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March 6, 2011
David Warsh, Proprietor


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A Hierarchy of Problems

The turmoil that has been sweeping the Middle East is susceptible to at least two broad and daring explanations.

On the one hand, Charles Krauthammer, of The Washington Post, argues that revolts against autocratic governments in Tunisia, Egypt, Yemen and Libya are testimony to the “fundamental tenet of the Bush Doctrine that Arabs are no exception to the universal thirst for dignity and freedom.”  Facebook and Twitter “may have mediated this pan-Arab (and Iranian) reach for dignity and freedom,” he wrote the other day, but the US invasion to bring down Saddam Hussein “set the premise.”

On the other, the upheaval may be the result of climate change

Sharply rising food prices have been the background to street protests throughout the Middle East. As Eric Pooley and Philip Revzin wrote in a particularly intelligent cover story in Bloomberg Businessweek last month, “The hunger that has roiled the Middle East was not caused by the whims of autocrats and cops. It began last year with crippling drought in Russia and later Argentina, and torrential rains in Australia and Canada. The deluges in Saskatchewan were so sustained and intense that farmers couldn’t plant some 10 million acres of wheat….”

Among climate scientists, the conviction has been growing that such floods and droughts will become more common in the future, the result of growing greenhouse gas emission. Reporter Justin Gillis wrote in The New York Times last month, “Basic physics suggests that as the earth warms, precipitation extremes will become more intense, winter and summer, simply because warmer air can carry more water vapor.  Weather statistics confirm this has begun to happen.”

Weather extremes are bound to effect crop yields in unpredictable ways.

To this point the food angle on the Mideast protests has been the stuff of newspaper sidebars. But perhaps rising food prices should be understood as the cause, not consequence, of rising oil prices – in which case, the weather story deserves deeper curiosity and more attention than it has been getting.  Bad harvests around the world last year drove nominal wheat prices in Chicago up 74 percent, corn 87 percent. Food prices in the Middle East were already nearing records as the first crowds gathered in Tunis. They have climbed sharply since – 2.2 percent on the UN index in February alone.

Now the crisis in Libya has sent oil prices rising above $100 a barrel, guaranteeing that world food prices will rise still more. World Bank president Robert Zoellick said last month, “The price hike is already pushing millions of people into poverty and putting stress on the most vulnerable, who spend more than half of their income on food.”   Another bad harvest – a drought in China, for example – would affect hundreds of millions more.

Meanwhile, high prices are good for farmers – and owners of farm land. The latter now include syndicates put together by Wall Street for sophisticated investors eager to participate in, for instance, the 23 percent appreciation of prime Iowa farmland last year reported recently by the Federal Reserve Bank of Chicago. The extent to which speculation in related markets – product futures, index swaps and the like – is fueling the price spike is anybody’s guess.

This is not to say that starvation looms, even though another year of bad harvests could precipitate a genuine global crisis. Brazil, Ghana and Indonesia seem to be well along on the kinds of structural transformations that permitted Germany and Japan to escape poverty in the nineteenth century and the exit of most of the rest of East Asia in the twentieth century, according to C. Peter Timmer, an emeritus Harvard Business School professor who has consulted extensively to governments, writing in the Asian Wall Street Journal last month.  But leaders in many other developing countries have preferred short-term palliatives to the kind of long-term investments in macroeconomic stability, openness and research that would make a difference.

What about the effects of climate change? Until recently, global food crises had been relatively rare events, Timmer noted, occurring perhaps three times a century, at intervals of thirty or forty years. The last one to have truly global ramifications occurred in 1972-74, when real prices of rice trebled and real wheat prices doubled. The food crisis of 2007-08, though scary enough, he wrote, was relatively mild by comparison. Now we could be on the verge of a second crisis in five years – one that already may be having profound political consequences.

The fact is that very little is known about the effect of greenhouses gases on weather patterns around the world. But at least climate scientists, meteorologists, ecologists and economists are bringing to bear so-called “integrated assessment models” on the problem. The idea is to marry global circulation models – purely physical depictions of atmosphere and sea surface temperature dynamics – to econometric models, in order to gauge the interplay among climate developments and human responses to them.

After the Mideast turmoil, it’s time to begin adding diplomats, military strategists and political scientists to the mix, at least in the informal assessments that we make. For all the talk about freedom and democracy in the Middle East, it is as true today as when Bertolt Brecht wrote it in The Threepenny Opera that, Erst kommt das Fressen, dann kommt die Moral. (Hunger trumps lofty thoughts.) The impulse to the Arab revolt was, of course, not an either/or proposition.  Both hunger and freedom were involved — and the Internet, too.  But the possibility that shifting weather patterns may have far-reaching social consequences is too easily ignored.  And I doubt that Krauthammer has ever gone without a meal in his life by other than his own choice.

.                                              xxx.

E. Glen Weyl, 25, a much-sought-after junior member of Harvard University’s Society of Fellows, has told friends that he will become an assistant professor next year at the University of Chicago.  A Princeton-trained theorist with a lively interest in the history of thought, Weyl is expected to teach the basic price theory course, with Gary Becker and Kevin Murphy, that Milton Friedman made famous.

Meanwhile, four young University of Chicago faculty members were among seven economists selected last week as Sloan Foundation Research Fellows. They are Veronica Guerrieri, Azeem M. ShaikhJesse M. Shapiro and Amir Sufi.  The other three 2011 research fellows in economics are at Stanford University:  Manuel Amador, Seema Jayachandran and Michael Ostrovsky. (Six of the seven did their graduate work at the Massachusetts Institute of Technology or Harvard University; Shaikh attended Stanford).

The Sloan program has done well over the years in recognizing early-career achievements and future potential, not just in economics but in physics, chemistry, biology, mathematics, computer science and earth sciences as well. Altogether 118 fellowships were awarded, each worth $50,000.

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