Avoiding starvation: how beneficial are the effects of speculation and futures trading on commodity markets
Outline, including interdisciplinary dimension
Trade in commodity futures has been accused of perverting price determination processes and causing food price increases that lead to mass starvation. Modern critics point at the alleged effect of commodity futures trade in aggravating scarcity that was originally caused by rapid population growth and limited additional farmland.
In 2012, leading scientists authored an open letter to the former German Federal President, Joachim Gauck, addressing his generalised condemnation of commodity futures trading, and asked him to encourage an ‘objective dialogue’. Supporters of trading commodities on futures markets emphasise that this is an essential tool to hedge price risks. Its absence would expose producers, traders and consumers to increased price volatility, eventually inducing reduced supply and rising prices.
This innovative, interdisciplinary project will combine the theoretical framework of economics with the archival approach of history in order to address the alleged indispensability of commodity futures trading. It will investigate this theme across a broad-ranging historical context, from early future contracts in the medieval world through to the more formal introduction of a commodity futures trade in the nineteenth century. The research team will examine pre-modern suspicion of future contracts in staple commodities and whether this inhibited the early development of a commodity futures trade.
Existing series of grain price data for north-western Europe, thirteenth to nineteenth centuries, as well as UK and US cotton data will be analysed to understand the role of commodity futures trade. To what extent can price risks be hedged without the potential to use futures? The project will look further at the transition from a regulatory regime where price risks were managed without this technique to a regime in the nineteenth century where it was available. What was the differential effect on price volatility and the behaviour of market participants?
History and economics, economic history, grain, cotton, food security
Secondary supervisor from a complementary discipline
Supervisors’ track record of PhD completions, plus excellence and international standing in the project area
Blum, an economist, has previously co-supervised three PhD students in the field of economics. He has top publications in economic history, agricultural economics and resource economics on topics relating to nutrition, food production and living standards in historical perspective.
He worked as an economist at the TU Munich’s agricultural campus and has additional publications in the field of resource, agricultural and development economics. Davis, a specialist in pre-modern socio-economic history, 'has first-supervised three PhD students to completion and currently co-supervises three students in interdisciplinary research.
He has published a book on medieval and early modern markets, regulation and ethics with Cambridge University Press, as well as in journals such as Economic History Review and the Journal of Historical Research in Marketing.
Intersectoral exposure and/or international mobility
(e.g. secondments to/collaboration with partner organizations)
Blum has close existing ties to colleagues in the field of resource economics (St Andrews), agricultural economics (TU Munich) and economic historians in various research departments in Europe and the United States. Part of the PhD would be spent at these institutions. The student would use this as a base to acquire specific expertise in relevant fields and to interact with specialists in aforementioned fields.
Similarly, Davis has close links with economic historians in a variety of institutions. In particular, he is currently working with the ‘Crises in the Middle Ages’ research project at the University of Lleida, Spain, and has hosted and mentored one of their PhD students at QUB in 2016. He also has close existing links with the Centre of Urban History at the University of Antwerp. Both institutions can provide short-term secondments for
PhD students to work with experts in the field and present their research.
Describe briefly the international profile of the partner
The University of St Andrews is home to one of the leading research clusters in agricultural and environmental economics in the UK. Its faculty include Nicholas Hanley and Eoin Mclaughlin, both leaders in their fields. The Technical University of Munich hosts one of Europe’s leading research centres in agricultural economics, located in Freising, Germany.
Relevant staff our PhD student will benefit from include Johannes Sauer, Gertrud Buchenrieder, and Justus Wesseler, all experts in their field. The Centre for Urban History at the University of Antwerp has a number of specialists in pre-modern trade and markets (with a focus on urban-rural grain supplies), such as Peter Stabel, Tim Soens, and Bruno Blonde.
The research group at the University of Lleida is run by Pere Benito i Monclus and has hosted a number of international conferences on famine, food supplies and grain merchants in premodern Europe.
Training that will be provided through the research project itself
Depending on the profile of the applicant, training in either economics, econometrics or history can be provided inhouse at Queen’s. Especially important will be the interface of history, historical methods (especially archival work and palaeography), economics and the statistical analysis of datasets - - a rare, if not unique, mix of expertise available at Queens.
Examples of additional training in non-research transferable skills
Both the Management School and the School of HAPP offer regular workshops on career development, leadership training and the soft skills
demanded by the employers of PhD students. The new Graduate School will also offer a roster of skills-based workshops for PhD students.
Expected dissemination of results: peer-reviewed journals, seminars, workshop and conferences at European/international level
Output will be presented at top international conferences such as the Economic History Society and the European Historical Economics Society. PhD chapters would form the basis for submissions to top field journals in economic history such as Economic History Review or the Journal of Economic History.
Expected impact activities
(e.g. public talks, visits to schools, open days, QUB impact showcase)
The policy implications of this research are potentially significant. The research will offer valuable insights into a world before commodity futures trading and associated infrastructure, such as appropriately sized storage facilities, and the consequent responses in demand and supply.
By looking at the historical origins of futures markets, we will better understand why we have highly formal institutions today and how they can be adapted to solve the problems faced by developing economies. The findings of the research will be communicated through an open workshop and conference (inviting a variety of interested groups from modern policymakers to commodity speculators).