What’s That Have to Do With the Price of Beer in Germany?

Dan Hamermesh, on his Economic Thought of the Day blog — it is excellent, and always fun — wrote this recently:

A disaster has occurred in Germany: The staple drink – beer – is rising in price. The reason is that there is a worldwide shortage of barley, a major ingredient in the brew. This has pushed up the price of barley, and shifted the supply curve of beer to the left. I would think that the shortage is temporary – with higher prices of barley, more farmers will plant the crop. That should alleviate the shortage, bring the price of this input back down, and after a year or two lead beer prices back more or less to their current levels. Not much consolation for those wishing to quaff the brew of the holidays, but their pain is probably going to be short-lived (and, if they drink enough, they won’t remember it anyway!).

One upside of this “disaster” is that there may be less crime in Germany, at least in the short run. Here’s what we wrote on the subject in a column about the economic impact of different weather events, including global warming:

Consider 19th-century Bavaria. The problem there was rain – too much of it. As Halvor Mehlum, Edward Miguel and Ragnar Torvik explained in a recent paper, excessive rain damaged the rye crop by interfering with the planting and the harvest. Using a historical rainfall database from the United Nations, they found that the price of rye was significantly higher in rainy years, and since rye was a major staple of the Bavarian diet, food prices across the board were considerably higher in those years, too. This was a big problem, since a poor family at the time would have been likely to spend as much as 80 percent of its money on food. The economists went looking for other effects of this weather shock. It turns out that Bavaria kept remarkably comprehensive crime statistics – the most meticulous in all of Germany – and when laid out one atop the other, there was a startlingly robust correlation between the amount of rain, the price of rye, and the rate of property crime: they rose and fell together in lockstep. Rain raised food prices, and those prices, in turn, led hungry families to steal in order to feed themselves.

But violent crime fell during the rainy years, at the same time property crimes were on the rise. Why should that be? Because, the economists contend, rye was also used to make beer. “Ten percent of Bavarian household income went to beer purchases alone,” they write. So as a price spike in rye led to a price spike in beer, there was less beer consumed – which in turn led to fewer assaults and murders.