ikonomos

2009issue

Whole run of a year gone by

We won’t leave tough times without a way to

be happy

Ateneo Economics Association

F RE E

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ikonomos is a year-long select collection of the Ateneo Economics Association’s work and research which captures and highlights the different economic issues that have transpired during the course of S.Y. 2008-2009. The very essence of this magazine encapsulates AEA’s thrust of initiating socio-economic awareness, leading to the development of a community with a firm understanding of pertinent economic issues. The sheer breadth of topics covered will provide you with a deeper understanding of how we, as student-economists, see society from our field’s perspective.

This edition of Oikonomos brings us into a closer look at how economics is practiced to scrutinize and address the different problems that our country is facing, proving once and for all that economics can go beyond theory.

Mai ValeraPresidentAteneo Economics Association

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2009STAFF

Editor-in-ChiefJeanne Naguit

Assistant EditorChuck Marin

Managing EditorGeorgette Uy

Design EditorKevin Baranda

WritersGeminn Apostol

Carl AranillaBianca Baluyut

Nicola RoaMarjorie Santillan

Betina SantosAudris Umel

Francis Viernes

Photo Contributors and Credits

Christopher Lee

From sxc.hu:Kym McLeod(Egilshay)

Neil Gould(ngould)ilker(ilco)

From flickr.comAlex Z. Germino

Cover Photo used from Neil Gould

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SEAOIL Prepaid Gas Card

Rice Crisis Analysis

Philippine Minimum Wage

Maximizing Happiness

FOREX study 1970-2007

Interview with Dr. Rosalina Tan

The Perfect Storm

2009 issueLOCAL

FEATURES

WORLD

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A recent news ar-ticle from the Inquirer

dated June 3, 2008, pre-dicted that the price of gasoline might reach Php 65 per liter. To protect the consumers from uncertain and abrupt price increases, SEAOIL Philippines, one of the growing Oil Companies in the Philippines, introduced

the SEAOIL Price Lock Prepaid Gasoline Card, which can be bought at Php 1,070 for20 liters.

Here are some of the mechanics of this offer:• The card ensures the consumers a fixed price of Php 53.50 per liter. In the event that the price of gasoline becomes lower than Php 53.50, the gas company will issue a refund.

• The card can be used for one transaction only. Once the prepaid card is availed, any unused portion will automatically be forfeited.

• This eight-week promo can only be availed in selected gas stations.

While this news seems to offer good news for consumers, one should not forget that the basic profit-maximizing assumptions still hold for firms such as this gasoline company. But it must be noted that economists do not mean

Department of Academics, Research and Development of the Ateneo Economics Association

SEAOIL Prepaid Gas Card and Consumer Welfare

© Kym Macleod (sxc.hu)

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to attach any negative connotations to the profit-maximizing nature of firms. For one thing, the best interest of the firms does not always mean the worst-case scenario for the con-sumers, like the SEAOIL Philippines case, for example. More importantly,

profit-maximizing is the logical thing to do for firms if they actually wish to be of any help to Filipinos because if they adopt wrong business strategies, then there might not even be a chance for them to stay in the market long enough to effect positive change.

In our opinion, SEAOIL is making use of the price discrimination strat-egy. In Economics, firms are using this strategy in order to extract more consumer surplus. In this case, which is an example of second-degree (quantity-based) discrimination, firms also aim to gather information on the buyer’s preferences of certain goods to others. Allowing those who are willing to buy a larger quantity (20 liters) with a smaller average cost (Php. 53.50) is clearly an ex-ample of quantity-based discrimina-tion.

To further explain on this pricing strategy, we should look at how the firms deal with their expenses. A firm

would be inclined to go for volume rather than high prices if the revenue would cover the variable cost, because most of the firms which are able to price discrimi-nate usually have high fixed-costs such as machines, large vehicles

and other capital.

SEAOIL PHILIPPINES is clearly practicing price discrimination, given these 4 assumptions:

• First, gasoline is being sold at two different prices, the normal price (Php. 58) and the lower price (Php. 53.50) when you avail of the offer.

• Second, in order for price discrimination and extraction of consumer surplus to be much more effective, the firm should be able to prevent re-selling of the lower priced gasoline. For example, a consumer might buy 20 gallons of gasoline at a price of Php. 53.50 per liter and then sell it at a much higher price say, Php. 55.00. Since Php. 55 is still much lower than the current prevailing price of Php. 58, buyers would certainly prefer it to the original price. The gasoline once placed inside the gas tank cannot be re-sold any-

In our opinion, SEAOIL is making use of the price discrimination strategy.

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more; thus, preventing any form of secondary transactions and ar-bitrages, ensuring the firm greater ability to price discriminate.

• Third, through this offer, the firm is able to classify consumers ac-cording to their willingness to pay. This means that the firm is able to segment the market in two parts according to price sensitivity of consumers- the ones who are will-ing to go to all the trouble for their income protection and the ones who are not.

• Lastly, since the market for oil is an oligopoly, we recognize that the participat-ing firms have some kind of monopolistic power to employ such strategies. If the market for oil were perfectly competitive, oil firms would not have any market power to price discriminate be-cause firms in competitive markets are price takers.

We assume that the reason why a firm calls on such strategies is because it is more profitable than not doing so. In order to explain this further, one should always bear in mind the profit-maximizing

perspective of firms. The first part of the promo’s mechanics is that the price-fixed prepaid gasoline card should only be used in a single transaction indi-cating instant 20 liters per transac-tion. This is a necessary condition for quantity price discrimination. The firm encourages the consumers to buy a considerably large amount of gasoline given the incentives of a lower price (average cost). If the buyer had the option of dividing the 20 liters in smaller amounts, then the gasoline company faces the certainty of loss. There is no incentive for firms

here for a consumer gets the upper hand in both price and quantity. Obviously, the firm would want to sell more quantity as long as it covers the marginal cost of producing it for it would want to dis-tribute its fixed costs over many units.

We can also see that through this offer, the firm is able to gather information about how much the consumers are willing to buy and the average price level incurring the biggest quantity demanded. Usually, this is done through self-selection strategies, wherein consumers are free to choose the quantity they prefer, the higher the quantity the greater the discount given. We as-

We assume that the reason why a firm calls on such strategies is because it is more profitable than not doing so. In order to explain this further, one should always bear in mind the profit-maximizing perspective of firms.

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sume that the firm is trying to gather information on how price-sensitive Fili-pinos are to gasoline price hikes and rollbacks through the number of those who will avail the offer. This might also be the reason why the offer only runs up to eight weeks; the firm hopes to see the success of the promo in its initial period in order to decide its profitability.

As you can see, there really is more than just one side to the coin. Apart from our view, there exists the producers’ view of profitability seemingly in favor of the consumer’s welfare.

Works Cited:

Abigail L. Ho, R. D. (2008, June 3). P65/liter gasoline price looms. Retrieved June 14, 2008, from Inquirer.net: http://newsinfo.inquirer.net/inquirerheadlines/nation/view/20080603-140361/P65liter-gasoline-price-looms

Phlips, L. (1983). The economics of price discrimination. New York: Press Syndicate of the University of Cambridge.

SEAOIL PHILIPPINES. (2008, June 10). Protect yourself from gasoline price increases. Retrieved June 14, 2008, from SEAOIL PHILIPPINES: http://www.seaoil.com.ph/news/2008_PriceLock.html

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THE SIGNIFICANCE OF RICE IN THE PHILIPPINE SETTING

Currently, the world is experiencing a global food crisis. There has been an increase in demand for rice all over the world especially in

China, Africa, the Middle East and India. To offset the increase in price, the top exporting countries of rice have reduced their exports significantly to keep domestic prices low and to counter inflation. The Philippines, being the

world’s top importer of rice, is directly affected by the global crisis. Every year, the Philip-

pines imports around 15% of its rice supply (equivalent to 2.2 Million tons of rice), most of

which comes from Vietnam and Thailand. But why does an agri-cultural nation like the Philippines import rice?

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Department of Academics, Research and Development of the Ateneo Economics Association

The Philippines consumes about 33,000 tons of rice daily. Approximately, 80% of the total population spends almost 1/4 of their income on rice alone. This shows that a slight increase in the price of this commodity will greatly affect the standard of living for most Filipinos.

© Christopher Lee

ANALYZING THE RICE CRISIS ISSUE IN THE PHILIPPINES

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THE IMPACT OF RICE CRISIS

After analyzing the probable causes of the current rice crisis, it might be worthwhile to ask what implications this crisis has on both the consumers and producers. For the Filipino consumers, the implica-tion is quite serious. As mentioned earlier, about 68 million Filipinos expend 24% of their income on rice alone. This huge proportion of rice in the Filipinos’ income makes us incredibly worse off with even a slight increase in the price of rice. For Filipinos spending a huge chunk of their income on rice, a lower standard of living comes hand in hand with large price increases, given their decreased purchasing power.

THE REASONS BEHIND RICE CRISIS

In an article entitled “Food Security and Rice?“, Dr. Onofre Corpuz provides some background on shortages and crises regarding rice. Based on this article, the Philippines has been importing rice since the Spanish era. This article by Dr. Cruz seemingly aims to cor-rect our notion that the Philippines is a top exporter of rice. Also, the reasons for the rice crisis before

are more or less similar to the roots of the crisis today. He attributes the recurrent rice shortages to the fol-lowing: feudal system, cash crops being favored over rice for exports, and primitive technology. In ad-dition, he blames the practice of idleness during the Spanish era.

The Philippines has intrinsic dis-advantages in the production of rice. First, the country lacks water sources for its cultivation. Unlike our neighboring countries, their agricultural lands are situated near flowing bodies of water. Further-more, the Philippine agricultural lands are scattered all over the country on different islands. This means that transportation, cultiva-tion, maintenance, and production are quite expensive because econ-omies of scale hardly arises from a disjointed production process.Another reason for the rice crisis is government negligence. The government could improve market outcomes. However, with wrong intervention and mishandling, the matter could get even worse. This negligence is evident in the high-cost of domestic rice produc-tion compared to our neighboring countries. Our country has more or less 4 million hectares utilized for rice production. We cultivate about 3 metric tons of rice per hectare. According to the PHILRICE, this figure is insignificant compared to the country’s production poten-

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tial, which is 12 metric tons per hectare.

A study done in 1999 by the International Rice Research Insti-tute (IRRI) indicates that the cost of rice production in the Philip-pines is almost 50% more than that of our neighboring exporting countries’, Thailand and Vietnam.

The annual cost of producing rice for Vietnam and Thailand is $683 per hectare and $636 per hectare, respectively. While in the Philippines, cost of production is $888 per hectare. The principle of comparative advantage mani-fests itself clearly in this data. We could conclude that if production of rice is cheaper in neighboring countries, then importation of rice is, indeed, an economically wise decision. However, an implication of such dependence on rice im-portation is that it makes us very susceptible to global crises like the one we are currently experienc-ing. The reason why we are still relatively better of than other af-fected countries is that most of our

daily consumption is being produced in the country. Perhaps, the most feasible solution that the government can pursue is the enhancement of the produc-tion process, which can significantly decrease the cost of production.

Unfortunately, the government has failed to lower the cost of rice produc-tion. In addition to this failure on the

part of the government, the NFA has not been able to procure large amounts of rice. The primary function of the NFA is to ensure food security and stable rice prices and supply through diverse strategies such as the procure-ment of rice supplies, thereby gaining significant influence over the market price. From the peak of its procurement in 1979, which is 10% of the total rice supply, it has now dropped to less than 5% of the total rice supply. A number of studies have shown that in order for the NFA to effectively influence the market price of rice, it must procure 15% more of the total rice supply.

Another government failure is the ill-action of subsidizing bio-fuel crops. The subsidized bio-fuel program of most

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Our country has more or less 4 million hectares utilized for rice production. We cultivate about 3 metric tons of rice per hectare. According to the PHILRICE, this figure is insignificant compared to the country’s production potential, which is 12 metric tons per hectare.

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countries in the world, including the Philippines, has further reduced the agricultural land that should be allotted for wheat, rice, and other agricultural crops.

To add to the long list of govern-ment blunders is its failure to impede the conversion of arable land to industrial centers, parks and offices. Just recently before the rice crisis hit the region, there was this problem regarding the Sumilao farmers’ ag-ricultural land being converted into an industrial center by a private cor-poration. Even though the economic gains we get from these sectors are substantial, the arable lands suit-able for agriculture is very scarce. Moreover, there are idle lands in the country that are not being devel-oped.

Aside from the aforementioned, there are factors that contribute to the current rice crisis which are completely out of the government’s discretion. First among these are the skyrocketing crude oil prices in the world market. One notable consequence of this is that it makes fertilizers and other input materials in the production of rice even more expensive. It also contributes to the increase in the price of rice since transportation is a cost incurred by suppliers.

Of all the rice shortage causes that

are beyond the control of the Philip-pine government, overpopulation is probably the most detrimental. For the longest time, it has been a known fact that the country’s capac-ity to produce food has struggled to cope with its population growth rate. The average growth rate during the years 1990-2000 was 2.34% for the population while the increase in rice yield, was around 1.6%. Clearly, if such trends continue, it would be hard for the Philippines to lessen its dependence on rice imports because its production of rice grows at a rate much lower than the rate at which its population is growing. Surpris-ingly, the Philippines does not make it on the United Nations Food and Agriculture Organizations’ list of 36 countries experiencing rice shortage.

Does this mean that we are not suf-fering the so-called rice shortage? Well, relative to the said countries included in the UNFAO list, we are not facing a rice shortage, at least not one as severe, and at least, not as of the moment. This is because 85% of the country’s rice demand is being produced locally. The other 15%, which is about 2.2 million tons of rice, has already been secured, and is to be imported from Vietnam. Therefore, no rice shortage threatens the country. But this is only certain for the short-term, and our country might not be as fortunate in the years to come.

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The media, on the other hand, has blown the situation out of proportion, therefore pushing consumers to panic-buy, and producers to hoard their sup-plies. Thus, the interaction of both the increase in demand by the consumers and the decrease in supply caused by the hoarding of suppliers raise the market price of rice disproportionately. This is why the price of rice is very high even if there is no actual short-age.

But why are there long lines in NFA stores if there isn’t any shortage? Aren’t long lines indicative of such? There are long lines in NFA stores because they sell subsidized rice. If a shortage really occurs, one thing the government could do is flood the market with imported rice. Naturally, the price of rice should go down since supply is augmented. However, this is not what is happening. The government imports rice, which is what they have been doing ever since, and sells it at a much lower price. Therefore, the main problem that the Philippines is really facing is the abrupt price increase in rice, not a shortage of supply. Thus, there is no point for either the consumers or the producers to deviate from their usual economic activities.

Works Cited:

Arze Glipo, V. V. (2002, April 17). Trade Liberalization in the Philippine Rice Sector.Retrieved April 5, 2008, from http://www.irdfpjil.org/docs/04.pdf

Asia-Pacific. (2008, May 06). Philippine CPI hits 3-year-high in April.Retrieved May 07, 2008, from China Economic.net: http://en.ce.cn/World/Asia-Pacific/200805/06/t20080506_15373347.shtml

Demographic Statistics.(2000, May). Retrieved May 05, 2008, from the Phillippines: http://www.philippines.hvu.nl/facts2.htm

Felix, R. (2008, March 19). Philippines to increase rice imports as it races to beat rising prices.Retrieved April 7, 2008, from Forbes.com: http://www.forbes.com/mar-

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The media, on the other hand, has blown the situation out of proportion, therefore pushing consumers to panic-buy, and producers to hoard their supplies.

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Head, J. (2008, April 11). Hoarders blamed for Philippine rice crisis.Retrieved April 15, 2008, from BBC News: http://news.bbc.co.uk/2/hi/business/7342161.stm

Mccartan, B. (2008, March 31). White Out: Asia’s Rice Price Crisis.Retrieved April 7, 2008, from Asia Sentinel: http://www.asiasentinel.com/index.php?option=com_content&task=view&id=1127&Itemid=32

Montero, D. (2008, May 01). Roots of the rice shortage.Retrieved May 02, 2008, from gulfnews.com: http://www.gulfnews.com/business/Business_Feature/10209682.html

Ordoñez, E. (2008, May 02). The Rice Problem.Retrieved May 07, 2008, from Inquirer.net: http://www.inquirer.net/specialfeatures/riceproblem/view.php?db=1&article=20080502-134046

Palatino, M. (2008, April 2). Why a rice shortage in the Philippines?Retrieved April 4, 2008, from UPI Asia Online: http://www.upiasiaonline.com/Economics/2008/04/02/why_a_rice_shortage_in_the_philippines/6495/

Percentage Distribution of Total Family Expenditure by Major Expenditure Group, urban-Rural.(n.d.). Retrieved from http://www.census.gov.ph/data/sectordata/1997/1e97f10.txt

Percentage Distribution of Total Family Expenditures by Major Expenditure Group: 2000 and 2003.(2007, September 14). Retrieved May 08, 2008, from Philippine Na-tional Statistics Office: http://www.census.gov.ph/data/sectordata/2003/ie03fr13.htm

Rice Around the World.(n.d.). Retrieved May 05, 2008, from International Rice Re-search Institute: http://www.irri.org/science/ricestat/index.asp

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Making Ends Meet: The Story of a Typical Pinoy

After every smile and “Salamat po!” he offers as each passenger hands in his or her payment, 43-year-old taxi driver Mang Rubio sighs heavily at

the thought of soaring prices of food, clothing, school tuition and gasoline. A father of nine children, he and his unemployed wife continually struggle to fit the basic necessities into Mang Rubio’s daily earnings. On a normal day at 6 o’ clock in the morning, he starts to drive around the metropolis and find passenger-customers from Cubao to España, Taft to Makati and Ortigas to Pasay. He usually goes home tired and moody at around 11 in the evening, after his submission of the stipulated boundary to the original owner of the cab unit. He is frequently left with a measly Php 900 wage, which vanishes immediately considering he spends solely for the gasoline and five of his offspring go to school. Hence, he is sometimes

© ilker (sxc.hu)

Geminn ApostolCarl AranillaBianca Baluyut

The Philippine Minimum Wage:A Positive and Normative Analysis

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forced to work 24 hours a day to compensate for the family’s lack of funds.

Only, things had gone worse – such fatigue brought by body aches and financial stress risked his health, which only prevented him to perform normally as a cab driver. This only induced him to earn approximately Php 300 – Php 500 less than usual cash

inflow, thus his eldest son and daughter were compelled to quit school in order to cut back costs. How can Mang Rubio get out from this cruel cycle of fate when: 1) he cannot negotiate well with his employer to lessen the remit-tance of specified boundary per day; 2) he has no other skills other than driving since he himself dropped out of high school due to the same circumstance: poverty?

This is the story of a typical Pinoy worker, who tries to subsist below the minimum wage.

Minimum Wage Defined In economic terms, a minimum wage basically refers to the “rate of pay fixed either by a collective bargain-ing agreement or by governmental enactment as the lowest wage payable to specified categories of employees.” The minimum wage can either be applied nationwide, or in some cases, in just different region or zones of a country. However,

there are still some exceptions with regard to where a minimum wage is applied. In some industries, estab-lishing a minimum wage is legally considered inapplicable. According to Rosa Linda Tidalgo, “In general, all workers who are non-wage earners, i.e., paid by piece, com-mission, boundary systems, and other arrangements are exempted.” Also small enterprises are exempted from the minimum wage as well as distressed industries or losing enterprises.

Beyond the economic definition however, there yet exists a moral and social definition of a minimum wage. In a way, with the words of

However, there are still some exceptions with regard to where a minimum wage is applied. In some industries, establishing a minimum wage is legally considered inapplicable.

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Mr. Joseph Francia, economist and professor, the minimum wage can be considered as a norm-- a social standard on what a person should receive to not just live, but to survive and live with dignity and well-being (more on this in succeeding parts).

Minimum Wage rates in the Philippines

Shown below is the newly assigned minimum wage in the Philippines given by the Department of Labor and Employment:

Region WO No. Date of Effectivity

Non-Agriculture

Agriculture

Plantation Non-Plantation

NCR WO 14/June 14, 2008

P 345.00 - 382.00

P 345.00 P 345.00

CAR WO 13/June 16, 2008

243.00 - 260.00

226.00 - 242.00

226.00 - 242.00

I WO 13/June 22, 2008

220.00 - 240.00

220.00 195.00

II WO 13/June 15, 2008

227.00 - 235.00

215.00 - 223.00

215.00 - 223.00

III WO 14/June 16, 2008

251.00 - 302.00

236.00 - 272.00

216.00 - 256.00

IV-A WO 13/June 01, 2008

236.00 - 320.00

216.00 - 295.00

196.00 - 275.00

IV-B WO 04/June 19, 2008

240.00 - 252.00

198.00 - 207.00

178.00 - 187.00

V WO 13/ July 1, 2008

196.00 - 239.00

207.00 - 217.00

187.00 - 197.00

VI WO 16/ July 6,2008

240.00 - 250.00

218.00 208.00

VII WO14/June 16, 2008

222.00 - 267.00

202.00 - 249.00

202.00 - 249.00

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VIII WO 15/June16, 2008

238.00 219.00 219.00

IX WO 15/ July 3, 2008

240.00 215.00 195.00

X WO 14/June 1, 2008

241.00 - 256.00

229.00 - 244.00

229.00 - 244.00

XI WO 15/June 16, 2008

265.00 255.00 255.00

XII WO 15/June 16, 2008

245.00 225.00 220.00

XIII WO 09/June 20, 2008

233.00 223.00 203.00

ARMM WO 11/ 15 days after publication

210.00 210.00 210.00

If you notice, the minimum wage varies from region to region. The ratio-nale to why the minimum wage rates differ in every region is because each region has different costs of living. It is evident from the date table above that Manila has higher cost of living than provinces which results to higher mini-mum wage rate in that area. It is assumed that urban areas have a higher cost of living than non-urban areas do.

Effects of Minimum Wage

The minimum wage, acting as a price floor, may not elicit problems in a free-labor market as the “wage adjusts to balance supply and demand”. However, the implementation of a binding minimum wage (the price floor is located above the equilibrium) as in the secondary sector market for unskilled workers, is predicted to

result into a surplus of workers, or unemployment.

The number of workers supplied would exceed the number of people in search for jobs. This is due to the fact that the less skilled and less experienced people would be excluded from the labor force as employers prefer hiring top, profi-cient performers and thereby resort to terminating the least competent

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A Normative Analysis of the Minimum Wage

It seems, from the aforementioned discussion that, economically, the cons outweigh the pros of implementing a minimum wage. Realizing the grave effects of the implementation of a minimum wage, why not abolish the minimum wage then? Doing such would not only maximize consumer and producer surplus, unemployment will also be prevented if not minimized, and the labor market will be able to freely determine how much workers will be needed and how much they will be paid.

After all, if we are to speak purely in economic terms, abolishing the minimum wage would actu-ally be good for the economy. But, taking all this into account, how come no government, including the Philippines, has done so? In the face of unem-ployment and deadweight losses, why can’t the minimum wage be abolished?

There are two fundamental setbacks in the pro-posal to let the labor market determine the amount of wage to be given to workers.First, this presupposes that the law of supply and demand in the labor market would determine the ideal price of labor. But how could the law of supply and demand work for the Filipino working class when around 30 percent of the labor force is either out of work or underem-ployed? The employment situation is so bad that it forced 10 percent of the population to seek gainful employment abroad.

Even in advanced capitalist countries, the law of supply and demand in the labor market is already skewed because labor-intensive production process-es are already spread out in capital-strapped Third World countries, which are desperately competing for foreign investments. How could it then work in backward, when the agricultural, and pre-industrial economies such as the Philippines where the unemployed and underemployed workers and landless peasants are in abundance?Second, the imposition of a minimum wage is not about the need to adjust

workers. This has become the chief incrimination against the existing Mini-mum Wage Law: it sets the grounds for unemployment on a national scale.

For production and commerce to continue, theworkers should have food, clothing, a roof above their heads, and should be able to bear and raise children.

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the price of labor, it is about survival. That is what wages are all about in the first place- to ac-count for our survival, or at least half-alive or close to that, if we are to consider the present day Philippine minimum wage. Just recently, in a study conducted by the Partido ng mga Mangagawa, it was found that a Filipino family of six living in Metro Manila needs P933 a day to survive, more than one and a half times, a terrible

P571 or 160% of the present minimum wage.

PM also maintained that a more thorough survey may reveal that the actual cost of living is higher than P933 since its study did not provide for savings and social se-curity, which in the NWPC basket of goods and services constitutes 10% of the cost of living. Further-more, PM’s study did not include items such as leisure and recre-ation, and the family budget for health excluded medical expenses.

“Even if both parents work—which is the buy one, take one policy of the government—then their com-bined income will not be enough

to feed the entire family,” Renato Magtubo, Partido ng Manggagawa chair said. “Also since we should not impose the burden of household chores and child rearing to the female parent, then the basket of goods should provide for a house-help. That is not anymore a luxury especially in the light of the insis-tence of the state that both parents must work instead of having just a single breadwinner,” Magtubo argued.

In

the end, we realize that we do not just give any wage. It should be, more than anything else, based on the “living wage” because it is sup-posed to provide for the subsistence of the worker and his or her family. For production and commerce to continue, the workers should have food, clothing, a roof above their heads, and should be able to bear and raise children. And these are supposed to be provided for by his/her wages. If the present day minimum wage falls short to that, how much more can we expect without a minimum wage?

Thus, providing the workers with decent wages is not even about justice, it is about keeping a virtual

In the end, we realize that we do not just give any wage. It should be, more than anything else, based on the “living wage” because it is supposed to provide for the subsistence of the worker and his or her family.

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slave alive to be able to work an-other day. And the irony of it all is that it is slowly killing the very source of its profits and capital: the worker. In the process, it is also constricting the market for its products because as it increasingly depresses wages, it also causes the purchasing power of the majority of the people to fall.

How then are we to reconcile the boon and the bane that is the minimum wage?

According to World Bank Hu-man Development Economics researcher Jan Rutkowski in

his study entitled “The Mini-mum Wage: Curse or Cure?”, minimum wage law should be thought as a functional tool in distributing wages fairly, rather than treating this as a instrument to reduce poverty as it is not well targeted at the poor. He added that there is evidence that attain-ing the “right” minimum wage level can be achieved, although this endeavor depends on “coun-

try-specific factors such as labor market conditions and variation in worker productivity across regions, industries, occupations, etc.”

With this premise, Rutkowski now suggests that instead of abolishing the minimum wage completely, why not try manipulating the labor supply and demand curves instead, through the implementation of policies and reinforcements, to equate the minimum wage with the equilibrium wage and ease it off its negative effects such as unemploy-ment.

One policy aimed at doing such is population policy. A well imposed population policy would ascertain that less and less infants will be born

to underprivileged families that rear up children who end up to be un-educated, unskilled and underpaid workers- the very participants of the aforementioned secondary sector market for unskilled workers.

Another policy that would allevi-ate the minimum wage of its grave repercussions is education policy. While population policies decrease

In the end, we also realize that paying the right wages is not something we do for our workers alone, it is something for ourselves as well

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the labor supply through direct labor supply reduction, educa-tion policies on the other hand are able to shift the labor sup-ply curve to make the equilib-rium price reach the minimum wage through market transfer of labor supply. Education poli-cies, particularly those geared on formal education, provides skills and specializations, thereby producing skilled workers for the primary sector market where the minimum wage is not binding and has no effect. An efficient education policy would ascer-tain that there would be a lower supply of unskilled workers in the secondary market for unskilled workers as compensated by a higher supply of skilled workers in the primary sector that education policies and programs produce.

Outside the Book: What We Can Do

Moving the supply and the demand curve seems like a big feat for an individual to do, not to mention, doing such would also require a great amount of effort and time. In the short run, what then can we do, as individuals, citizens, and more importantly, as men and women for others?

We can start by being just with

how much we pay our workers, from the highest professional to the ordinary maid. Everybody deserves a life of dignity and has a right to comfort, happiness and well being. A worker is not just a mindless ma-chine; a worker is also a human be-ing. In the end, we also realize that paying the right wages is not some-thing we do for our workers alone, it is something for ourselves as well, for without them, who would drive our cars, wash our clothes, type our reports and sort our files.

Secondly, and as students, we can contribute very much simply by staying in school and making the most out of it. The labor market is already flooded with underpaid laborers, and so many are already suffering because of such that the economy cannot afford another student-out of school. The invis-ible hand is something we cannot always trust our well-being with. At the end of it all, it is really the workings of a thousand individual and human hands that bring forth wonders even greater than what the supply and demand curves can create.

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Even without studying Econom-ics, people do make choices

that leave them at their happiest. In everyday life people naturally make decisions that would satisfy them the most given resource and budget limitations.

Gift-giving

In giving gifts we normally maxi-mize our happiness depending on the happiness of the person we’re getting the gift for and our budget-limitations. We orient our thinking with the receiver’s personal likes and interests. If he or she would be equally happy between two different objects with differ-ent prices, then you’re better off buying the cheaper one. Like for last year’s Valentine’s for example, I had two options: an expensive rose for my girlfriend worth P150

Some economists assume that people make choices that would maximize their utility. Utility is an abstract word used in Economics, usually to denote one’s degree of satisfaction. In other words, utility can be likened to one’s happiness. But is there really a basis for assuming that people maximize their happiness given the choices they make?

by Francis Viernes

MAXIMIZING YOUR HAPPINESS

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0and a cheap one for P50.

Knowing for a fact that my girl-friend loves anything I give her, I opted for the cheaper rose. However, this doesn’t mean that I love her any less. In fact, choosing the cheaper one allowed me to buy her more roses and even left me with enough money to take her out for dinner. And besides, if your girlfriend really loved you, then she wouldn’t care how much you spent on her. At the end of the day, it’s always the thought that counts. But if your girlfriend’s some kind of a Scrooge, then that’s a totally different story.

Time Management

Perhaps the scarcest of all re-sources is time. It can neither be replaced nor replicated What’s worse is that the best use of one’s time cannot be dictated by some sort of universal standards; it all comes down to one’s own judg-ment of how best to spend one’s time. After all, we are talking about maximizing one’s happiness.

Now I don’t mean to sound like a party-pooping parent, but as an economic student I should warn you about the “law of diminishing marginal returns”.

Basically, what this means is, for every additional hour, or perhaps a shorter unit of time, that you spend doing something, you reap less and less satisfaction. It may sound lame but this principle holds the key to maximizing one’s happiness. And I have my own personal experience to back this up. There was this one time when I studied for five hours straight for an exam. The first two to three hours

were great and it truly felt like time well spent. But the last two hours of studying did not help as much as the first three did, a classic case of diminishing returns. Perhaps I would have been happier spending the last two hours doing something else, like chatting with my friends, watching a movie, or even singing in a karaoke bar.

Even if we turned the situation around, and instead of studying, I spent five hours partying, this eco-nomic theory would still hold true.

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Simply put, the basis of rationality is one’s happiness and if we are maximizing our happiness, then we are being rational.

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Let’s say partying would make me happier than high grades would. Now although this is true, come the fourth and fifth hour of party-ing, I’d probably have run out of stories to tell and met everyone at the party. In this case, I might have been better off spending the last few hours studying for that major exam. Moral of the story: a well-budgeted time, depending of course on one’s personal opinion leads to a happier you.

...Maximizing(cont’d)

The Rationale

Even the most personal sorts of activities involve maximization of one’s happiness. When it comes to making friends, or choosing a lover, or even marrying someone, one usually chooses what would leave oneself at his or her happi-est. In economics, we call these choices resulting in maximized happiness rational choices. Simply put, the basis of rationality is one’s happiness and if we are maximizing our happi-ness, then we are being rational.

Increasing One’s Chance of Maximizing Satisfaction

As you might have noticed in the previous examples, the most ideal choice is usually the one that is based on the information at hand. I ended up buying the cheaper roses based on my knowledge that a cheaper kind is available and that my girlfriend will appreciate my gift regardless of its price.

As for my experience with the five-hour study session, I was able to recognize afterwards that it would have been best if I spent the last two hours doing something else because I realized that during that time, my brain stopped functioning properly and I was no longer increasing my knowledge.

Informed choices usually translate to a maximized choice and it usually leads a person to greater satisfac-tion. But even without enough eco-nomic background, a person that has enough information is bound to make the right decision, and ultimately at-tain optimum satisfaction.

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This study examines the foreign exchange competitiveness and

export performance of ten East Asian economies – China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Philippines, Singapore, Thailand, and Vietnam – from 1970 to 2007. Using secondary country-level data from the World Bank and International Monetary Fund, the re-sults of the research generally confirm the hypothesis that depreciated real exchange rates are positively corre-lated to export performance.

Analysis shows that real exchange rate (RER) targeting was used as a policy tool particularly, though not solely, aimed at maintaining currency stability and enhancing external competitiveness to boost export per-formance. It was used also to address current account deficits and inflation which oftentimes resulted from high export growth. Apart from a policy of RER targeting, however, several other factors, such as domestic and external shocks and the effective peg of the East Asian currencies to the US

FOREIGN EXCHANGE COMPETITIVENESS AND EXPORT PERFORMANCE OF EAST ASIAN ECONOMIES

1970-2007

© Alex Z. Germino (flickr.com)

Audris P. Umel

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dollar, also seemed to influence the external competitiveness and export growth of these economies. Thus as their development expe-riences show, especially that of China, Japan and South Korea, maintaining a competitive RER can be critical in jump-starting growth in the export sector.

Nonetheless, it does not imply that pursuing RER targeting policy can replace those that develop an export-friendly environment (e.g. improvements in technology and infrastructure, developed human capital, better monetary and fi-nancial systems, relatively efficient bureaucracies, etc.). The 1997 economic debacle highlighted this point, as well as the costs of keeping the RER low or relatively undervalued for too long.

Thus, following the conclusion of Eichengreen (2008), more than a development-related policy tool, the real exchange rate is thus best recognized and utilized as a facili-tating condition: keeping the RER at competitive levels and avoiding excessive volatility enables an economy to develop its capacity and opportunities for growth, in education and training, savings and investments, institutional capacity to assimilate and gener-ate organizational and techno-logical knowledge, etc. Without

these fundamentals, policy geared toward the real exchange rate will accomplish little, if any at all, sustained improvement in export performance, and consequently, in economic growth.

For those interested in viewing the complete thesis of Ms. Umel, go to the Ateneo Economics Department or the school archives.

Works Cited:

Eichengreen, Barry and Paul Masson. Exit Strategies: Policy Options for Coun-tries Seeking Greater Exchange Rate Flexibility. IMF Occasional Paper No. 168 (August 1998). Quoted in Barry Eichengreen, The Real Exchange Rate and Economic Growth. Working Paper No. 4, Commission on Growth and Development, 2008.

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Francis Viernes: When/how did you realize that teaching was your calling?

Dr. Tan: It was as early as grade 2. By that time, I was already acting like a teacher.

FV: Is there any similarity with the way you treat your own chil-dren and the way you treat your students?

Dr. Tan: YES. There is similarity with the way I treat my children and students. This is true. I am impatient with the carelessness of my children

Interview with Dr. Rosalina Tan

by Francis Viernes

Rosalina Palanca Tan is currently an Associate Professor in the Department of Economics in the Ateneo De Manila University. She finished her undergraduate degree in Economics-Honors Program in Ateneo during 1983 with a distinction as honorable mention. She also took her Masteral Studies in the same school which she finished by the year 1987. Her Doctoral Degree was, however, taken in So-phia University in Tokyo Japan, specializing in Environmental Economics. She currently has 23 published research works, some of which won the Most Outstanding Scholarly Work for the Social Sciences and other Research awards by different institutions, and 4 unpublished researches.

So for me, there is no such thing as a greatest achievement. For me, all my works, all my research projects are great.

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FV: Do you consider yourself as a terror teacher?

Dr. Tan: I don’t consider myself as a terror teacher. Nung bata ako, I would consider myself one, but not anymore

FV: What prompted you to take up further studies in Japan instead of other countries?

Dr. Tan: Well, may naka-pagsabi sa akin na may nag-oofer ng scholarship sa Japan for Graduate Studies, and then I applied and passed. Also, Japan was a growing economy at that time, which was during the 1980’s, and was very close to the US so it was a very good place to study, eco-nomically speaking. It was the bubble economy at that time. But it was not Japan Economy which I studied there but Environmental Economics

FV: Aside from economics, what are your other interests?

Dr. Tan: Nag-aalaga ng anak. I used to do some gardening before but I stopped because after giving birth it gets dangerous. I also cook but I don’t love cooking.

FV: How about watching TV or movies?

Dr. Tan: I am not particularly keen on watching TV. Other than teach-ing Economics, I do a lot of research on Environmental Economics. Other than teaching, I like to learn, study-ing in my free time, attending talks and seminars. This is one thing I would like to impart to my students: that LEARNING NEVER STOPS. Gus-

to ko ring sumasagot ng tests.

FV: You have one word to describe yourself. What would it be?

Dr. Tan: Sige, ikaw ang tanungin ko nyan, if you have one word

to describe myself, what would it be?

FV: Well, if I am to describe you in one word I would choose Passionate.

Dr. Tan: Yun, eh di yun ang ilagay mo diyan. Ayoko kasi na sa akin manggagaling yung one word na iyon.

FV: If you were not an economist, what would you be?

Dr. Tan: Let’s put it this way. I was in Physics before Economics. At the time of my undergraduate studies,

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magkasama ang block ng Physics and Eco-H. At that time also. mas nauuna pati na kunin ng ECO-H ang ECO102 kaysa sa mga Eco standards. During EC102, I saw the graphs and computations and then I liked it. So by then I shifted to Eco-H also because hindi rin ako malalate sa graduation if ever na lilipat ako. If I am not economist, I would be in the Natural Sciences.

FV: What do you feel is your great-est achievement?

Dr. Tan: Let’s put it this way. If ever I finish a good research, I feel happy about it. So for me, there is no such thing as a greatest achievement. For me, all my works, all my re-search projects are great. Some of this research projects that I feel good about are my Dengue Vaccine Demand project,Value of Statistical life, Watershed Protection in the Cagayan De Oro Case which I co-authored with Dr. Germellino Bautista, which won the Outstanding Scholarly Work in the Social Sci-ences in 2003.

FV: What advice would you give to future economists like us?

Dr. Tan: In Economics, once you know the basics then it is the same in all the fields of Economics. Just understand the basic principles, laws and theories found especially in your Microeconomics, Macroeco-

nomics together with Mathematical Economics. The models of other fields in Economics are, more or less, the same with these subjects.

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Intimidating Increases

There has been a significant increase in average world price for rice, wheat, maize, and soybeans since 2006. However, there have been

debates regarding the causes for such dramatic increases for each product mentioned, which the globe produces and consumes regularly. Studies have been made with regard to the reasons behind the amplified food prices. Since the beginning of 2006, the average world price for rice has increased by 217%, wheat by 136%, maize by 125%, and soybeans by 107%. In late April of this year, 2008, rice prices have reached 24 cents per pound, or Php24.36 per kilogram.

The chart released by the World Bank shows a significant and considerable increase in overall world prices since 2000, but taking into consideration the

encircled portion of the chart, which shows the increase in nominal prices during the years 2006 and 2007, it is apparent that the increase in prices that has taken place between these two years outweighs that of the increases from 2000 until 2003, and even the slightly larger increase during the year

by Nicola RoaMarjorie SantillanBetina Santos

THE PERFECT STORM

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2004.

Wheat prices, which have also been taken into account during the ac-counting of the nominal price index conducted by the World Bank for overall food prices since the year 2000, have increased by more or less $150 per metric ton between the years 2007 and 2008. Economists

have hypothesized prices for all key natural food products to continue to increase for the following years due to the demand for natural products to be transposed to biofuel and oils, as well as the continuing increase in global rational demands.

With the data and charts previously provided, it is apparent that global food prices have been rising for the past five years. The noteworthy increase in prices have allowed for the conduct of research towards

the reasons for the amplification of global food prices with regards to rice, wheat, and several other major natural food products.

Because Supply and De-mand Situations Become Unmanageable

Factors such as biofuel hype, natality rate increase, changes in diet among

Asians, rocketing oil prices, de-crease in stockpile rice, and natural disasters altogether collide to create “the perfect storm” that is globally experienced through the drastic rise in world food prices.

The harsh reality of the causes of global price changes with regard to rice, wheat, maize, and soybeans may be traced to a very basic aspect of economics: supply and demand. Due to the problem of global warm-ing, scientists have come up with

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what they call “biofuel”, a gaso-line substitute which causes no net increase in the release of carbon dioxide into the atmosphere. A number of crops are portioned for the formulation of biofuel such as sugar cane, rapeseed, sunflower, palm oil, and molasses; however, the same crops mentioned above are considered to be the most efficient. This leads to the harsh debate of the “Food vs. Fuel” issue.

Food vs. Fuel Not long ago, turning corn into fuel was considered a smart way to reduce a country’s dependence on foreign oil. But now, the idea is being challenged because of the world wide food crisis. Even an of-ficial from the United Nations went as far as to say “Using food sources to create biofuel is a crime against humanity.”

The Food versus Fuel debate has be-come internationally controversial. Its main focus is the risk of diverting farmland or crops to the produc-tion of biofuel in detriment of food supply all around the world. Growth in the use of corn for ethanol has led critics to question the industri-ous ability to satisfy the demand for both renewable fuels and traditional uses like livestock and poultry feed, and food processing and exports. Skeptics suggest that the corn in-dustry will face difficulty in meeting

demand, and growers will experi-ence a dilemma: Food or fuel?

A discovery was made in 2005 that methyl-tertiary butyl ether (MTBE), an oxygenate additive in gasoline used to downgrade car-bon monoxide emissions, caused groundwater contamination in most states in North America. Such discovery resulted in an amplified demand for ethanol fuel, which is the next best thing to MTBE.

Ethanol fuel is produced mainly from corn fields. The new demand for corn, which is based on the need for both food and fuel pro-duction, has become problematic due to the difference in rationing corn crops. The difficulty here lies in adapting to a currently more limited source of corn due to the fact that there is now competition with regard to the crops.

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Graph A: U.S. Corn Used for Ethanol(Millions of bushels) 1 bushel=56 lbs

Graph B: U.S. Ethanol Production(Millions of gallons)

As observed from Graph A above, 1,800,000,000 bushels of corn were supplied for ethanol production in 2006, which is almost 9 times its quantity when juxtaposed to the low 1980 amount of 200,000,000 bush-els. Consequently, the supply of ethanol (Graph B) amounted to almost 5,000,000,000 gallons in 2006, which, just as the supply for corn used for ethanol increased, also escalated nearly 10 times as compared to almost 500,000,000 gallons in 1980.

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The trade-off between the need for renewable energy and the need for affordable food has become evident among developed and develop-ing countries. Develop-ing nations are more than bothered nowa-days about subsidies from the U.S. to support biofuel production that turn staples like corn into biofuel, leaving rice the only food not used to make biofuel. Rice,

being the only food not used to make biofuel, has become less available to people because corn-eating people in the past have now become rice-eating people, thereby increasing the demand for rice. Consequently, the price of rice has increased as well, due to higher demand and lower supply.The world’s population growth rate has actually been declining over the years. The decline, however, does not necessarily imply that availability of food shall lessen despite the logic that there would be more resources avail-able per person if the population decreases and the food supply remains the same. This is the sense considered by the Malthusian Theory, which states that the rapid increase in population is often faster than the food supply available to them. The next graph shows the population growth rate from 1950-2050.

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This graph could also show the demand for food from 1950-2050. Despite a rapid growth rate has taken place about fifty years ago, the food sup-ply did not readily adapt to this increase. The theory then states that even as there has been a steady decline in the global population for the past 18 years, food sources possibly still remains to be at the level on which it was fifty years ago, if not, maybe just a little bit higher. As given support by the Malthusian theory and the current problems on food supply, the world under-goes a food crisis.

Rise in the price of oil

We can attribute the rise in the price of oil to increased demand and decreased supply. It is a fact that it took us 125 years to consume the first trillion barrels of oil. However, at the rate we are going, we can predict that we can do the same rate of consumption for the next 30 years. Also, there is a slow down in oil sup-ply growth. There is limited amount of fossil fuel alongside increasing demand for it. The remaining re-serves are getting harder to extract,

so subsequently, we would not expect the oil price to decline. Since oil is very much used in the agriculture sector, prices of basic food commodities increased. The rise in the price of oil has made the production of fertilizers more expensive; thus, making the cost of food production higher. Although natural gas is more commonly used in manufacturing fertilizers, it still has an effect because rise in the price of petroleum has led

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countries to turn to natural gas; hence, the higher cost of fertilizers.

Oil also provides energy for mechanized food production and transport; thus, directly affecting rising food prices. Rise in the price of oil is very much connected to the “food vs. fuel” issue since the surging of the price of oil is the main reason why countries are looking for alternative energy sources such as biofuels.

Increased Demand in Asia

Although most Asian countries remain poor, there has been a significant escalation of economic status among these countries, most especially the newly developed ones like China. Parallel to this change in economic status is the change in lifestyle and diet. The table below shows the consumptions of newly prosperous countries per capita ratio. China, for example, has a larger consumption in meat due to diet changes. Because demand for meat is now higher (especially that China has a huge population), cow production should be heightened as well to meet these increasing demands. But increas-ing cow production would consequentially lead to a higher supply of feed grains in order to feed more cows. According to Paul Collier, an economist, one kilo of meet entails six kilos of feed grain. Thus, crops are not only for eating and for making biofuels, but are also for non-feeding usage as well; non-feeding usage meaning crops are needed to supply other food products as well.

Another factor affecting price change in food is the decrease in stockpile rice. Stockpile rice is the stock of rice used by a country for emergency purposes as a way to intervene in the market to keep prices down. Many countries have lessened their stockpile rice over the decade, which resulted 2005/1990 ratios per capita consumption

India China Brazil Nigeria

Cereals 1.0 0.8 1.2 1.0

Meat 1.2 2.4 1.7 1.0

Milk 1.2 3.0 1.2 1.3

Fish 1.2 2.3 0.9 0.8

Fruits 1.3 3.5 0.8 1.1

Vegetables 1.3 2.9 1.3 1.3

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in the removal of the key tool in controlling prices. Investments in irrigation have also declined dramatically. The Philippines, for example, lessened in-vestments in irrigation in order to ration more budgets into the development of urban areas.

Natural Disasters

Natural Disasters can affect both the supply and demand curves. There were many calamities that contributed to the shock of the steep decline in food supply. The most influential one is the extended drought in Australia, in particular the fertile Murray-Darling Basin, which produces large amounts of wheat and rice. The drought has caused rice harvest to fall by 98% from pre-drought levels. Australia is second to US in terms of food production and can produce up to 25 million metric tons of wheat a year. However, in the year 2006, they were only able to harvest 9.8 million metric tons. Other disas-ters such as the heat wave in San Joaquin Valley, California, which killed a large number of farm ani-mals, and heavy rains in Kerala, India, which destroyed swatches of grain, also contributed to the cut down in supply.

In May 2008, Cyclone Nargis hit Burma and escalated the price of rice. Burma has originally been a rice exporter and they were fore-casted to export 600,000 metric tons of rice in 2008. However, due to the aftermath of the said calam-

ity, they might be a rice importer for the first time.

Because of these occurrences world-wide, the affected people devas-tated from the calamities increased demand for food subsidies.

When worse comes to worst: Impact on Third World Countries: The Philippines

According to an article in the Philip-pine Daily Inquirer, soaring food prices are forcing millions of Filipi-nos into poverty. Inflation reached 8.3% last April mainly because of soaring rice and oil prices which were at their all-time highs.

According to a study conducted between January 2007 and March 2008, rice prices have risen at an annual rate of 22.9%. The Philip-pines is one of the biggest rice importing countries in the world. Thus, a rise in the world price of rice would equate to a lot of Filipinos getting hungry due to the consequential decrease in imports acquired by the country.

The Arroyo government has stated that the Philippines is not in danger of food shortage. The reason for the

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increase in food prices, as the government states, is due the in-crease in world food prices. The Philippines urged China, Japan, and other key Asian nations, to convene an emergency meet-ing, especially tackling the issue with those countries who have established rice export bans. “Free trade should be flowing,” Philippine Agriculture Secretary Arthur Yap stated. In late April 2008, the Philippines govern-ment requested that the World Bank exert pressure on rice exporting countries to end export restrictions.

As experts have predicted, the world food prices have gone down relatively. However, UN Food and Agriculture Organiza-tion (FAO) warns that we should not expect food prices to return to their former low levels, for three reasons. First and foremost, costs of farm inputs have esca-lated, and many of them in fact come directly from petroleum (e.g., fertilizers, pesticides). To the extent that high oil prices are here to stay, as we argue above that they indeed are, then food production costs, and therefore, prices will still be higher than be-fore. Second, food-surplus coun-tries are experiencing increasing domestic demand due to both rising incomes and populations, leaving less for them to export.

Lastly, the rest of the countries that are net food importers likewise need more and more food to support our grow-ing economies and populations.

This poses a problem for Filipinos who cannot support themselves in lieu of escalating food prices. Add the fact that the Philippine government seems to be helpless about it, or at least, not influential enough in terms of impact of opinion.

The Perfect Collision of Factors

Arguments made by economists, critics, farmers, and other specialists whose fields are congruent with the issue of the global food crisis have given their points of view on what constitutes this rapid increase in food prices. The difficulty rests in the fact that there are, as known throughout the world, scarce resources, and considering the fact that as the global population increases as fast as the industrial world does, it comes as no surprise that natural resources are quickly being depleted. Efforts have been constantly made to lessen the impact of this depletion on the known world; however, it seems as if these efforts are not yet enough in order for the global population to live harmoni-ously without doubts on the global food prices, which, as a matter of fact, affects every single entity living on this earth. Factors such as biofuel hype, natality rate increase, changes

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in diet among Asians, rocketing oil prices, decrease in stockpile rice, economic crises, and natural di-sasters altogether collide to create “the perfect storm” that is globally experienced through the drastic rise in world food prices.

Works Cited:

Bradsher, Keith. “The Rice Crisis.” Reader’s Digest. Aug 2008 issue

Energy Information Association. “Eliminating MTBE in Gasoline in 2006.” PDF, 01 Sep 2008. 22 February 2006, p. 1

Iowa Corn. “Ethanol Production” <http://www.iowacorn.org/etha-nol/ethanol_6.htm> accessed 01 Sep 2008

“Asian States Feel Rice Pinch.” BBC News, South East Asia. <http://news.bbc.co.uk/2/hi/south_asia/7324596.stm 11 Apr 2008>

Population growth rate. <http://www.worldmetas.info/population> accessed 01 Sep 2008

Von Braun, Joachim. “High and Rising Food Prices: Why are they rising, who is affected, how are they affected, and what should be done?” PDF. 11 Apr 2008, p.3, slide 7

Comment by Paul Collier on 2 May 2008 to the Financial Times. The Economist Forum blog post “Food Crisis is a Chance To Reform Global Agriculture” by Martin Wolf, 30 Apr 2008

“2007- 2008 World Food Price Crisis.” Wikipedia: The Free Ency-clopedia. <http://en.wikipedia.org/wiki/2007%E2%80%932008_world_food_price_crisis#cite_note-45> ac-cessed 01 Sep 2008

Habito, Cielito. “Where are Oil and Food Prices Headed?” Philippine Daily Inquirer. <http://business.inquirer.net/money/columns/view/20080707-146851/Where-are-oil-and-food-prices-headed> 07 July 2008

“ADB STUDY: High food prices forc-ing millions of Filipinos into poverty” Philippine Daily Inquirer. <http://newsinfo.inquirer.net/breakingnews/nation/view/20080518-137326/High-food-prices-forcing-millions-of-Filipinos-into-poverty> accessed 01 Sep 2008

“CNN: Food vs. fuel” YouTube. <http://www.youtube.com/watch?v=gaSt77X82_E&feature=related> 07 May 2008