In an earlier missive in this thread, I wrote: >>Sen and de Long are saying that even with close-to-perfect markets (or even perfect ones), people can starve, simply because they don't have enough money to buy food when the price goes up. That's a pretty damning indictment of markets, but it doesn't explain why people don't have the money. << After writing this, the little neoclassical homunculus in my head (a result of college and graduate school indoctrination) woke up and said: "wait a 'sec. If markets were _really_ perfect, as in the Arrow-Debreu Walrasian General Equilibrium Model, no-one could starve. After all, the potentially starving person could borrow money on the perfect futures market, taking advantage of his or her potential to earn wages in the future (after the food shortage) to pay the interest & principle, smoothing life-time consumption of food over the life cycle, so that there would be no significant dip in food consumption in the short run due to a bad harvest or other factors that limit the supply of food. In any case, any inadequacy on the supply-side of the food market are clearly due to tariffs or other trade barriers. Given free trade, the borrowed money could buy food at reasonable prices. (The idea of a world-wide bad harvest and food shortage is almost impossible.) So the problem is that markets aren't perfect _enough_." I'm surprised that Brad didn't bring the issue of futures markets up. I "forgot" to assume away perfect futures markets (without which the rest of the story doesn't work). But that's the difference between neoclassical economics and realistic economics. Pure neoclassicals use the Arrow-Debreu model (or some other equally ideal theory) as their baseline, bringing in one or two "imperfections" (i.e., real-world facts) to try to come up with something relevant. On the other hand, realistic economists like Adam Smith and Karl Marx started with the empirical world as their baseline, trying to develop valid abstractions based on empirical reality. (Some of the nominal or pragmatic neoclassicals are also this way.) The pure neoclassical necessity of "assuming away perfect futures markets" is like a physicist being compelled to "assume away God" when doing cosmology. Perfect futures markets are absurd (like the existence of God in my book), given (among other things) our fundamental uncertainty concerning future events. Louis writes: >... hasn't capitalism (and imperialism) historically been wedded to anti-market mechanisms? Wasn't the British East India Company antithetical to Adam Smith's ideals, as he even stated explicitly? Isn't the Bengali famine an outgrowth of these policies dating back to the 17th century?< In theory, the only non-market mechanism that capitalism is "wedded to" is the state, which enforces property rights (along with the inequality of such rights). In theory, therefore, mercantilism can go away. It's been going away for the rich capitalist countries (more for the US than for Japan, for example). Classical mercantilism in Europe was linked to domestic absolutism and efforts to engage in primitive accumulation. It resulted in the polarization of classes (and the sometimes fast, sometimes slow abolition of self-employment) and the wealth distribution, which has since been preserved by "normal" state activity, such as busting or taming unions. Recent famines are due to wars, weather, and the like disrupting food supplies (something we should expect more of as global warming kicks in) at the same time that rural populations become increasingly dependent on the market -- rather than their own gardens -- for food. The commercialization of agriculture (and such events as the "Green Revolution") is almost always linked to proletarianization of the small-holders, so that these people become vulnerable to famine. Again, this isn't in Sen (as far as I know) but doesn't contradict his work. > On the other hand, is the cure laissez-faire capitalism? If the capitalist is free to invest, and the state does not interfere with his decisions, isn't the result famine just the same? Export agriculture in Latin America might proceed by the "Wealth of Nations" textbook, but the result is hunger and premature deaths from malnutrition. The answer is to be found in what Marxists have always called for, production for human need rather than profit.< In theory, eventually stable commercial agriculture with a steady work-force will settle in, as the process of primitive accumulation and proletarianization swallow up the last of the world's rural populations. Agriculture, in theory, will be like the automobile industry, perhaps even able to insulate itself from the seemingly growing swings of weather conditions. But it seems to me as if commercial agriculture aims to promote pesticide and herbicide use, the use of chemical fertilizer, and the development of hybrid and genetically-altered crops. Though profitable to individual capitalist-farmers and to chem and bio corporations, these seem dangerous in terms of their impact to the environment and the eaters, especially in combination with each other. So it's quite possible that we urban proletarians and semi-proles will starve due to some kind of world-wide environmental disaster-driven famine some time in the future. Here the problem is definitely a matter of production for profit being behind the problem. Hey, didn't someone on pen-l once publish a book titled FARMING FOR PROFIT IN A HUNGRY WORLD? Jim Devine [EMAIL PROTECTED] & http://clawww.lmu.edu/Faculty/JDevine/jdevine.html
