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http://www.marginalrevolution.com/marginalrevolution/2008/07/onion-futures.html

Onion Futures

There are none.

The bulbous root is the only commodity for which futures trading is banned. Back in 1958, onion growers convinced themselves that futures traders (and not the new farms sprouting up in Wisconsin) were responsible for falling onion prices, so they lobbied an up-and-coming Michigan Congressman named Gerald Ford to push through a law banning all futures trading in onions. The law still stands.

And yet even with no traders to blame, the volatility in onion prices makes the swings in oil and corn look tame, reinforcing academics’ belief that futures trading diminishes extreme price swings.

Amazing, onion farmers and Congress panic in 1958 with the Senate Committee arguing that

…speculative activity in the futures markets causes such severe and unwarranted fluctuations in the price of cash onions…[that a] complete prohibition of onion futures trading [is necessary] in order to assure the orderly flow of onions in interstate commerce…

and for going on fifty years onion futures are banned.  Makes me want to cry.

More here on the banning of futures markets .  (A report from 1956 indicates that the fluctuations at that time were due to an attempted swindle.)

Hat tip to Newmark’s Door

Posted by Alex Tabarrok on July 8, 2008 at 07:14 AM in Economics | Permalink

By N. GREGORY MANKIW Published: July 13, 2008

http://www.nytimes.com/2008/07/13/business/13view.html?ref=business

In the months to come, John McCain and Barack Obama will be vying for the support of various voting blocs. It is safe to say, however, that one group won’t get much attention: economists.

David G. Klein

The American Economic Association represents only a small fraction of 1 percent of the electorate. In every election season, we economists expect to be largely ignored, and, unlike many of our other forecasts, that one often turns out to be right.

But suppose it were otherwise. Imagine that those running for office tailored their economic positions to attract the experts in the field. What would it take to put the nation’s economists solidly behind a candidate?

On many issues, from universal health insurance to increased taxes on the rich, economists do not speak with a single voice. But on some issues we do. Here is an eight-plank platform designed to attract a majority of economists. It is based on discussions I have had with my colleagues — call them focus groups, if you’d like — and polls of my profession:

SUPPORT FREE TRADE Economists are nearly unanimous in their support of an unfettered system of world trade. Here, Senator Obama lags behind Senator McCain. Senator Obama’s bad-mouthing of Nafta and his opposition to free-trade pacts with Colombia and South Korea make most economists cringe.

Many economists would go even further than Senator McCain has suggested by, for example, repealing antidumping laws. The ostensible purpose of these laws is to prevent foreign companies from selling in the United States at prices below fair value, but the law’s notion of “fair” rarely makes sense. In practice, these laws are little more than an excuse for special interests to shield themselves from competition.

OPPOSE FARM SUBSIDIES Economists like free markets, a principle that applies to agriculture as much as any good or service. Again, Senator McCain has the lead. Senator Obama’s endorsement of the recent $300 billion farm bill, his support for domestic ethanol subsidies and his opposition to imported sugar ethanol may bring votes from farmers, but economists view these policies as a burden on taxpayers and consumers.

LEAVE OIL COMPANIES AND SPECULATORS ALONE With the stunning rise in oil prices, both presidential candidates have been tempted to demonize market participants. Senator McCain has complained about the “obscene profits” of oil companies and called for a “thorough and complete investigation of speculators.” By contrast, most economists see nothing more sinister than the forces of global supply and demand at work. There is little benefit, and potentially much harm, in the candidates’ populist finger-pointing.

TAX THE USE OF ENERGY Senator Obama wins a point by opposing a summer gas tax holiday, a McCain proposal that economists greeted with derision. Most economists advocate increased taxes on energy products. The recent response of consumers to higher gas prices — including the increased use of mass transit and greater purchases of small cars, scooters, and even bicycles — demonstrates that the price mechanism is the most reliable way to reduce energy consumption and to curtail a variety of driving-related problems.

RAISE THE RETIREMENT AGE Like both presidential candidates, most economists recognize that Social Security faces a long-term problem. Senator Obama says he wants to fix it by extending the payroll tax to high incomes. Senator McCain opposes tax increases and wants the Social Security system to include personal accounts, but he has avoided proposing specific benefit cuts needed to make the numbers add up.

Some economists endorse Senator Obama’s tax hike, and some endorse Senator McCain’s personal accounts, but a much greater number would increase the age of eligibility for benefits. As Americans live longer, we need to redefine old age — a theme that should resonate with Mr. McCain, who is 71.

INVITE MORE SKILLED IMMIGRANTS As part of their embrace of globalization, economists are more open to immigration than is the general public. Admittedly, unskilled immigrants raise some potential problems: They may depress wages for Americans at the bottom of the economic ladder, exacerbating the rise in inequality, and they may overburden the social safety net. By contrast, skilled immigrants promote economic growth, especially among poorer Americans, and pay more in taxes than they get in government benefits. The more, the merrier.

On this issue, economists very clearly practice what they preach. Many of the best economists at top American universities were born abroad.

LIBERALIZE DRUG POLICY Many economists marry their support of economic freedom with a similar support of personal freedom. Drug policy is a case in point. A 2006 poll of professional economists asked whether the United States should legalize marijuana. Those in favor outnumbered those opposed more than three to one.

RAISE FUNDS FOR ECONOMIC RESEARCH The government subsidizes economic research through an arm of the National Science Foundation. The amount of money is relatively small — measured in the millions, not billions — and spending has been about flat in inflation-adjusted terms over the last decade. If Senator McCain or Senator Obama wants to endear himself to economists, there is no easier way than by promising an extra few million dollars to improve our understanding of how the economy works.

You might view this policy as nothing more than a way to buy a few votes. Perhaps you view economists as mere mortals, as tempted as anyone else by special interests. Maybe you would regard more funding for economic research as not very different from the billions thrown every year at farmers.

If you are that cynical, I won’t try to dissuade you.

N. Gregory Mankiw is a professor of economics at Harvard. He was an adviser to President Bush and advised Mitt Romney in his campaign for the Republican presidential nomination.

Seems pretty popular for politicians to discount, and the media to mock, economist these days. Didn’t that happen during the rise of socialism during the early 20 century?

With a centralist republican and wide-left liberal running for office it looks like there is a high probability for big government and more taxes, maybe it is time to make F. A. Hayak’s “The Road to Serfdom” required reading for high-schools and elected officials.

While not mention in the post, I found out the hard way…  While strong coffee and espresso are very popular, the drinks were served in thimbles.

Apparently, it is bad form to use the slightly larger 8oz coffee cup for espresso.