[zumachase]

I’m sorry, that’s just not how economics works. A market with excess supply necessarily has lower prices than one that is balanced, ceteris paribus.

Idaho potatoes were mentioned above. They are only being thrown away because the market does not want them. The mechanism by which this happens is price: prices drop low enough that it’s cheaper to throw away (we saw negative oil prices recently). One explanation is that other farmers saw this supply glut and raced to slash their prices. If we took all those excess potatoes and gave them away, then absent this excess supply, those other farmers would not have done this and prices would have remained steady or not gone down as much. Thus the artificial increase in quantity demanded is necessarily inflationary.

[Unsimplified]

Incorrect. The use of discarded product by non-market flows has no effect on market price.

[zumachase]

You’re putting the cart before the horse: price came first, then the product was discarded.

The risk that these potatoes might be dumped into the market pushed prices down. If you magically take this risk away, it doesn’t matter by which mechanism, that threat goes away and price responds.

If I’m another potato farmer and all of a sudden all those extra potatoes are teleported somewhere else, I will in all likelihood raise my prices.

Even the most progressive theorists would not debate this. It’s basic aggregate supply and demand.

[Reelin]

> If I’m another potato farmer and all of a sudden all those extra potatoes are teleported somewhere else, I will in all likelihood raise my prices.

There seem to be two different scenarios being conflated here.

You describe producers acting in response to the risk of future price changes.

It seems to me that others in the thread are describing a scenario where product is discarded because the price has already fallen so far that it is no longer profitable after accounting for various processing costs (ie things such as packaging and transportation).

In the latter scenario, if someone were to foot the bill for the redistribution itself there should be no direct effect on that specific part of the market. This assumes of course that the producers aren't compensated for the redistributed good (so it isn't significantly different than simply disposing of it). It also assumes that people don't resell or otherwise barter the product they receive (it's food and they're presumably starving so that assumption seems fairly reasonable in this case). (And of course there are bound to be countless indirect effects on the market as a whole.)

[zumachase]

> It seems to me that others in the thread are describing a scenario where product is discarded because the price has already fallen so far that it is no longer profitable after accounting for various processing costs (ie things such as packaging and transportation).

I understand what people are saying. Unfortunately this just isn’t how things work. If there were a way for this to occur, prices would respond. Ultimately markets aggregate information and package it up in a single metric we call price. If all of a sudden there was a new future demand for some good, no matter how you frame it, prices will respond.

[Reelin]

In the limited case where redistribution is equivalent to disposal from the perspective of the producer, and the food goes directly to people who are otherwise starving (ie literally incapable of purchasing food) I just don't see how that can be the case.

Obviously this includes a number of assumptions which might not hold. The redistributed product can't reenter the market. It must only go to those who otherwise could not have purchased it or an equivalent in the near term. The total value being redistributed must be insignificant relative to the market as a whole (to limit secondary effects). Etc.

> markets aggregate information and package it up in a single metric we call price

In terms of the movement of information, product that would otherwise have been destroyed seems irrelevant. Consumers who were otherwise incapable of consuming seem irrelevant. Am I missing something?

[ianleeclark]

> It’s basic aggregate supply and demand.

Okay, so then we have absolutely no idea in which way the demand curve will curve then. If the demand curve can be any polynomial, then we have no clue if this will happen or not.

[zumachase]

What? Nothing I said has anything to do with the demand curve. This is all supply side. We hold the demand curve constant for any such analysis.

But it’s irrelevant anyway: a basic tenet of economics is that people are, in aggregate, utility maximizers. So yes, we do have an idea of some fundamental properties of the demand curve and it cannot simply be any polynomial.

[ianleeclark]

> We hold the demand curve constant for any such analysis.

And this is the portion that I'm critiquing. You're holding it as a constant curve sloping downwards.

> So yes, we do have an idea of some fundamental properties of the demand curve

Okay, sure, it relies on there being people who have demand for some commodity.

> it cannot simply be any polynomial

"Any polynomial" might be overselling it, but we can't assume it's sloping downwards.