This paper quotes the long-run price elasticity of wheat growing area at around 0.37, though they acknowledge that there’s significant controversy over these price elasticities and the exact values estimated are highly sensitive to modeling assumptions; from what I can gather the paper is actually on the more pessimistic side of the literature.
That’s just the growing area elasticity; it doesn’t take into account other margins on which you can increase production (such as better tech, more capital investment, productivity gains from having more people etc.), but even at 0.37 a doubling of the price should give you a 30% increase in wheat supply.
The paper also cites elasticities for many different kinds of crops, and the price elasticity of supply for soybeans and wheat is significantly higher than the price elasticity of supply for e.g. rice. This heterogeneity further leads me to believe that there’s another margin we can push on, which is to use crops whose supply is more price elastic as overall crop demand goes up. For example, this paper from Brazil estimates a national long-run soybean price elasticity of supply around 0.8, and in some regions of Brazil the elasticity exceeds 1.
I think I still stand by my prediction that the long-run price elasticity of supply for wheat should be well above 0.37 and slightly above 1, but this would come from pushing on many different margins and not just increasing land use.
This paper quotes the long-run price elasticity of wheat growing area at around 0.37, though they acknowledge that there’s significant controversy over these price elasticities and the exact values estimated are highly sensitive to modeling assumptions; from what I can gather the paper is actually on the more pessimistic side of the literature.
That’s just the growing area elasticity; it doesn’t take into account other margins on which you can increase production (such as better tech, more capital investment, productivity gains from having more people etc.), but even at 0.37 a doubling of the price should give you a 30% increase in wheat supply.
The paper also cites elasticities for many different kinds of crops, and the price elasticity of supply for soybeans and wheat is significantly higher than the price elasticity of supply for e.g. rice. This heterogeneity further leads me to believe that there’s another margin we can push on, which is to use crops whose supply is more price elastic as overall crop demand goes up. For example, this paper from Brazil estimates a national long-run soybean price elasticity of supply around 0.8, and in some regions of Brazil the elasticity exceeds 1.
I think I still stand by my prediction that the long-run price elasticity of supply for wheat should be well above 0.37 and slightly above 1, but this would come from pushing on many different margins and not just increasing land use.
Thanks, that was very informative! I update towards “it is still possible to produce more food” than we currently are