A Rational Decision Maker: Stay Away from Next Panic Buying

Vincent Thian/AP

Chinese consumers just recover from the recent nationwide salt panic buying. The panic, which began in China’s coastal provinces and spread quickly throughout the country, was a result of two misunderstandings:

  • The radiation from reactors at Japanese nuclear plants, caused by the devastating earthquake and tsunami would contaminate sea salt supplies in China.
  • The iodine in salt can prevent thyroid cancer, which is a disease associated with radiation exposure.

Misled by the rumors, millions of Chinese consumers flocked to their nearby supermarket, bought as many bags of salt as they could, which made the salt price jump ten times in some cities. China Daily reports a man purchased 6.5 tons of salt during the insane buying period, now finds himself stuck with three truckloads of salt, which can’t be returned, sold or even transported.

straightfromthedoc.com

Chinese consumer is the victim in this rumor-led crisis, of course no one wants it to happen again. So how should we do to prevent it?

Many people blame the Chinese government for not responding quickly and effectively, but I don’t think it is the cause. We all know in a market-oriented economy, the price is determined by the demand and the supply. China is now transforming into a more open market, the price fluctuation is and will always be a common phenomenon. Open your eyes and be realistic. We are not living in a planned economy era any more. We cannot depend on government’s macroeconomic control all the time. We have to hand over the power to the “invisible hand” of the market. Otherwise, Chinese economy cannot be strong enough to enter the entirely free international marketplace.

But we’ve got to prevent it, and there is a way. All we should do is to become a rational decision maker to protect ourselves from next waves of social panic, and that can be achieved within several steps:

  • Be aware of the economic situation and be alert to the unusual signs. So when the crisis approaches, you can anticipate it and have enough time to make your decision.
  • Once you are aware of the unusual signs, you need to realize what are  important in making the decision. In this case:
    • the accuracy of the information: find out whether the rumors are true or not;
    • basic health knowledge: you should know that taking too much salt is bad for your health, a small amount of salt will be enough to maintain your body’s daily activities;
    • general prediction of the uncertain future:  the government will not let the salt price jump too much, since the seasoning is the fundamental ingredient in people’s life. It can go from 1.6 to 2 considering China is in a high inflation period, but if it goes from 1.6 yuan to 16 yuan, it is ridiculous, and you don’t want to be part of it.
    • financial cost: if you buy a small bottle of salt, it usually costs you 1.6 yuan ($0.25), at the highest price it costs you 16 yuan ($2.4), and you can consume it for several months. But if you buy 6.5 tons of salt, it costs you 27,000 yuan ($4,100), and you can NEVER eat it up in your life!
  • After understanding these, you can choose the optimal decision easily. You may still decide to go to buy several bottles to emotionally calm your fears towards the uncertain future, but  I am sure you will not rush into the supermarket to buy tons of salt, and you will not panic if the salt has been out of stock.
Advertisements

What could China learn from American agriculture?


I had a general idea of American farmers (mostly learned from news media and movies) before I came to the United States: having a very big farm; growing and harvesting large amount of crops with the help of modern machines; possessing the land as their private property; being well educated; and the most important part, getting decent incomes from their land. The life of American farmers sounded amazing for me, since what I learned in China is being a farmer equals to being a poor without much education (I mean the real farmer). But I was not surprised by it at all. I could easily assume that the productivity of land is credited to the improved technology and the scientific research on agriculture.

What I learn by reading four books of American agriculture confirms some of my assumptions, but completely turns over some others.

In the book A Revolution Down on the Farm: The Transformation of American Agriculture since 1929, the author Paul K. Conkin shows a general picture of the agriculture revolution in the past century, changing from a small family model to a large agribusiness model. He gives the credits to the new machines, the electrification, the chemical inputs and the plant and animal breeding, which confirms my assumption. But what I didn’t know is that the productivity revolution causes surpluses and lower prices, and leads to the government intervention, described by Paul as “an institutional framework for this growth”.

It is an interesting point for me: while the American government subsidy in farming is to reduce the amount of crops production, the Chinese government is subsidizing the agriculture industry to increase its production, in order to bring down the competitive disadvantage of Chinese crops in the international market, and to reduce the agricultural products imports from the United States. In the United States, the agriculture revolution took place spontaneously and smoothly in the middle 20 century; however in China, the competition from the international market gives the local agriculture industry too much pressure to grow healthily in the pace of nature. The pressure reflects on the Chinese government too, whose subsidy is only focusing on the industry’s total output, without doing enough scientific researches on how to increase the productivity. As a result, the land is overused: the arable land is decreasing rapidly in China.

But the agriculture revolution is not a good thing in all aspects, that’s what Wendell Berry talks in his book The Unsettling of AmericaCulture and Agriculture. The agricultural industry changes from a small family farming model to a large agribusiness model, at the same time, the role of the farmer changes from the nurturer to the exploiter. Farming is a form of business now, Wendell argues, “productivity combined with processing and marketing efficiency”, and the business management ability is more important than the real farming skills. The whole traditional agricultural culture built on the intimate relationship between human being and the land, is destroyed by the agribusiness system.

The angle of Berry’s book is unique. “Get big or get out”, the philosophy of the agriculture transformation in the United States makes the agriculture highly developed (and also competitive in the international market). But the philosophy is actually the law of the jungle, which emphasizes the “agripower”, which cares more about quantity than quality, which the mass production and consumption culture is built on.

But how could the Americans solve this problem? How should the Americans deal with the agribusiness? I think Josh Kilmer-Purcell and Lisa M. Hamilton both answer this question in their books by narrating the personal stories of several farmers. In Kilmer-Purcell’s book The Bucolic Plague: How Two Manhattanites Became Gentlemen Farmers, the two young New Yorkers are trying so hard to become two gentlemen farmers, which I interpret as the attempt to escape from the mass production and consumption culture and the desire for a simple, idyllic life closed to nature and land.

Although I don’t think any of their stories can be simply copied to China, the desire is showed there. As Harry, an African-American dairyman in Texas, said in Hamilton’s book Deeply Rooted: Unconventional Farmers in the Age of Agribusiness, “I learned from him that you worked not to be rich, but to be free.”

Would like to read more book reviews on the four books ?

%d bloggers like this: