Saturday, January 13, 2007

Globalization and tortillas

The NYT has a small note about how the Mexican government is concerned about the rising cost of tortillas, and will end tariffs on imported corn to keep them affordable (though I must say I thought NAFTA was ending them anyway). This is caused in part by high demand for ethanol made from corn. So there is a chain reaction: instability in the Middle East, the invasion of Iraq, development in China, etc. lead to high oil prices, which lead to demand for alternative fuels, which leads to corn demand, which leads to higher prices for tortillas.

Stephen Dubner at Freakonomics Blog recently crafted a related hypothesis. Given rising prices for corn, some food manufacturers were looking to replace high fructose corn syrup, which is associated with obesity. Therefore, high oil prices spark a chain reaction that might ultimately lead to Americans losing weight.

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