This is the Cato Daily Podcast for Friday, December 19, 2008.

I'm Caleb Brown.

Why don't markets for food function as well as they could around the world?

And who pays the price when those markets are purposefully distorted?

Sally James Trade Policy Analysts at the Cato Institute offers her thoughts.

Food prices generally seem to have hit high in July and since then have fallen back from those historic highs.

They're still high compared to say 18 months two years ago and it's still causing problems

for poor people around the world, but they've certainly deflated since the July when the crisis seemed to have hit its peak.

In terms of the government's impact on the price of food for good or ill, is it mostly

unilateral policies, is it bilateral trade agreements, is it multilateral trade agreements that can be, that we could point to as

culprits for inequities in food prices?

Well, certainly there's been some unilateral changes in places like the European Union.

They've stopped, well, they've at least reduced the amount of, say, export subsidies

that were historically depressing world food prices, that may have some effect.

But the biggest changes seem to have been, at least in terms of government policy, is this

push towards using foodstuffs like corn and soybeans, other oil beans, as energy sources.

Now there's a lot of, I guess, controversy about how much those policies are responsible for the run-up in food prices, certainly

other things like the fall and the dollar up until recently. The weather obviously has a huge effect and we had some terrible weather

conditions in historically big exporting countries of agricultural commodities that

can account for some of the supply disruptions. On the demand side we've had

growing demand for food. That also explains perhaps some of this fall in food

prices since the July highs. In other words, the world economy is growing.

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