Housing and bread: an analogy

Nobody quite remembers when and why this law originally came to pass, but at some point in the distant past, the government of Analogistan introduced a nationwide statutory limit on the amount of bread that could be baked per year. For a long time, nobody really noticed. Annual bread production never came too close to the limit anyway, so the constraint remained largely theoretical. About three decades ago, however, a combination of population growth and a change in dietary habits led to a surge in bread demand. Since then, bread prices have exploded, turning bread into a luxury good. Views about what should be done about it remain divided. Our correspondent reports:

‘We are deeply worried about the government’s cuts to the rate of Bread Benefit’, explains a spokesperson of the Bread Poverty Action Group (BPAG). ‘This disastrous decision is going to plunge even more families into bread poverty. We demand a triple-lock system, in which Bread Benefit rises each year by the rate of bread inflation, the general rate of inflation, or the rate of average income growth, whichever is highest. This ensures that the most vulnerable are protected.’

Yet several authors at The Warden, a left-leaning newspaper, fear that higher rates of Bread Benefit will only line the pockets of wealthy private bakers. ‘It is time to bring back a sensible system of bread-price controls’, argues an op-ed in the paper’s recent edition. ‘It is time to challenge the prevailing neoliberal dogma, which has left bread prices dictated by market forces alone. Free-market fundamentalism has impoverished millions of bread consumers.’ The Warden recommends a return to the previous system of local Bread-Price Boards.

Their colleagues at The Autonomous, another left-leaning newspaper, offer a slightly different take: ‘It all began with the Right to Bake’, today’s editorial reads. ‘The government short-sightedly sold off all the Council Bakeries, which used to provide Social Bread on the basis of need, and left us at the mercy of for-profit bakeries. These companies are not democratically accountable, they are just in it for the bottom line.’

For Josh Delacroix, a leading figure in Analogistan’s environmental movement, the problem is a distributional one. ‘While most loaves of bread are privately owned, the total bread stock is a common resource. Either we ensure that it is used wisely and fairly, or we allow its distribution to become the starkest expression of inequality. I suggest a new concept: bread footprints. Like ecological footprints, it reminds us that the resource is finite, and that, if some people take more than they need, others are left with less than they need.’

In some respects, there are signs of improvements. Several councils have started to clamp down on rogue bakers. ‘It’s a disgrace’, an enforcement officer who did not wish to be named told us. ‘Some bakeries are mixing sawdust into their dough, and still charge up to five Thaler for a loaf. But people are desperate enough to buy it. We have closed down five bakeries in the last month alone, and I am intent on closing down many more.’

But is the government doing enough to support bread buyers? Finance Minister Josh Oborn thinks so. He defends his proposal of government-backed bread loans: ‘This government is on the side of the strivers. Our Help to Eat programme will enable hard-working families to get a foot on the bread ladder.’

In parts of academia and the think tank world, more exotic proposals are being debated, like an abolition of the bread production ceiling. These proposals, however, are fiercely rejected by organisations like the Campaign to Protect Rural Analogistan (CPRA). ‘If these ideologues get their way, our countryside would disappear under a carpet of wheat and rye’, a CPRA spokesperson explains. ‘Let me give you a few facts: Firstly, there is no bread affordability crisis in this country. It is a myth peddled by corporate bakers. Secondly, the bread affordability crisis has nothing whatsoever to do with the production ceiling. There is not a shred of evidence for this simplistic assertion. Thirdly, we need a more balanced debate: Bread affordability cannot be our only goal, we also have to think about the long-term national interest. There are other things that people can eat. Cake, for example.’

Head of Political Economy

Dr Kristian Niemietz is the IEA's Editorial Director, and Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).

2 thoughts on “Housing and bread: an analogy”

  1. Posted 02/05/2013 at 14:42 | Permalink

    Great blog Kris! The bread analogy would of course apply to many more markets.

  2. Posted 02/05/2013 at 15:21 | Permalink

    House prices and wages. We all know these prices are exempt from the usual rules of economics, simply because we all care about them a lot.

    I look forward to reading an analysis of how the minimum price for bread has certainly raised the amount of bread being purchased, and improved the lives of low-value bakers, none of whom were priced out of the market.

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