Misconceptions, Untruths and Misinformation

Misconceptions, Untruths and Misinformation Harwood D. Schaffer University of Tennessee Agricultural Policy Analysis Center Dakar Agricole 2011 Dakar, Senegal April 18, 2011

What’s the Big Deal • With assessment tools? • Why do we care whether they are accurate or not? • Because they have an outsized impact on the policies that affect the poorest of the poor • 800 million to 1.4 billion human beings • Despite five decades of economic modeling, they remain socially and economically excluded • For them it is a life or death matter—a permanent loss of human capability

Declaration of Dakar 2003 • Developed by farmer organizations as they examined the impact of trade policies on their lives • Three points that focus our discussion of trade and price models • WTO vision: The world upside down • For agricultural policies founded on rights • For mutually supportive international trade

WTO Vision:The World Upside Down - I • I want to give voice to those farmers who gather here 8 years ago • Commercial agriculture and WTO-style trade will work for 5% of the farmers • The numbers are the same in the US • I want to speak for the other 95% of the farmers who comprise 2/3 of those suffering from chronic hunger in many countries – the other third are displaced rural poor living in urban settings

WTO Vision:The World Upside Down - II • Despite what we know about: • The low elasticity of supply, • The low elasticity of demand, • The fixity of resources • That we depend on markets NOT clearing—we need a carryover • There is no such thing as a demand for stocks—they are the RESIDUAL • We treat ag commodities in the same way that we treat cars and computers

Ag Policies Founded on Human Rights • Food is like any other product • No, Food is Different • While food is a market good it is not a “free market” good • The aggregate food market is a coercive market because of the nature of the product in the transaction rather than the actors in the transaction • People need to eat every day • They cannot wait for prices to drop before reentering the market—this is where we ration supplies with price • Food is a human right that governments and international governmental organizations have the responsibility to Respect, Protect, and Fulfill • Gender

Ag Policies Founded on Human Rights • The role of food production • As Milton Friedman noted (though he did not say it this way), self-production is the only tool people have when alternate employment is not available • The growth of an underclass in major cities around the world are a direct reflection of the failure of ag policies in the rural areas • PUSH(displaced rural poverty) vs.PULL(opportunity) • The responsibility to Respect, Protect, and Fulfill has been abrogated when 1.4 billion people face chronic hunger

For Mutually Supportive Trade • The world market is not a dumping ground where you solve your overproduction problems • Agricultural trade is not a Human or even a Commercial Right • Agricultural trade is a tool: • That can be used to ensure the achievement of human capacity and the fulfillment of the Right to Food

A Word on Volatility • Volatility in agricultural commodity prices is the consequence of bad policies that • Do not take into account the unique nature of the agricultural sector • We need real stocks, both strategic and operational – local, national, international • CEOs in other sectors engage in management • Ignore the needs of the poorest of the poor who are excluded from the market

Some Words on Modeling • Model are a reflection of reality - I • Abstraction of a complex system using an extremely limited number of variables • Fallacy of Misplaced Concreteness • Numbers like 144 million lifted out of poverty and $500 billion in added global income seem more real than they are • Numbers are very sensitive to assumptions in the model • Other modelers had widely different numbers for the impact of the same policy set

Some Words on Modeling • Model are a reflection of reality - II • They look at production and GDP and don’t account well for worker displacement • They can’t model what they do not have numbers for: • Production for self-consumption – a large number of producers in developing countries • Those whose income is so low they do not have the price of entry into food markets (ineffective demand)

Some Words on Modeling • Model are a reflection of reality - III • Can’t model the qualitative • Human Rights – an evolving concept • Values – solid and yet ever changing • Can’t model the unpredictable • Human agency • Black swans – a 9.0 earthquake off Japan • The current economic crisis

Where Do We Go From Here? • Continue to make improvements in modeling • Be clear about limits and biases of models • Use social scientists (sociologists, anthropologists, political scientists, political economists) in defining problem and interpretation of results • Offer the results with GREAT HUMILITY not a meat cleaver

Let’s Keep Our Eye on the Ball • The poorest of the poor • Reserves are crucial to protect the most vulnerable • Declaration of Dakar 2003 • Trade policies must reflect the nature of agriculture and benefit the weakest • Ag policies must be based on human rights • Mutually supportive international trade

Thank You

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WTO Vision:The World Upside Down - II • The agricultural sector is like any other economic sector- I • Crop marketing is not like what is taught in Economics 101 • Lack of a timely price response on the consumer side • With low prices, people do not go to 5 meals a day • At high prices, they may change to a cheaper mix of products, but they will buy something; they will do without other things and pay what is needed • Unless they can’t afford to be in the market

Second Misconception • The agricultural sector is like any other economic sector - II • Crop marketing is not like what is taught in Economics 101 • Lack of a timely price response on the producer side – low prices • With low prices, farmers do not leave a significant amount of land idle • With low prices. instead of reducing supply, they over invest, politically and economically, in consumer demand enhancement efforts like ethanol

Second Misconception • The agricultural sector is like any other economic sector - III • Crop marketing is not like what is taught in Economics 101 • Lack of a timely price response on the producer side—high prices • With high prices, farmers convert land to crop production and plant every slough, windy knob, and inconvenient corner • This increased acreage wrings out very slowly in response to low prices as more bushels help

Second Misconception • The agricultural sector is like any other economic sector - IV • Crop marketing is not like what is taught in Economics 101 • Fixity of resources • Few alternate uses of land during times of low prices • Once removed from production, it is hard to bring it back into production • It is geographically locked – one can move industrial factories, but not land

Second Misconception • The agricultural sector is like any other economic sector -V • Crop marketing is not like what is taught in Economics 101 • Production controls are different from those in industry • Farmers determine land allocation • Weather is often major factor in determining production • Production decisions are made annually not on a daily basis, they are made well ahead of known demand

Second Misconception • The agricultural sector is like any other economic sector -V • Crop marketing is not like what is taught in Economics 101 • We don’t want markets to “clear” • As the Momagri Model reflects DInvt + Invi cannot be negative • There is a need for national/international reserves to protect availability in times of stress • As we have seen, the markets have no incentive in providing reserves to protect people

Misconceptions, Untruths and Misinformation