Monday, January 16, 2012

Economics Recall FAIL

"The last President of the Soviet Union, Mikhail Gorbachev, is said to have asked British Prime Minister Margaret Thatcher: How do you see to it that people get food? The answer was that she didn't. Prices did that."

The quote is from a book called Basic Economics, a subject I should have considered before I wrote in my last post that low-carb food costs more because it's high quality. If that were true, a pound of nutrient-dense chicken liver would cost a lot more than a sugary (but tastier) piece of pumpkin cheesecake roll at Denver Urban Homesteaders where I buy meat. It doesn't.

As a former freshman economics student, I should have remembered that prices are a function of supply and demand. As economist Thomas Sowell put it,

Prices in a market economy are not simply numbers plucked out of the air. While you may put whatever price you wish on the goods or services that you provide, those prices will become economic realities only if others are willing to pay them...

There's much more to it, of course, but I was wrong to say that better foods are necessarily higher priced. I live in a time and place where low-fat food is a health-nut staple and sugar and starch are almost hourly indulgences. There's a line in the documentary Fathead that you'd have to pay people to eat more vegetables. Full-fat meat and dairy is in the dietary equivalent of Siberia (or Norway, where odd summer weather and a low carb craze have caused a butter shortage and high prices for the stuff). Here in the U.S., if you prefer fat, juicy hamburger to boneless, skinless chicken breasts and plain coffee to confections in a cup, so much the better for you and your wallet. But if you want brownies that are better for you than what you'd make from the ingredients in a $2 mix, I'm afraid you'll have to shell out more money for better ingredients.

Source:
Basic Economics: A Common Sense Guide to the Economy by Thomas Sowell, 4th Ed., 2010.

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