Giffen Goods Are Real

Rare, but apparently someone has found a proper example of the law of demand failing, distinct from the luxury "Veblen good" category. From an Economist blog in 2007:

These “Giffen goods” show up in every introductory economics textbook as a freak case when the law of demand fails… Jensen and Miller look at poor Chinese consumers and demonstrate that they consume more rice or noodles, their staples, as prices go up…. People need a certain amount of calories to survive—let’s say 1600 per day. You can either get that by consuming rice and perhaps some vegetables alone, or by eating rice, vegetables and a few bites of meat.But meat is expensive. As the price of rice goes up, these poor Chinese can no longer afford the luxury of cooking meat, yet they still need to get to their 1600 calories. So they eat rice instead, which is still relatively cheap compared to meat. Voila!: Giffen behaviour in action.What does this mean for the real world? Prices of certain food crops have increased by as much as twofold over the last 18 months, which has lots of negative consequences for the world’s poor. One such consequence might be that demand for staples has gone up even further.

Quoted from http://www.economist.com/blogs/freeexchange/2007/07/as_price_goes_up_so_does_deman