decide to ditch such a shitty product
Repeat
This cycle absolutely wrecks agricultural economies which are dependent on one or a handful of key exports.
This is why we have agricultural derivatives, e.g. forwards and options: to transfer food price volatility from lightly capitalised farmers to investors better able to absorb the risk. In fact, farming is the original raison d'être (raisin d'être? :D) for these derivatives.
"the notion that the government’s raisin-administrators ward off chaotic gyrations in prices far-fetched: walnut and citrus farmers, after all, have abandoned similar systems in recent years without any ill effects"
This issue has been studied extensively - "agricultural central banks" are a bad way to deal with a perishable commodity because they shift demand volatility onto the government's balance sheet and so dull the incentive for supply to adjust, or find ways to become more versatile.
Does anyone know more about the walnut/citrus story? Casual googling isn’t turning up much. When were these systems abandoned? If it’s been <10 years, then we probably don’t have a good idea of the effects yet.
...and, indeed, many other financial derivative products. They have a terrible reputation but smoothing the curve between boom and bust in commodities is a very useful service.
And back when investing in such derivatives was limited to, e.g. buyers of such commodities, it worked fine.
Now the average commodity "investor" just sees a differently-labeled slot machine and cares not at all about the underlying commodity, and never intends to accept delivery of same. For speculators, increasing (not decreasing) the boom-bust cycle is beneficial.
For farmers a boom bust cycle is fine as long as they cam match the product being sold. If they sell a futures when planting they get out of the market and stop carring about the eventual price.
Derivatives began as insurance contracts that worked fairly well between interested parties that actually wanted to move physical product and reduce risk (say farmers and supermarkets).
However, most of these markets have mutated and are mostly used for speculation by agents who have little to no interest in the actual delivery of said commodities (Glencore) - and are in fact more interested in pricing manipulation and monopolistic/oligopolistic market control than acting as a volatility store. Derivatives work well when the agents in the contract actually care about locking in the price of the commodity (say oil miners and airlines) - but when the people on either side don't care about reducing risk (say speculators and speculators) - things fall apart.
In turn, pricing volatility and rents accrued to speculating market participants increase, harming both supply/demand parts of the physical commodity curve, and doing the exact opposite of what was intended.
Glencore owns farms, mines, and production facilities around the world. It also has direct supply relationships to manufacturers, power generators, and food processors. It is not the example you were looking for.
If you want an example of someone who has "little to no interest in [accepting] delivery of said commodities", pick me. I'm a trader. What I do is analogous to the person at the Department of Agriculture who decides how much supply at a given price should be produced. Central planning has an aesthetic appeal, but especially when it comes to consumer discretionary products like raisins, it is a messy way of shifting the burden of forecasting from those unable (the farmers) to those with little incentive to get it right and an even lower chance of being displaced.
> Glencore owns farms, mines, and production facilities around the world
How is this evidence against my point? De Beers does the same with diamonds. Looks like they can manipulate prices easily enough.
My argument against yours cannot be taken as me stating that central planning is good - but merely that derivative markets can become bad. Just because I hold a critical a position on a thing, it does not necessarily mean that I'm advocating for the use of an opposing thing. If I criticise capitalism for doing such and such - it does not follow that I advocate replacing capitalism with communism/socialism to fix such and such.
I like derivatives and financial markets just as much as the next guy - but only when they are used properly - to reduce, and not to increase risk.
Derivatives don't so much reduce pricing volatility as allow people who don't want to be exposed to the risk to exit the market and leave it to the daytraders.
Everyone in the food industry, by definition, is speculating on food prices, there is no reason to think the farmers are any more altruistic than the banks, and somebody has to make the market.
That would mean that everyone is in speculation, as everyone is in some industry, and we are all at the receiving end of the food industry.
The difference being, that farmers as well as consuments have an interest in sustained prices and in the product itself while banks are actually speculating - trying to convert money into more money without care for the consequences. (For consuments the sustained interest is obvious, but farmers are also interested in stability since they can't shift their investments around as easily and lossless as speculants can.)
What is your opinion on onion? It's the only food that has no derivative market, and it suffers from the highest volatility of all. This suggests that futures do smooth things out.
Pretty piss poor reasoning there. Both oil and corn production and demand far exceed onions by a significant order of magnitude. Saying onions are more volatile than corn is like saying that the fortunes of individuals are more volatile than those of society at large (i.e. basic probability theory). Both corn and oil are more diversified than onion - and in turn - exhibit a lower variance - futures market or not.
Corn is in so much stuff because it's production is subsidized by our government, and therefore is much cheaper to use than alternatives. This is why you see high fructose corn syrup used to sweeten foods more often than regular sugar. Sugar is (for the most part) imported, and sells at a much higher price than our subsidized corn products.
We played the Beer Distribution Game @ MIT to simulate this phenomenon. (http://en.wikipedia.org/wiki/Beer_Distribution_Game) While my initial reaction is to shudder at the thought of a Raisin Czar, I gotta say that I'm not sure it's a bad idea after seeing how out of control long time constant supply chains can become.
The BDG demonstrates oscillations in conditions of isolation -- the participants aren't allowed to communicate and nobody has any insight into the global status of the system.
Agriculture is not like that. In particular, the supply of any crop is known and publicised as harvesting begins, and it can be predicted with some confidence based on seasonal conditions. Current worldwide market rates and futures provide guidance on what is happening elsewhere. So in fact all participants have partial insight into the global state of the system, which changes behaviour considerably from the BDG scenario.
There's a second problem too. There are a lot of derivative products that are impacted by these cycles. Take Raisinettes for example. If you were the company making Raisinettes and one year you can make them available because the market is functioning, but the next year you can't because the market collapses, you know what happens? You simple remove that product from your product offerings. It's possible that once the market returns to normal, the derivative product is no longer offered because the company making such a product doesn't want to spend time and money making the product, taking it to market and marketing it if the market may just collapse again the next year.
This is a serious issue for any agricultural product where there are a lot of derivative products. The maple syrup industry in Canada for example keeps large reserves to make sure companies making derivative products can bank on a solid supply of maple syrup at non-volatile prices.
Petroleum has more derivative products, e.g. plastics, than almost any agricultural commodity. It is telling that oil companies prefer to sell on the open markets versus locking into long-term contracts with single counter-parties. Granted, I'm sure they would be thrilled to have the government step in as a buyer-of-last-resort.
Farmers tend to be quite conservative about crop changes and new techniques, technologies.
Interestingly, they possess the capability to form long term memories.
This means that no, actually, they don't stampede from crop to crop. The boom/bust cycle in agriculture prices is largely driven by the weather and shifts in consumer preferences.
"Absolutely no monopolies or cartels, unless, you know, we think its fun or directly benefit from it." - Politicians worldwide
It's interesting that people readily recognize the absurdity of this truth when it comes from some places, but insist that it's not only acceptable, but actually required, when it comes from other places. Note that this has become widespread in many parts of modern capitalist societies, and, by definition, ubiquitous in every single experiment we've had with communism and socialism.
To be fair, these are Depression-era programmes which predate modern economics. We did not know, in 1937, why a government-backed authority who guaranteed to buy the overproduction of a discretionary consumer item is a market-distorting waste of resources.
This isn't really accurate. Bastiat, even Adam Smith, explored these concepts in fair depth well before 1937. On top of that, trade simply isn't that complicated. We've been doing it for thousands and thousands of years. I think it has been pretty clear to any ancient Egyptian or Greek farmer, medieval peasant, or Bedouin trader that if the king guaranteed to give some people gold for as much product as they could produce, no matter what, that those people would begin producing as much product as they could, regardless of whether that product was needed or useful.
If by "modern economics" you mean neoclassical economics, quite the opposite is true: Those Depression-era programmes were created after laissez-faire didn't bring the US out of the Depression.
I am amazed these laws have survived as long as they have. I met a gal on an airplane once whose "job" was being the taxpayer representative an outdated agricultural committee for the US DoA. She was making 6 figures, for attending four meetings a year (transportation costs included). I was stunned at the waste of it all, but as waste go it was minor.
Many of them weren't challenged until recently, because the farmers who'd have standing to challenge them generally supported them. As the article notes, they're in effect a price-support mechanism for certain commodities, which would be an anti-trust violation if done via private-sector cartel, but not when authorized by Congress.
They can challenge it, but only via the political process, not a legal process. Congress had been given the power to regulate interstate commerce (lest the individual states try to do so themselves). This wasn't a problem for the first 120 years of the republic, because the government didn't have the budget to maintain a centralized bureaucracy to do too much (nor to mention that the concept of a centralized bureaucracy was born from Prussian authoritarianism that flowered in the latter half of the 19th century).
The nationalistic progressivistic movements sweeping out of Europe hit America in the early 20th century, leading people to ask: "Europe has this, why can't we?" And we ended up with a central bank and income tax all within a decade. Big centralized government built on dangling strands of Constitutional safeguards.
Well, the argument here is pretty specific: the plaintiffs (some farmers) argue that the law is unconstitutional because it seizes their property in a procedure that doesn't comply with the 5th amendment. Only the farmers would have standing to raise that particular argument.
A consumer arguing the law was unconstitutional would have to come up with a different reason, at least.
That's probably not sufficient to rule it unconstitutional. Remember, just because something is boneheadedly stupid doesn't make it unconstitutional.
The farmers going after the government for involuntary expropriation without just compensation have the best claim AFAIK in terms of getting it ruled unconstitutional.
Perhaps some day we will get past this sort of pedantic nonsense and actually read intent rather than injecting irrelevant not-quite-humorous commentary into otherwise useful discussions. But apparently that day is not today.
Yet some women feel demeaned by being referred to by a corruption of the word "girl", perhaps in the same way many men would take offence if you called them "boy". Not to worry, though; next time I encounter any such complaints, I'll tell them that you said it's not demeaning, so their feeling are an illusion.
It's context, isn't it? I wouldn't appreciate you calling me "dude" in a business setting, but I wouldn't mind in general. Likewise, I can imagine scenarios in which "gal" would be offensive, but this just isn't one.
What is socially acceptable is decided by society, not by any particular individual. Mind you, that doesn't prevent us from being more careful around people we know to sensitive to certain forms of address, but in a public forum that's not really possible because you don't know who you're talking to.
Words carry history. I can think of words that you might use in conversation with various groups without meaning to project any negative overtones whatsoever that would nonetheless be extraordinarily badly received; you could explain to the paramedic as he stems the bleeding that you didn't actually mean to cause offense.
FWIW, I've got three daughters, all adults now. We've talked about the evolution of the 'casual sex nomitive' and their consensus was that as a group it was ok to call everyone guys like "Hey guys, let's go to the beach!" but in the singular it they preferred the use of 'gal'. Further the use of guy/gal was preferred in casual speech over man/woman.
I suspect at some point every word may be pejorative in some way.
Just because there was someone famous with a name doesn't mean that name was derived from that famous person. It took on new meaning in the UK after that famous person became famous, but he didn't invent it. While we're here, he wasn't a failed terrorist. He was a failed assassin.
russel was simply assuming that the institutionalised speciesism if the airline industry was still in place. Animals fly with the cargo, except some small illiterate/non-communicative cats and dogs.
I was vaguely aware of some of this but had no idea of the extent of it and which products are affected. A bit of searching turns up the Agricultural Marketing Service website [1] and some of the markets affected:
Dairy - a cursory search didn't turn up a comprehensive list but market reports include milk, butter and cheese.
Livestock Poultry and Seed Program Rulemaking includes the following:
Beef
Lamb
Pork
Poultry and Eggs
Sorghum
Soybean
Other sections include tobacco, cotton, and even organic products.
Note that at least some of these programs are involved in grading food products, standardizing marketing claims, and food safety instead of purely market stabilization.
One article [2] paints a fairly positive view of these practices and points out how cherry growers decided to go without the regulation and reserve provided and within 10 years prices had plummeted to the point where they decided to reinstate the Cherry Industry Administrative Board.
The National Agricultural Law Center has quite a bit more if you're interested in case law, Congressional research, and a number of other resources.
It always amuses me that in Australia primary producers identify themselves as conservative and align with the conservative party but have historically been a bunch of agrarian socialists. We even had some towns founded as agricultural communes in my area back in the late 19th century and when I was a kid there were still farmers co-ops running lots of local businesses. The patrons at the local hotel will tell you how much they hate unions and socialists while the pub they are drinking in is community owned and actively fights independent competition. Farmers are a strange bunch, they hate government intervention but love a handout. We used to have similar things like a single authority handling grain exports here. The justification was that it allowed us to compete with countries which distorted the market due to subsidies and barriers like the socialist USA :-) That has all gone as far as I know. Now large corporations (still community owned in a sense via the stock market) pretty much perform the same functions but there is the illusion of choice where in fact little exists as dominant players in the market distort things just as much as statutory ones. In fact that is their job.
>Farmers are a strange bunch, they hate government intervention but love a handout.
How is that at all strange? Hypocritical, certainly, but not strange. People want the government to take money from others and give it to them but not the other way around. That is basically the entire basis of politics on the question of government spending.
I think part of it is that farmers were historically socially conservative, but not particularly free-market oriented. Given the miscellaneous catastrophic risks to livelihood that small farmers face from fluctuations in weather and prices, from the perspective of economic politics, farmers have typically been in favor of vaguely socialized systems that share some of the risks and stabilize prices. Even when it wasn't done via the state, the tendency was towards agricultural cooperatives and other kinds of economic pooling schemes.
This may explain why many of the raisins sold in Sweden are grown in California. I was wondering why, when there are plenty of grape farms in Europe. It's unlikely that growing in California + shipping + import tariffs is cheaper than growing in Spain. Turns of the export price of American raisins is artificially depressed.
I know this is a serious issue re the problems with inflated and systemic agricultural bureaucracy per the thoughtful comments below...but: raisins.org.
Unfortunately it is not. New Deal era laws such as this one existed to help prevent a flood of excess food ruin the market for farmers during the Great Depression in the United States. Unfortunately, nobody is keen to revisit any laws from the New Deal, no matter how outdated, because of the kind of scrutiny it might bring on programs like Social Security.
Yes, the Great Depression, when our foremost leaders reasoned that we could become more prosperous as a nation by destroying crops and making food more expensive to a population facing an unemployment rate of 20% (and devoting a far greater portion of their budget to food than you or I do).
FDR came up with the most toxic economic policy ever experienced in this nation, bar none, and easily added seven years onto the Great Depression. And no, it's wasn't the fault of Social Security: it was the fault of nonsense like this.
They say in high school history classes World War II led the US out of the Great Depression. It's only true because that's what finally convinced the idiots in charge that they needed to get their act together if they actually wanted to muster enough industrial output to fight a war.
If there is a God, Mr. Roosevelt, may he have mercy on your soul.
Not all is fault of the Great Depression legislation, take for example one that came to the forefront during the "Fiscal Cliff" negotiations. Read about the 1949 Agricultural Act on Wikipedia, http://en.wikipedia.org/wiki/Agricultural_Act_of_1949
Remember that seven or eight dollar a gallon milk scare? That is the source of that mess. Follow the links at the bottom of the article for all sorts of farm bills.
Its pretty damn scary how much the government meddles in the industry because we have 400 plus experts.
Even at the time the laws were harmful and unconstitutional. Many people were barely able to afford food or even going hungry, and meanwhile the government was doing everything it could to raise the prices further and reduce production.
It's funny, apparently two of the most major agricultural markets are not governed by capitalist principles at all. The EU is infamous for spending half of its many billion budget each year on subsidizing and aggressively controlling agriculture.
The "right thing" with agriculture seems to be a mix between socialist tight control and capitalist principles. Lenin had a lot of success with the New Economic Policy [1], until Stalin crushed it all.
Saying that NEP was a success is like saying replacing daily savage beatings with moderate floggings on weekends only is a success. Of course, the latter is better, but you're still beaten pretty bad. NEP was better than what preceded and followed it, but was very far from the "right thing" - and was never intended as anything but temporary measure to allow the economy to recover a bit after the savage years of the war and "war communism", and the centrally planned economy always was and remained the ultimate goal of socialism. What Stalin did was inevitable.
Every time you see someone inveigh against a particular system that has been in place for a long time, you should ask: "I wonder why that system was put there? Maybe there was a reason."
Netscape decided to throw away all their code and do a complete rewrite, and then realized that just about all of it was there for a reason. The Economist is happy to do a drive-by on agricultural price stabilization, but if they were successful there would be years where your frigging Raisin Bran was priced at $200/box, and the Economist wouldn't have anything to say then, except perhaps "not our problem if you idiots listened to us".
Agricultural price stabilization schemes exist for a reason.
When you say things like "$200 a box" that are clearly exaggerations, readers of your comment are unable to tell whether your other statements are similarly exaggerated -- in this case, your claim that most of the original Netscape code was actually discovered to be non-cruft.
I know Joel Spolsky famously wrote about the Netscape rewrite, but a solid citation would be really helpful here.
Any agricultural product with a long lag between planting and harvest ends up getting sucked into cycles of boom and bust, which are terribly destructive for all involved. The cycle goes like this:
This cycle absolutely wrecks agricultural economies which are dependent on one or a handful of key exports.