richh.com | a personal + political blog by rich halvorson: Economics

In the news this week is the worsening hunger crisis in Haiti -- attributed to rising food prices. But why are food prices rising? ... To read most reports on the matter, the prices of food seem to be a mystery. While there are current trends that are causing these specific fluctuations, longer-term policies are the real problem.

The truth is that food prices could be much, much lower than they are in Haiti and around the world, except for Farm Bills and agriculture policies (especially in the US and EU) that protect Big Farming companies, and pay others not to farm at all. The bills also put a limit on food imports from other regions.

These policies not only keep food prices higher than they need to be in the US and EU, but they force global food prices up higher than they would be, and therefore are responsible for a significant portion of the malnutrition in nations like Haiti. With a global farm policy more friendly to trade, prices would fall all around and make food more available to the global poor as well as the US and European working class. Why do these policies remain then? ... Because they have strong lobbies who push (and payoff) legislators to keep them in place. ... Until these legal barriers are removed, the world -- and especially the poorest of our brothers and sisters -- will needlessly suffer higher food prices.

For many in Haiti and other poor nations, those prices aren't just inconvenient, they are fatal hunger pangs caused by the criminal negligence of first-world legislators.

In sports, siblings, and life in general, the "Who's your daddy?" principle is very often useful. After getting someone to scream 'uncle' -- whether a feisty little brother or a losing team at the Boise Badminton Blowout -- they realize who is definitively superior.
We can gloat with pride, "Who's your daddy?"

This principle applies to social systems (business, politics, economics) through the 'uncle' power of the almighty dollar. Government programs and agencies, just as much as businesses and non-profits, live and die by the dollar -- by how much 'income' they have each year. There is one major difference, however. Who do you think controls the purse strings to government programs and agencies? Unlike any other aspect of a free society, they are not accountable to the people they serve -- government bureaucracy is only accountable to higher levels of bureaucracy.

One great example comes from my time spent as a public school teacher. Our high school received more money for every special needs child in our school. Now, that sounds like a great policy, right? Schools need more money to help give the best education to special needs children. However, it creates a twisted incentive -- the school would try to label as many children as possible 'special needs' just to get an extra coupla bucks from Uncle Sam. With this system in place, a counselor is telling all my students they're dysfunctional, whether they are or not -- which can have an extremely detrimental effect on a child's future.

This type of incentive doesn't serve the school, the students or the parents ultimately. It's a broken system. Why? Because the school is one piece of a bureaucracy that's accountable to a higher level of bureaucracy. Since higher-ups in the system control the flow of cash, the school is oriented to serve them and their needs and demands -- rather than the true needs of students, parents and families.

What's the solution? The control and incentive needs to rest squarely with the people the school is aimed to serve. If they are supposed to serve students and parents, then parents should control the flow of where dollars are going. Broken schools shouldn't be able to prop themselves up on dollars sucked from bureaucracies, while trapping children inside.

They must be 100% accountable to the students they serve. Students and parents choose where to send their children, and money follows. This would reduce the nearly 75% spent on administrative overhead, and push those dollars into textbooks, curricula and teacher salaries.

On a broader social level, we need to make sure that the "Who's your daddy?" principle points in the right direction -- that it creates incentives to serve the people that need to be served, whether in health care, education, business, politics, etc. Properly structured incentives are the key to broadly beneficial systems. Any time you look at a broken social system, ask yourself where the money's coming from - "Who's their daddy?"