Bad law breeds bad law

The scandal of the US ethanol program – a mandate, a subsidy and a trade barrier all rolled into one – is now having dire repercussions in Mexico, as Russell Roberts relates:

President Felipe Calderon signed an accord with businesses on Thursday to curb soaring tortilla prices and protect Mexico’s poor from speculative sellers and a surge in the cost of corn driven by the U.S. ethanol industry. The corn tortilla is the basic staple of the Mexican diet and is especially crucial for the poor…

“The unjustifiable price rise of this product threatens the economy of millions of families,” Calderon said. “We won’t tolerate speculators or monopolists. We will apply the law with firmness and punish those who take advantage of people’s need…

The rise is partly due to U.S. ethanol plants gobbling corn supplies and pushing prices as high as $3.40 a bushel, the highest in more than a decade.

As Russell says,

So because of a bad law in the United States (the requirement to put ethanol in gasoline), the Mexicans have decided to pass a bad law that can only lead to a tortilla shortage.

How many people even considered the possibility of increased Mexican poverty as a result of the desire to “save the planet (and fatten our wallets)” that led to the ethanol program? My suspicion is a big, fat zero. Another demonstration of the knowledge problem.