A LOAF OF BREAD FOR A JUG OF WINE Sen. Percy of Illinois reports that when he flew over his home state the other day on a visit he looked down and saw they were growing corn in the cemeteries. He was kidding, but with farmers looking at $5 wheat, $3.50 corn, and $10 soybeans they certainly should be planting up to the doorways. . . . Whether they realize it or not, consumers benefit from those high prices in ways that are not obvious to them, even if they do recognize that $5 wheat is a compelling incentive to plant up to the doorways and maximize prospects that supply will rise to meet demand. What also needs to be recognized is that we can now buy a barrel of foreign crude oil with less than a bushel of wheat, and a year ago it took almost 2lA bushels to get that barrel. While the U.S. dollar buys 20% less abroad than it did 18 months ago, the value of our chief exports has risen by 200% to 300%. The export of U.S. food and feed grains should be seen from this perspective. The United States is not simply selling farm produce abroad. The nation is engaged in trade, in swapping some of what we have that others need or want for quantities of what they have that we need or want. Should the government now decide to restrict the export of wheat, as so many voices are demanding, the workings of the international marketplace would inevitably deny U.S. consumers that which they would have received in exchange for the wheat we wouldn't sell. Advocates of export restriction will argue that we shouldn't export more than we need for our own purposes. But while this sounds like a reasonable proposition, it simply asks that the government substitute its judgment for the judgment of the marketplace and choose to hold on to a bushel of wheat and do without a barrel of oil, or a bottle of Scotch, or whatever foreigners have that they are willing to trade for a bushel of wheat. Left to itself, the marketplace would certainly not take all of our grain, or even more than we willingly choose to trade. At some point the price would go so high that the foreigners would not be willing to trade what would be necessary to get a bushel of wheat. At what point would an Italian stop bidding for American wheat for his loaf of bread? A bottle of Chianti? A pair of shoes? A new Ferrari? Why should the U.S. government decide that one of its citizens should have a loaf of bread instead of the wine, the shoes, or the sports car? Of course, the housewife and consumer doesn't understand that this is what trade is all about. In fact, we hear from economists every day who don't understand it. They make no connection when the government restricts the export of soybeans and the dollar plunges on the foreign-exchange markets. And they make no connection now, when the United States is the only nation exporting grain and the dollar is sharply rising against other currencies. Unhappily, Washington swarms with people these days who know what Americans want better than the individual Americans themselves know. They're the people who have given us the beef shortage, the gas shortage, the fuel-oil shortage, and all the other shortages. They're now thinking of restricting the export of wheat, which will not only have farmers pulling back from their doorways but also mean shortages of everything we now buy abroad. DISCUSSION 1. Many economic fallacies are related to the failure to observe the secondary effects of an action. a. What would be sacrificed if American farmers were prohibited from selling their wheat abroad? b. What would be sacrificed if the state of Florida prohibited growers from selling oranges to out-of-staters, so Florida consumers could have cheap oranges? c. Do you think that producers should be prohibited from exporting goods out of country and out of state when domestic consumers need the products? Why or why not?
A LOAF OF BREAD FOR A JUG OF WINE
Sen. Percy of Illinois reports that when he flew over his home state the other day on a visit he looked down and saw they were growing corn in the cemeteries. He was kidding, but with farmers looking at $5 wheat, $3.50 corn, and $10 soybeans they certainly should be planting up to the doorways. . . . Whether they realize it or not, consumers benefit from those high prices in ways that are not obvious to them, even if they do recognize that $5 wheat is a compelling incentive to plant up to the doorways and maximize prospects that supply will rise to meet demand. What also needs to be recognized is that we can now buy a barrel of foreign crude oil with less than a bushel of wheat, and a year ago it took almost 2lA bushels to get that barrel. While the U.S. dollar buys 20% less abroad than it did 18 months ago, the value of our chief exports has risen by 200% to 300%. The export of U.S. food and feed grains should be seen from this perspective. The United States is not simply selling farm produce abroad. The nation is engaged in trade, in swapping some of what we have that others need or want for quantities of what they have that we need or want. Should the government now decide to restrict the export of wheat, as so many voices are demanding, the workings of the international marketplace would inevitably deny U.S. consumers that which they would have received in exchange for the wheat we wouldn't sell. Advocates of export restriction will argue that we shouldn't export more than we need for our own purposes. But while this sounds like a reasonable proposition, it simply asks that the government substitute its judgment for the judgment of the marketplace and choose to hold on to a bushel of wheat and do without a barrel of oil, or a bottle of Scotch, or whatever foreigners have that they are willing to trade for a bushel of wheat. Left to itself, the marketplace would certainly not take all of our grain, or even more than we willingly choose to trade. At some point the price would go so high that the foreigners would not be willing to trade what would be necessary to get a bushel of wheat. At what point would an Italian stop bidding for American wheat for his loaf of bread? A bottle of Chianti? A pair of shoes? A new Ferrari? Why should the U.S. government decide that one of its citizens should have a loaf of bread instead of the wine, the shoes, or the sports car? Of course, the housewife and consumer doesn't understand that this is what trade is all about. In fact, we hear from economists every day who don't understand it. They make no connection when the government restricts the export of soybeans and the dollar plunges on the foreign-exchange markets. And they make no connection now, when the United States is the only nation exporting grain and the dollar is sharply rising against other currencies. Unhappily, Washington swarms with people these days who know what Americans want better than the individual Americans themselves know. They're the people who have given us the beef shortage, the gas shortage, the fuel-oil shortage, and all the other shortages. They're now thinking of restricting the export of wheat, which will not only have farmers pulling back from their doorways but also mean shortages of everything we now buy abroad.
DISCUSSION
1. Many economic fallacies are related to the failure to observe the secondary effects of an action.
a. What would be sacrificed if American farmers were prohibited from selling their wheat abroad?
b. What would be sacrificed if the state of Florida prohibited growers from selling oranges to out-of-staters, so Florida consumers could have cheap oranges?
c. Do you think that producers should be prohibited from exporting goods out of country and out of state when domestic consumers need the products? Why or why not?
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