My last blog post listed some policies and institutions with which various small countries around the world have had success — innovations that might be worthy of emulation by others.  Of course there are plenty of other examples of policies and institutions that have been tried and that are to be avoided.    The area of agricultural policy is rife with them.   Many start with a confused invoking of the need for “food security.”

          The recent run-up in wheat prices is a good example.   Robert Paarlberg wrote an excellent column in the Financial Times recently, titled “How grain markets sow the spikes they fear.”   Grain producing countries point to the high volatility of prices on world markets and the need for food security when imposing taxes on exports of their own grain supplies, or outright bans, as Russia did in July.    The motive, of course, is to keep grain affordable for domestic consumers.  But the effect of such export controls is precisely to cause the price rise that is feared, because it removes some net supply from the world market.    (The same could be said when grain importing countries react to high prices by enacting price controls, because that adds some net demand to the world market.)    read more