King Rat (gkr) wrote,
King Rat
gkr

Eco 200: dire predictions

(group) Worldwatch Institute regularly predicts an increased scarcity of grain worldwide in the coming year and warns that the world is about to run out of food.

  1. How could you use the commodity futures page in the newspaper to evaluate this prediction?

    If the commodity futures show any prices at all, then professionals expect there to be some food to be available. If the overall prices remain consistent with previous years' prices adjusted for inflation, then they expect about the same amount of food to be available.

  2. If professional speculators disagree with the forecasts of the Worldwatch Institute, in whose forecasts would you have more confidence? Why?

    I would generally trust the forecasts of those who have a stake in the matter, provided they have a large enough stake.

  3. Do you think that the people at Worldwatch Institute buy wheat futures at the time they issue their forecasts? Should they?

    I don't know if they do. Perhaps they have and issue dire forecasts to drive up prices so their futures become more valuable. If they intend to hold the contracts until the scarcity or abundance becomes apparent, then they probably should not, as they will likely lose money when their predictions turn out wrong. Or at least won't make as much money as their forecasts would predict.

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