rofessor Nurkse presented a compelling case against the price
stabilization policies of national marketing boards for primary products
based on the fact that these policies may reduce the quantity of foreign
revenue accruing to the primary producing country [1], If they do, they
may act to restrict the rate of economic development. To maximize export
earnings, he proposed elimination of the marketing boards' function of
insulating domestic producers of primary products from demand
fluctuations on the world market. These demand fluctua¬tions were
considered to be the result of cyclical fluctuations within the advanced
countries, hence they were treated in a short-run context. To see
Professor Nurkse's argument, consider a marketing board which has as its
objective the stabilization of the price of a primary product, X, to the
domestic producers of X in country A by use of a buffer fund1. This will
be accomplished by the board, as a domestic monopsonist, if it fixes a
price for its purchases of the product, then sells on the world market
for whatever it can get in light of world demand conditions. Assuming
that stabilization of price is its sole objective, it will select a
domestic price which represents the anticipated weighted average of the
world market price over some time period so that the board itself will,
hopefully, show neither a profit nor a loss at the end of the period
from these tax and subsidy operations. While the short run free market
supply function, Sf (which we assume to be linear, of positive price
elasticity, stable, and responsive without lags), still exists, the
stabilization of domestic price at p in Figure 1 will yield a supply
function to the world market, Sm, which is perfectly inelastic at the
quantity, Q.
Economic Evaluation of Wind Power Projects in a Mix of Free and Regulated Market Environments in Brazil