Bangladeshi Onions And Ain’t The Price System Wondrous?

Bangladesh has rather fewer onions around than people would like to be eating. This is a pity, of course, especially as onions are an important part of the local cuisine. The shortage is bad enough that the Prime Minister has made it known that none of the dishes cooked at her official residence were, on one day last week, prepared using onions.

So, what is it that we need when such a thing happens? Well, we’d like someone to scurry off somewhere and go and get more onions, obviously. A rising price achieves that. But more, we’d like people to use fewer onions. Perhaps go a little lighter on them in a dish, possibly prepare dishes that don’t even require them. Substitute away from the use of onions that is.

“Even if I have to stand another two hours, I will do that. I can save some 250 taka by buying one kilo of TCB onion. I am standing here because I have to save money,” said Ratan, an English teacher who goes by one name.

“I am 41 years old. I have never seen onion prices ever crossing beyond 120 taka.”

Sharmin, a housewife who also goes by one name, said she had stopped using onions in her cooking in the past week.

“My husband sells piazu (pakora), which needs a huge quantity of onion. But after the recent price hike, he stopped selling piazu,” she added.

Restaurants have cut onions from their menus and there has been a fall in the sale of deep-fried snacks normally cooked with onions.

Oh look, it’s already happening. And how? Purely by that price system. No one actually has to do anything at all. There is no planning, no missives from ministries, no politics, no government intervention. Well, of course, there are all of those things but the thing which is reducing consumption in this time of dearth achieves that desirable end without any of them.

Prices go up, people consume less. Ain’t the market pricing system wondrous?

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Bloke in North Dorset
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Bloke in North Dorset

There’s another lesson in onion pricing as well. Its the one commodity in the USA that is illegal to have a futures market. As a result the rice volatility of onions is greater than other commodities. There’s lots of articles explaining how it came about, this one is a bit old but is a good summary. And yet even with no traders to blame, the volatility in onion prices makes the swings in oil and corn look tame, reinforcing academics’ belief that futures trading diminishes extreme price swings. Since 2006, oil prices have risen 100%, and corn is up 300%.… Read more »

Spike
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Spike

Sure; it will smooth out price fluctuations to have the largest possible number of people in the onion market, and you achieve this by attracting people who neither grow any nor want to take actual possession of any: this is a futures market and they are the “evil” speculators.