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Sunday, November 27, 2011

Effective demand and famines

There's a three-toed sloth at Carnegie Mellon University who thinks he understands what causes famines.

http://cscs.umich.edu/~crshalizi/weblog/841.html

You may be refusing to take this seriously, objecting that I have loaded the rhetorical deck pretty blatantly --- and I have! (Though not more than is customary in teaching economics.) But this is the core of Amartya Sen's model of famines, which grows from the observation that food is often exported, at a profit, from famine-stricken regions in which people are dying of hunger. This occurs not just in cases like the USSR in the 1930s, but in impeccably capitalist situations, like British India. This happens, as Sen shows, because the hungry, while they have a very great need for food, do not have the money to buy it, or, more precisely, people elsewhere will pay more. It is thus not economically efficient to feed the hungry, so the market starves them to death.

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