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Forecasting Consumer Price Indexes for Food

Located here is an article entitled "Forecasting Consumer Price Indexes for Food: A Demand Model Approach," by Kuo S. Huang. Huang uses an inverse demand function to assess the change in quantity demanded for a variety of goods (including beef, eggs, fruits, vegetables, cereal) based on a one percent change in price of that good. Huang presents a chart that shows, for example, that a one percent increase in the price of poultry would result in a .84 percent decrease in the quantity demanded of poultry. He also gives figures for cross elasticity of demand: A one percent increase in the price of red meat, for example, .91 percent decrease in the quantity demanded of beef.

Huang uses six aggregate food quantities and per capita income to for forecasting consumer price indexes. Huang himself admits that relying on this information may harm the accuracy of his study.

Not only can we not be sure that his information is reliable, the figures he presents are not as useful as I first thought for our model. Most importantly, we are interested in data for very precise demographics It does us little good to see how the American in general responds to a change in price of a particular good (even if this information is accurate): we need to know a middle income Poweshiek County resident who buys 40% of her food locally responds to a change in price. Perhaps Haung's data and methodology will provide us with a starting point for obtaining relevant figures of our own

After doing some reading at Sohodojo.com

After reading Longitude - What It Means to be an Entrepreneur: The Remarkable Story of John Harrison at Sohodojo.com, I have a few thoughts on how the content of this blogging relates to our Local Food Economy Game project

"John Harrison stood up to, and held his ground in earnest opposition of, the Powers That Be. In the Big Is Good World, the Powers That Be define the rules of the game and are its referees. It is unbelievably difficult to 'reinvent the game' when competing against those who have that much control over Life As We Know It."

John Harrison

John Harrison - Repro ID PU2851 © NMM London

In our modern economy, institutions like Wal-Mart define the rules of the game and are the referees. By setting the rules – the prices for which their goods will be sold – they make competition from others, who are less concerned with price, difficult. With their ability to undercut the prices of other firms while maintaining their enormous profits, they eliminate many competitors from the game. It is a goal of this project to bring to the forefront other goals of the game of consumerism: those that introduce decision-making factors aside from price; those that allow sustainable producers to have a shot.

"But the reality is that it is how you behave as an entrepreneur and how you practice capitalism that gives the domain of business a positive or negative value basis."

Whatever the outcome of our Local Food Economy Game, even if we are successful in increasing the use of local foods in our economies, these networks will continue to be based on capitalism. As I see it, one of our goals is to show that capitalism can take many forms. It does not have to be the ruthless pursuit of profits at the expense of all other concerns. It is possible to maintain an economy based on capitalism – and capitalist values are so well-entrenched in our society that I believe that capitalism will always exist here – while also valuing other, non-monetary factors, in our buying decisions. Capitalism is not a matter of black and white: there are shades of gray in which we can introduce our personal values to make the world a better and more sustainable place.

And a general thought in the nature of the entire post

I think that much of what needs to be changed is the mentality of consumers. When I buy something, my only two considerations are cost and quality of the good or service that I am looking for. You can say that this is a result of my tight budget, but my parents, who are not financially bound to the same extent I am, operate in a similar manner. If the same product is available at a cheaper price, buy it there, without even thinking about other factors. I know that a goal of Sohodojo is to introduce other factors into the mindset of consumers, and I think this is an entirely appropriate and important goal. If we can find a way to "change the rules of the game" so that other, non-price factors become important in our buying decision, than I believe a market will open up in front of our eyes.

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An ACE in Ames - Leigh Tesfatsion

We have two primary goals for this project during Jelal's time here as our summer intern:

  • identification of candidate simulation software technologies and development of a proof of concept for The Local Food Economy Game as a web-based exploratory learning environment, and
  • identify and pursue the development of collaborative relationships with Iowa-based kindred spirit researchers in both the local food economy and agent-based simulation domains.

I knew we were going to be okay finding kindred spirits in the local food economy space. We are, afterall, in the historical agricultural heatland of the United States. I did not expect, however, to find a world class theoretical and applied research scientist in the rather specialized domain of agent-based economic simulation.

Leigh Tesfatsion: Professor of Economics and Mathematics at Iowa State University and expert in Agent-based Computational EconomicsLeigh Tesfatsion: Professor of Economics and Mathematics at Iowa State University and expert in Agent-based Computational EconomicsWow, were we happy to learn about Leigh Tesfatsion! Leigh is Professor of Economics and Mathematics at Iowa State University in Ames. Here's how she describes her current research interests:

  • Agent-based computational economics: A constructive approach to economic theory;
  • Testing the economic reliability of FERC's proposed wholesale power market design;
  • Modeling decentralized market economies as distributed local-interaction systems;
  • Concentration and market power in a dynamic production economy;
  • Labor institutions and the evolution of macroeconomic performance.

And here are links to a her current work that is spot on relevant to our project:

I can't wait to arrange a field trip to Ames so Timlynn and I can take Jelal along with us to meet our Community Capitals Framework friends at the ISU-based North Central Regional Center for Rural Development (NCRCRD) and get the local food researchers there together with Leigh Tesfatsion! What fun we have ahead.

A couple interesting links and a question...

I've been doing some research in the library, and found a couple things that are probably of interest to Jim and Timlynn, but may be of general interest as well.

  • A list of Professor Gordon Bigelow's (author of "Let There Be Markets: The Evangelical Roots of Economics," published in Harper's magazine) scholarship is located at:

    http://www.rhodes.edu/english/facultybigelow.htm

    I've been scouring the College library looking for any publications, but so far I've been unsuccessful...I'll let you know if anything turns up.

  • The Institute for Social Network Analysis of the Economy (www.isnae.org) is very interesting and relevant. I've skimmed over a few of the articles in their resource section; through the links on the site I found an article called "Re-thinking the Network Economy," by Stan Liebowitz, which I will read today.

Also, of the list of agent-based modeling tools listed on the website maintained by Leigh Tesfatsion (http://www.econ.iastate.edu/tesfatsi/acecode.htm), the program RePast seems to be one of the more prominent, as I've come across links to it on several different web sites. I'll try to look into it somewhat before coming to Fairfield, to see if it might fit our needs.

And a question for Jim...what was the title of that book that's entitled "The Story Of B," and is the third book of a trilogy? ...I've been trying to check it out but can't remember the name.

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Boxed Economy Simlulation Platform

The boxed economy simulation platform discussed in the links on this page:

http://platbox.sfc.keio.ac.jp/en/papers/index.html

is very interesting, as we have discussed. If we can obtain a copy of this platform from its authors, we would have--as Jim said--a viable candidate for our simulation software. I plan to print out and read a few more of these articles before coming to Fairfield on Wedensday.

A couple unrelated and random thoughts...

  • The models we design would be an interesting tools for the managers of local businesses, who could use the simulation to help make decisions regarding starting up/shutting down, raising/lowering prices, etc.
  • Although I only recently came across it online and have yet to read it, Michael Rothschild's Bionomics: Economy as an Ecosystem looks to be a very interesting book, especially when put into the context of Barabasi's Linked, and his "universal network theory." The idea that economics is adopted from a biological framework is an extension of Barabasi's belief that all networks are derived from the same basic principles. This book also speaks to the idea that economics is a "human" science, not a hard science that is stricly based upon mathematics and utility maximization
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