WTO makes progress in cutting farm subsidies

[Lawrence of Arabia]

You can consider comparative advantages, but you either have to say the supply changes or it doesn't change. Which is it?

but thats where the problem is. since some countries have comparative advantages, the graph doesnt demonstrate what their advantage is compared to the countries that are subsidized. since you dont know, you cannot tell if poor farmers will benefit from a removal of first world subsidies. this graph only shows one dimension of it and ignores the crux of the argument, which is that their advantage is being crushed by the rich.

not only that, it misleeds everyone into thinking that with a removal of subsidies, prices will increase. as you saw on the Adam Smith graphs, this only occurs when the supply is totally subsidized by foreign countries (the mali example.) and that country has no comparative advantage in producing it. in the US cotton example, prices remain the same when subsidies are removed. the difference is where the money is going.

[Kidlicious]

Originally posted by Lawrence of Arabia
but thats where the problem is. since some countries have comparative advantages, the graph doesnt demonstrate what their advantage is compared to the countries that are subsidized. since you dont know, you cannot tell if poor farmers will benefit from a removal of first world subsidies. this graph only shows one dimension of it and ignores the crux of the argument, which is that their advantage is being crushed by the rich.

Ok. Do you believe the subsidies increase overall supply to the world market or not?

[Kidlicious]

The non-subsidized farmers only produce less after the price falls. So you have to accept that the price falls atleast in the short run. I think you're saying that in the long run the price will go back up to where it was, because so many non-subsidized farmers reduce or stop production.

This is why that's not so. The world demand curve for agricultural products is downward sloping, but not vertical. People will buy more food at lower prices. So an increase in supply will bring the price down. An increase in supply from some producers will cause others to reduce production, but not by the same amount, because the consumers consume more at the lower price. The price never goes back up. You can't have a price/quantity point that is not on the demand curve unless you have some price manipulation.

[Lawrence of Arabia]

The world demand curve for agricultural products is downward sloping, but not vertical. People will buy more food at lower prices. So an increase in supply will bring the price down. An increase in supply from some producers will cause others to reduce production, but not by the same amount, because the consumers consume more at the lower price. The price never goes back up. You can't have a price/quantity point that is not on the demand curve unless you have some price manipulation.

i agree, the demand curve is downward sloping, but it is very inelastic - you arnt going to eat massive amounts of more food because its cheaper. but an increase in supply from some producers (through subsidy) will NOT cause others to reduce production, because 1) that is their livelyhood, and 2) they have nothing else to do, 3) other first world suppliers will scream for a subsidy and 4) in third world countries, the cost of living is much lower, so even if they make very little profit they will continue to produce because they can still live.
the subsidy will replace foreign imports in that market, but will not lead to changes in price, as long as the domestic market is the one being subsidized.

[Kidlicious]

Originally posted by Lawrence of Arabia


i agree, the demand curve is downward sloping, but it is very inelastic - you arnt going to eat massive amounts of more food because its cheaper. but an increase in supply from some producers (through subsidy) will NOT cause others to reduce production, because 1) that is their livelyhood, and 2) they have nothing else to do, 3) other first world suppliers will scream for a subsidy and 4) in third world countries, the cost of living is much lower, so even if they make very little profit they will continue to produce because they can still live.
the subsidy will replace foreign imports in that market, but will not lead to changes in price, as long as the domestic market is the one being subsidized.

It doesn't matter if the subsidies replace foreign imports or not. The price will not stay the same. The problem is that you aren't looking at how it plays out. The first event is an increase in supply from the subsidy. The second event is a fall in price. The third event is the fall out of producers because of the lower price. It doesn't happen in an istant. It's a process.

[Odin]

Originally posted by KrazyHorse

I don't know. Do you like putting millions of people suddenly in poverty?

FARMERS HAVE BEEN SUBSIDISED FOR THE LAST 40 GODDAMN YEARS

GET OFF THE FARM, FOR ****'S SAKE

I would love it if we let the land here revert to tallgrass prairie and bur oak savanna.

[Bereta_Eder]

eliminating the farm subsidies will make the produtcs more expensive worldwide. so no

[Bereta_Eder]

also there's enough food prodcued today in the world to feed everyone. the problem is that in some countries there are institutes to lose weight and in others people are starving (so much for the genetically modified foods theory of "feeding the planet")

[Lawrence of Arabia]

It doesn't matter if the subsidies replace foreign imports or not. The price will not stay the same. The problem is that you aren't looking at how it plays out. The first event is an increase in supply from the subsidy. The second event is a fall in price. The third event is the fall out of producers because of the lower price. It doesn't happen in an istant. It's a process.

look at the US cotton graph provided by adam smith. do you see an 'increase in prices?'

[Kuciwalker]

Originally posted by paiktis22
also there's enough food prodcued today in the world to feed everyone. the problem is that in some countries there are institutes to lose weight and in others people are starving (so much for the genetically modified foods theory of "feeding the planet")

I don't quite see the connection between the two, except as a lame troll.

[Kidlicious]

Originally posted by Lawrence of Arabia


look at the US cotton graph provided by adam smith. do you see an 'increase in prices?'

That is a graph for one nation, not the world.

[Lawrence of Arabia]

That is a graph for one nation, not the world.

its a model thats optimized for subsidization and its effects - the aggregate demand and supply model is not optimized for that. therefore, we will use that model to show what will happen when subsidies are removed.

[Kidlicious]

Originally posted by Lawrence of Arabia


its a model thats optimized for subsidization and its effects - the aggregate demand and supply model is not optimized for that. therefore, we will use that model to show what will happen when subsidies are removed.

That convenient. You're none the smarter for it though.

[Lawrence of Arabia]

well you cant seem to provide a reason for not using the model that AS gave us, other than 'this is a graph for one nation, not the world'. it is also a graph specifically designed for subsidies, while the AS/AD graph on crudely shows what subsidies do.

its like using demand and supply diagram for business economics, when there are much better and more accurate diagrams used to model events.

[Kidlicious]

Originally posted by Lawrence of Arabia
well you cant seem to provide a reason for not using the model that AS gave us, other than 'this is a graph for one nation, not the world'.

How can you get the world price without a model of the world market?