Friday, April 1, 2011

IMF Says 10% Increase in Food Prices in Poor Countries Means a 100% in Increase in Riots

IMF economists, Rabah Arezki and Markus Brueckner, are out with a new study. They looked at food prices and political unrest between the years 1970 and 2007, and found data which points to indications that  a 10% increase in international food prices corresponds to an added 0.5 in anti-government protests over the following year in the low-income world — a  100% increase from the annual average.

You have to take empirical studies with a grain of salt, since there are no constants in the realm of human action. Just because something occurred over the last 37 years, it doesn't mean it will occur in year 38. However, empirical studies may point us toward underlying cause and effect relationships we may want to study. Although Arezku and Brueckner studied only food prices, it is hard to imagine that food prices climbed in a vacuum in most of these cases. It was probably full out double digit price inflation.

So although Fed economists may think that there is no problem with inflation and that it quickly finds its way through the entire economy, not hurting anyone, they may want to take a shot at an alternative explanation as to why the masses seem to get pretty upset when prices climb by more than 10%.

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