Fogelman College Alumnus Featured in The Economist
For release: June 8, 2013
David Jacks, graduate of the Fogelman College of Business and Economics, was featured
in The Economist regarding his research on inflation trends and the short and long-term
effects on the economy. The Economist is regarded as one of the most prestigious publications
in the field.
David Jacks was a FCBE economics major. Upon graduation from the University of Memphis,
he proceeded to earn his Master’s from the London School of Economics. He received
his Ph.D. from the University of California at Davis and he is currently an economics
professor at Simon Frasier University in Canada.
Please see below of click the link to view David Jack’s full article in The Economist.
Rocks for the long run
Jun 12th 2013, 12:30 by R.A. | WASHINGTON
SINCE late last year commodity prices have been on a long, slow downward slide. Yet
many in the markets, like Jeremy Grantham, a British money manager, reckon that the
commodity-price spike of the past decade is but a taste of what's to come. This week's
Free exchange column looks at a paper that seeks to show what history has to say about
future price moves:
David Jacks, an economist at Simon Fraser University, assembles figures on inflation-adjusted
prices for 30 commodities over 160 years...Over the very long run commodity prices
display a marked upward trend, having risen by 192% since 1950, and by 252% since
1900. But an upward trend has clearly not translated into global famine, and not all
commodities are alike.
Long-run rises have been most pronounced for commodities that are “in the ground”,
like minerals and natural gas. Energy commodities especially have boomed, soaring
by roughly 300% since 1950. Prices of precious metals have also risen, as have industrial
ingredients like iron ore. In contrast, prices for resources that can be grown have
trended downwards (see chart). The inflation-adjusted prices of rice, corn and wheat
are lower now than they were in 1950. Although the global population is 2.8 times
above its 1950 level, world grain production is 3.6 times higher.
Yet over shorter horizons prices can move far out of line with the long-run trend.
A price series will sometimes enter a generational departure from trend known as a
supercycle. Mr. Jacks finds that supercycles tend to cluster around periods of mass
industrialisation or urbanisation, when soaring commodity demand butts up against
supply that is slower to respond. Unsurprisingly, many of the commodities Mr. Jacks
tracks entered a supercycle as of the late 1990s, as extraordinarily rapid Chinese
economic growth began to take off.
But Mr. Jacks finds that supercycles tend to peak within 15 to 20 years. That, one
supposes, is generally long enough for demand growth to ease amid soaring prices and
supply to take off. And that suggests that a supercycle peak is looming, assuming
the world has not passed it already. It is quite possible that the next decade or
so will bring commodity-price growth that is below the long-run trend level.
There are no guarantees, of course. To the extent that producers anticipate easing
price growth they may delay or idle exploration and production activities, propping
up prices. Emerging market demand could accelerate unexpectedly. But while in the
very short run markets can throw off wild price signals, over longer stretches of
time they still seem to do a good job responding to surging demand and bringing prices
back—eventually—to manageable long-run trends.