Apr 21 2008

Why learning economics is SO IMPORTANT! The case of Ban Ki Moon…

UN chief warns world must urgently increase food production – Yahoo! News

So you don’t say things that make you sound stupid to people who have studied economics, i.e. AP Econ students. Here’s UN chief Ban Ki Moon speaking at a UN conference in Ghana this week:

“One thing is certain, the world has consumed more (food) than it has produced” over the last three years, he said.

Ban blamed a host of causes for the soaring cost of food, including rising oil prices, the fall of the U.S. dollar and natural disasters.

He said he would put together a special task force to help deal with the problem and called on the international community to help…

“We need a real world and not the world of economic theories,” Ban said. “I will work on this right now with a sense of urgency.”

You know who says things like that? People who don’t understand the basic economic theories. Sadly, the theory Mr. Moon is missing here is one of our science’s most basic and simple to understand: that of supply and demand.

First of all, I’d just like to point out the absurdity of his first statement, that “the world has consumed more than it has produced.” Mr. Moon, I’d like to ask you this: If our world has not produced all the food we’ve consumed, then whose world DID produce it? Can’t we just call up the world where all the extra food we’ve consumed was grown and ask them to send us more?

Next, regarding Mr. Moon’s “task force” that he plans to form to deal with the problem, my question is this: What can a handful of bureaucrats accomplish around a table in New York that the market can’t do on its own? Rising food prices send signals to farmers who grow food; a signal that sends a very clear message: “GROW MORE FOOD!”

I’m sorry, but Mr. Moon and his “task force” can spend all the time and money they want brainstorming ways to get farmers to grow more food, but in the mean time the invisible hand of the market, guided by price signals sent from consumers to producers, will work its magic to allocate more resources towards food production and away from alternative uses of grain crops such as ethanol production, eventually shifting the supply curve of food out, stabilizing food prices.

Mr. Moon’s intentions are honorable, but his means of achieving his goal are misguided in an era of the market mechanism, which underpins most of the world’s agricultural economies today.


About the author:  Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author

25 responses so far

25 Responses to “Why learning economics is SO IMPORTANT! The case of Ban Ki Moon…”

  1. Cassy Changon 22 Apr 2008 at 6:58 pm

    lol…how can people consume what wasn't produced in the first place?

    i think food shortage is due to the fact that it takes so long to grow many foods! so if they really want to do something about it…i say invest in biotech!

  2. Jason Welkeron 22 Apr 2008 at 7:15 pm

    Cassy, good point, actually. Remember price elasticity of supply? In the short-run, rising demand for food leads to steep increases in price because producers are unable to adjust their resources towards producing more food rapidly enough to respond to higher prices.

    Perhaps in the next year supply will become more price elastic, meaning farmers will become more responsive to the higher prices, shift more resources towards food production, and help bring down the world food prices.

  3. Helenon 22 Apr 2008 at 10:02 pm

    I guess what Ban Ki Moon was TRYING to get at is that we cannot wait for market forces to take hold while millions are starving to death. But just like we can't cheat God (how ironic – I'm not even Christian), we can't cheat the economy. Ban Ki Moon can accelerate the increase in food production in the short run, but eventually the economic repercussions from these measures will catch up with him.

    Doesn't the UN have a group of economists that do all these research and prevent these things, like Ban's speech, from happening? Where did they all go? Or whoever prepared Ban's speech needs to take some econ classes again.

  4. yunqimokon 23 Apr 2008 at 8:28 pm

    Moon's first statement was utterly hilarious. At first, I thought he might be very deep and relating it to something like how the US has consumed more than it has produced, but because he talks about the world, it is completely impossible. LIke Mr. Welker pointed out, earth, unfortunately is a soliltary planet, and human have, as of now, not yet discovered life anywhere else in our galaxy or even universe. We must have produced all the food we consumed, "alien brocoli" doesn't sell in our markets right? Secondly, it's very sad how political leaders can misunderstand such basics of economics that even normal, unwise, naive high school students can easily understand.

    I suppose Moon is on the right track thinking about the welfare of his people, becasue he is terrified of rising food prices. After all, politicians talk to the mass majority of people who are probably more ignorant than they are. Thus, his speech is there to motivate people and give them hope, as well as a sense that Moon is doing something to ease their problems. Not that bureaucrats will suddenly make acres grow and chickens appear in everyone's pots.

  5. Christina Huon 24 Apr 2008 at 9:10 pm

    Haha I thought that either 1)Mr. Moon wrote his speech too late at night, 2)he was so huffily proud of his country that he saw fit to call it the world, or 3)the U.S.'s [over]consumption was so large that he believed it would equal that of an entire third-world world.

  6. Jason Welkeron 24 Apr 2008 at 11:16 pm

    You know, in retrospect I think I was a little harsh on Mr. Moon. It turns out it is actually possible for the world to consumer more food than it produces in a given year… simply by dipping into its inventories of food that was overproduced in past years.

    This was my mistake, but then again, Moon's statement does sound awfully funny, and I'll keep the quote here along with my critique, because I am not convinced he had inventories in mind when he made the statement, rather he was probably thinking of the impact such a claim would have on listeners… Ahhh…. politics!

  7. Conrad Liuon 25 Apr 2008 at 12:16 am

    Haha, like Mr. Welker said, he probably had his intentions on-tack, it's just his wording that's a bit…off. In any case, I'm just wondering if there's often inventories of food that can be overproduced? I mean, I know that corn in the U.S. is always (or at least, was) overproducing corn. Surely this can't be the only food that is overproduced…

  8. Tim Chuon 25 Apr 2008 at 12:16 am

    I dunno about you guys, but the moonanites have been supplying me with …'herbs' for the past few years. fresh off the moon market. i say we invest on interstellar trade. soon enough, extraterrestrials will contact us and we'll have to communicate with giant speakers and a piano, but its okay they can specialize in death rays and stuff and we can give them the internets. sounds pretty fair to me.

  9. Jeff Yeon 27 Apr 2008 at 7:29 pm

    Haha tim…i'm at a loss for words at your comment. I think Moon's idea about establishing a task force now to satisfy a short term issue, and worry about the repercussions later, nicely compares to procrastination. Although the ethics of the two may differ, the basic idea is the same. We sacrifice long term comfort for short term wants/needs. I would've thought a large scale leader like Mr.Moon would have grown out of that habit already.

  10. Trevor Sunon 28 Apr 2008 at 7:58 pm

    So if the world is running low on food, cant we just tell the farmers to grow more? Why does he have to assemble a task force to deal with this problem, or did i misread something? I can see how we eat more food than we create but I think hes’ worrying about it a little too much.

  11. Claire Moonon 28 Apr 2008 at 1:22 pm

    I'm ashamed of being Claire "Moon" now..

    okay.. when you just listen to his statement without thinking it sounds right

    but after thinking at least a BIT then its ridiculous…

    consuming more than producing….

    I really hope that could happen one day =)

  12. MichaelChowon 28 Apr 2008 at 8:37 pm

    I think Trevor makes a good point on how if the supple of food if it gets low then can’t we just demand more? Overall I think this is pretty ridiculous how he is assembling a “task force” to get farmers to make more food.

  13. KatherineYangon 28 Apr 2008 at 1:38 pm

    I don't like how he used the words "task force" it implies it's a situation you can directly confront. Like how Mr. Welker says its telling people to just grow more food like that will solve anything.

  14. richardtuon 28 Apr 2008 at 3:21 pm

    First of all, when you think about Ben's first statement, where he said, "The world has consumed more than it has produced." How is this even possible? You cannot consumer something that doesnt exist. Well, it make sense when you say, "a country has consumed more than it has produced," because they can do that through trade, and help benefits each other. BUT, it just doesnt make sense when you said the world has done so. Also, he said that, we dont need a world of economic theories, we need a REAL world. if you think about this, how do we govern the real world and its financial foundation? We have to learn from the economic theories, and through our mistakes. Therefore, without economic theories, we wont be able to govern a country's national income etc. Furthermore, as suggested we do not need a "task force" to increase our food supply, the "invisible hand" will guide itself and shift out the supply curve.

  15. howardlinon 28 Apr 2008 at 3:23 pm

    This is very interesting… Because how can "the world consume more than it has produced ." It's really impossibe because then who in the world PRODUCED the food?! The "invisible hand" will allocate the correct amount of resources towards the right amount of products.

  16. Jeewonon 28 Apr 2008 at 8:57 pm

    Hahaha, the way Mr. Moon said it is really funny, since the world can't consume more than it produced, but when we think about inventories it makes much more sense.. And I agree with Helen, that Ban Ki Moon's plan to form a "task force" is intended to accelerate the force of the invisible hand that is to allocate more resources toward food production. So let's stop making fun of Mr. Moon 😉

  17. Chan Min Parkon 28 Apr 2008 at 9:25 pm

    Mr.Welker, it's not Mr.Moon it's Mr.Ban. Thats like calling me Mr.Min not Mr.Park! I think he simply meant we should just stop talking about how to fix this problem by looking at the theories but actually start working on it because this problem is becoming serious. And I think as UN Chief he should be worried because this is not simply dealing with the economically active countries we know but countries like Ghana etc. They are intending to "raise $750 million per year to help feed 73 million people in 80 countries."

  18. Sharon Lion 28 Apr 2008 at 10:07 pm

    Why can't we just grow more food? It would be kind of cool if we could donate fat to starving countries, like this facebook group says http://www.facebook.com/group.php?gid=2228069967

    hehe.

  19. andyxuon 28 Apr 2008 at 11:02 pm

    1) Moon said the world has consumed more food than it has produced "Over The Last Three Years".

    Why is everyone so convinced this is not (theoretically) possible?

    You can easily achieve what Moon said by producing more food than you consume before "these three years" (creating a food surplus), store the food, and consume the food over the next three years.

    2) Instead of establishing a "special task force" and "Asking farmers to grow more food", why does the UN simply provide an incentives for these farmers to work harder in the fields, one example is a subsidy, another is an restriction of farmlands used to non-agricultural purposes.

  20. Kevin Yehon 28 Apr 2008 at 11:07 pm

    lawl econ nob.

    Anyways, yeah like some ppl have said before me, the best bet would be to provide a subsidy for farmers to stimulate more food growth.

  21. Jennifer Choion 29 Apr 2008 at 1:10 am

    Okay so reading the article and the comments was very funny. First of all, yes, as Chan Min said, it's Mr.Ban not Mr.Moon haha. Second, I think a lot of us missed the last phrase when he said "the world has consumed more than it has produced *over the last three years*". As Andy explained above, consuming more than the produced amount is actually possible if you think about inventories of food from past years' production.

    I think Mr.Ban's point in saying "we need a real world and not the world of economic theories" is that it is urgent that we take actions rather than be waiting and just sit around talking about such theories. One of the United Nations' tasks is dealing with problems of economically less developed countries; the problems those countries are facing are more than 'just a recession,' but what they are facing are scarcity of food and death of millions of people due to hunger.

  22. Jinnyon 29 Apr 2008 at 8:48 pm

    Let's give some slack for Ban Ki Moon here. Yes, his speech was indeed a little misleading, but all in all, I think his claim was quite plausible, since it IS possible to consume more than we produce. Also, I think what he was trying to get was to emphasize the immediacy of the world-wide food shortage. And many people have suggested subsidies to stimulate farmers to grow more food. However, I don't think this can be simply solved by subsidies because there are issues with set-asides. For instance, in France, the government actually pays the farmers not to produce more output in order to prevent making surplus so that they do not have to sotre the surplus and maintain a price floor. So, I wonder how the world will solve this problem.

  23. Julieon 29 Apr 2008 at 10:35 pm

    the content and title of this article is pretty deceiving for those who dont understand economics.

    “One thing is certain, the world has consumed more (food) than it has produced” over the last three years, he said. how is that possible? pretty interesting…

  24. mina.songon 29 Apr 2008 at 11:43 pm

    This is really ashame for being Korean…

    And.. one more thing… His name is Ban Ki Moon.. which is in order of Asian way not American way.

    so… his last name is not Moon, his Last name is BAN. which means… we have call him Mr. Ban.. not Mr. Moon…

    OMG…..

    Claire….. he is not Mr. Moon…..

  25. Dana Y.on 30 Apr 2008 at 3:22 am

    First off, I would like to say, Mr. Ban's comments were a bit hastily prepared but not entirely ludicrous. The gravity of the global food crisis does require attention and Mr. Ban might have been employing a hyperbole (jk). Anyways, I too, like Jinny, believe that merely subsidizing farmers will not solve the core of the issue. The crux of the issue is very multifaceted and incredibly complex: rising oil prices, global warming, the evergrowing demands of the newly booming Chinese and Indian economies, overconsumption by nearly all countries, and the list goes on. So what should we do? Tackle these problems, one by one.