This Is What Happens When Markets Are Too Efficient

<p>A couple weeks ago, the price of oil <a href='https://www.cnbc.com/2020/04/26/why-oil-prices-went-negative-and-why-they-can-go-negative-again.html'>dipped below zero</a> (negative $37.63, to be exact). This was unprecedented. Decreased demand due to COVID-19, the Russia-Saudi Arabia oil war, and near-full storage capacity—together, they briefly forced producers to pay others to take oil off their hands.</p> <p>At the same time, we started hearing reports of food producers <a href='https://www.nytimes.com/2020/04/11/business/coronavirus-destroying-food.html'>dumping milk</a>, <a href='https://www.reuters.com/article/us-health-coronavirus-usa-lettuce/california-farmer-plows-under-lettuce-after-coronavirus-shutters-restaurant-market-idUSKCN21Y02M'>plowing under lettuce</a>, and <a href='https://www.wsj.com/articles/farmers-deal-with-glut-of-food-as-coronavirus-closes-restaurants-11586439722'>smashing eggs</a>—even as shoppers complained that their grocery stores couldn’t seem to keep milk and eggs in stock. Idaho farmers dumped potatoes they couldn’t sell...until an ad hoc <a href='https://www.accuweather.com/en/weather-news/mountain-of-spuds-discarded-by-idaho-farmers-saved-in-potato-rescue/729662'>“potato rescue team”</a> was formed to load potatoes into the back of pickups and get them to food-insecure neighbors. Meanwhile, 61,000 egg-laying chickens were <a href='https://www.startribune.com/egg-demand-shifted-and-61-000-minnesota-chickens-were-euthanized/569817312/'>euthanized</a> in Minnesota because of shifting demand.</p> <p>What do negative oil prices and mountains of discarded potatoes have in common? They both demonstrate how incongruous our markets have become, how divorced they are from reality, and how fragile. It’s a moment, says Strong Towns president Chuck Marohn, reminiscent of The Grapes of Wrath.</p> <p>In this episode of the Strong Towns podcast, Chuck looks at the oil and food systems in detail. In addition to explaining why it’s possible to have a negative price for oil, Chuck examines