“Many economists will tell you that the ideal intervention to help the poor is to simply give them money (a negative income tax) – that shores up their income – rather than directly controlling prices. In general, this is correct advice; but not in this case.
Suppose we collect $1000 from the rich and hand this out to the poor. Since the rich spend a tiny fraction of their money on food and the poor a large fraction, this transfer will cause food prices to rise. In general, this would not matter since the price was being driven up by the greater purchasing power of the poor. But in the present precarious situation, the risk is that if the negative income tax does not reach all the poor, then the ones who are left out will see their position deteriorating as prices rise further”.
Tags: Food Crisis
