Seen in the Wall Street Journal (subscriber link):
One of the chief causes of food-price inflation is new demand for ethanol and biodiesel, which can be made from corn, palm oil, sugar and other crops. That demand has driven up the price of those commodities, leading to higher costs for producers of everything from beef to eggs to soft drinks. In some cases, producers are passing the costs along to consumers. Several years of global economic growth — led by China and India — is also raising food consumption, further fanning the inflationary pressures.
Food-price inflation has been climbing — in some cases sharply — in India, China, Europe, and even smaller economies like Turkey, South Africa and Poland. In Hungary, it is running at more than 13% a year, compared with less than 3% in 2005. In China, food prices are climbing at a 6% pace, more than three times the speed of a year ago. Prices are also up in Germany, Italy and the United Kingdom. They may even be picking up in Japan, the world’s second-largest national economy, though the signs are tentative since overall prices there are only just starting to rise after a prolonged economic downturn.
I think a few policy makers are (or should be) getting a crash course in the law of unintended consequences.
It would be nice, as environmentalists, industrialists, and politicians consider questions of CO2 reduction and energy conservation if someone would put together a balanced cost-benefit analysis of different conservation or alternative fuel alternatives that considered ripple effects like how ethanol demand leads to increased food prices which leads to a drag on the global economy.
Perhaps the economics department of a good liberal arts college ought to take it up as a multi-class project?
