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NECSI paper on food prices published in PNAS, clarifies origins of Syrian crisis

A NECSI paper recently published in the Proceedings of the National Academy of Sciences explains the origins of dramatic food price increases that have been linked to the Arab Spring, Syrian crisis and resulting European migrant crisis. The paper can be found here<http://necsi.edu/research/social/foodprices/PNAS.html>.

The paper links sudden increases in food prices to U.S. policy decisions. While, the causes of high food prices have been debated, Prof. Yaneer Bar-Yam and his co-authors systematically rule out explanations that are not consistent with the data. They construct a dynamic model of food prices using two factors determined to have the largest impact: corn-to-ethanol conversion and investor speculation.

This new dynamic model of trend following overcomes the failure of equilibrium theories to quantify the impact of speculation. The fitting of actual prices to theory has a p value of 10^{-60}, and the out of sample fit is as good as many theories' in-sample fit, p<0.001. Ethanol conversion, which removes nearly 5 billion bushels of corn from the market each year, results in a smooth price increase, while speculation results in bubbles and crashes.

These findings significantly inform the discussion about food prices and market equilibrium, and have immediate policy implications. Unstable food prices promoted riots and revolutions in 2011, including in Syria. The subsequent destabilization of Syria as a nation state led to civil war, a power vacuum into which ISIS rose, and massive displacement of refugees and migrants.

Following the paper's release, it received press coverage from Motherboard. Their article can be found here<http://motherboard.vice.com/read/commodities-traders-helped-spark-the-war-in-syria-complex-systems-theorists-say>.
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