Are Farm Subsidies Making Us Fat?

In the past couple weeks, there have been a number of popular press articles suggesting that farm subsidies are a big part of the reason Americans eat unhealthy and are overweight. Here's the title from the New York Times: "How the Government Supports Your Junk Food Habit", and Fox News: "Government heavily subsidizes junk food, report suggests", and NPR: "Does Subsidizing Crops We're Told To Eat Less Of Fatten Us Up?". All the hubbub seems to stem from this article by some CDC researchers in JAMA Internal Medicine, which shows people who are more overweight tend to get more of their calories from foods that happen to be subsidized.

But, as we should all know by now, correlation is not causation.  Here's Tracie McMillian in a piece for National Geographic:

But what the study does not show is the degree to which subsidies—and, in particular, the ones that are currently in place—actually persuade people to eat more of those foods. The researchers, by the way, admit this: “We cannot say [the link between subsidies and consumption] is causal from this study,” says K.M. Vankat Narayan, a lead author.

So while there’s an accepted correlation between low prices and increased purchases, nobody really knows how much farm subsidies matter when it comes to which foods people buy—and eat.

She's right on the first part and wrong on the second.  There are actual lots of people who know how much farm subsidies contribute to food consumption, and they're called agricultural economists (in fact, McMillian goes on to then cite two prominent food and agricultural economists on the issue: Parke Wilde and David Just).  My view is in line with Wilde's and Just's:

Indeed, in contemporary America, “the potential impact of the agricultural subsidies on consumption right now is inconsequential,” argues David Just, an agricultural and behavioral economist at Cornell University. Subsidies for farmers are unlikely to have much impact on consumer prices, adds Wilde, because farmers’ share of what we pay at the store is so little.

Let me pause right here and say that the question of the causal relationship between farm policy and unhealthy food consumption is an empirical, positive question, not a normative one.  There are a variety of reasons one may think we should or should not have farm subsidies (I generally find myself in the latter camp for reasons I won't go into here), but for the moment let's set the "should" question aside and ask what the evidence actually says on the link between farm subsides and unhealthy eating.  

Here's what I wrote on the issue in a recent Mercatus paper (which came out well before all the JAMA paper and the resulting news stories):

Despite popular claims to the contrary, research suggests that farm subsidies have likely had little to no effect on obesity rates. First, although such policies may have had some effect on farm commodity prices, these inputs account for only a small share of the overall retail cost of food. For example, in 2013, only 7 percent of the retail price of bread was a result of the farm-gate price of wheat and other agricultural commodities. Even the enormous price swing that took wheat from around $3 per bushel in 2006 to almost $12 per bushel in February 2008 (a 300 percent increase) would be expected to increase the price of bread by only about 14 percent. Second, agricultural policies are mixed, and some policies (such as those for sugar, ethanol promotion, and the Conservation Reserve Program, or CRP) push the prices of agricultural commodities up rather than down. Third, despite the widely varying agricultural policies across countries and over time (see figures 14–16), those policies do not correlate well with differences in food prices and obesity rates across countries or with changes in obesity rates over time.

In the model I used for the forthcoming paper I wrote on the distributional impacts of crop insurance subsidies, I find that the complete removal of crop insurance subsidies to farmers would only increase the price of cereal and bakery products by 0.09% and increase the price of meat by 0.5%, and would also increase the price of fruits ad vegetables by 0.7%.  So, while these policies may be inefficient, regressive, and promote regulatory over-reach, their effects on food prices are tiny, and depending on which policy we're talking about, could push prices and consumption  up or down.  

For those truly interested, here's a small list of academic papers by economists on the relationship between farm policy and obesity/health (for links to the actual papers, just do a quick googlescholar search).

Alston, Julian M., Daniel A. Sumner, and Stephen A. Vosti, “Farm Subsidies and Obesity in the United States: National Evidence and International Comparisons,” Food Policy 33, no. 6 (2008): 470–79. 

Balagtas, J.V., Krissoff, B., Lei, L. and Rickard, B.J., 2014. How Has US Farm Policy Influenced Fruit and Vegetable Production?. Applied Economic Perspectives and Policy, 36(2), pp.265-286.

Beghin, John C., and Helen H. Jensen. "Farm policies and added sugars in US diets." Food Policy 33, no. 6 (2008): 480-488.

Miller,J. Coreyand Keith H. Coble, “Cheap Food Policy: Fact or Rhetoric?” Food Policy 32, no. 1 (2007): 98–111. 

Okrent, Abigail M.  and Julian M. Alston, “The Effects of Farm Commodity and Retail Food Policies on Obesity and Economic Welfare in the United States,” American Journal of Agricultural Economics 94, no. 3 (2012): 611–46.

Rickard, B.J., Okrent, A.M. and Alston, J.M., 2013. How have agricultural policies influenced caloric consumption in the United States?. Health Economics, 22(3), pp.316-339.

Zilberman, D., Hochman, G., Rajagopal, D., Sexton, S. and Timilsina, G., The impact of biofuels on commodity food prices: Assessment of findings. American Journal of Agricultural Economics, 95, no. 2 (2013) : 275-281.


At the Fork

A while back, I was contacted by some folks asking if I would agree to be interviewed for a new documentary about livestock production and animal welfare.  I was a bit skeptical and discussion with some of the producers didn't allay my concerns.  I wondered: was I being set up to be the stooge in a Daily Show type interview?  Would my words be taken out of context? There is certainly precedent for these sorts of shenanigans in documentaries, even by well known journalists.  Probably the only thing that kept me talking was the knowledge that the documentary was being made by John Papola, who along with Russ Roberts created the popular Keynes-Hayek rap videos.  

Long story short, I ultimately agreed to be interviewed, and about 10 seconds of my four hour interview can now be seen on screens across the country.  The resulting documentary, At the Fork, was even shown in theaters in Oklahoma  City and Tulsa a week or so ago.

I suspect some of my friends in the livestock industries will find things not to like about the film.  This piece in the National Hog Farmer, for example, questions why some large-scale commercial hog farmers agreed to be interviewed and bristles that the film was financially supported by HSUS and urges viewers at the end to eat less meat.  For my part, I wish more of the questions I was asked about the economics of livestock production and animal welfare made the film - most of the snippets of me contained brief explanations of different production systems.  

But, when it's all said and done, I think Papola did an admirable job trying to get an objective an honest picture of modern animal agriculture.  As I encouraged the producers to do, they actually went and talked to large-scale hog and poultry producers, asked why they did things the way they did, listened, and didn't put them in dim lighting with ominous music.  In fact, the only group who looked like they had something to hide is one large feedlot who wouldn't let the filmmakers on the property.  From my perspective, the only way to counter the argument that no one would eat meat if slaughterhouses and production facilities had glass walls, is to directly challenge the premise and be more transparent.   

Sure, the filmmakers didn't hit every nuance and industry talking point about gestation and farrowing crates or about improved resource use and carbon impacts, but this is not an industry film.  Imagine walking up to a stranger on the streets of New York City, Chicago, or Los Angeles and saying: "what do you think about modern livestock agriculture?"  or "here's a camera, go make a film about farm animal welfare in America."  What do you think you'd get?  From the livestock industry's perspective, I'd say they got about the best they could hope for in At the Fork.  

One other positive note.  So many food and agricultural documentaries are filled with anti-market, anti-capitalist undertones (or in many cases overtones).  Papola is a libertarian and you won't find that sort of sentiment in the film.  His is a market-based message: he's going to try to convince you to buy different types of animal products.  I spent a lot of time talking with him about whether government policies were to blame for consolidation in the food sector in general and large confinement operations in animal agriculture in particular.  By and large, I told him I didn't think there was good evidence for that line of argument.  I argued that it was predominately market forces driving these outcomes (none of this made the film).  I'm sure he could have found someone else to say otherwise to fuel a particular narrative, but he didn't and I take that as a sign that he was truly trying to learn and not just push an agenda.  

Enough of my thoughts.  Watch the film and decide for yourself.

Food Demand Survey (FooDS) - July 2016

The July 2016 edition of the Food Demand Survey (FooDS) is now out.  

Results reveal a reversal in the three-month slide in demand for meat products.   Willingness-to-pay (WTP) increased for all food products in July; there were sizeable increases in WTP for steak WTP (+46.44%) and deli ham (+33.15%) from June to July. This month, WTP for steak reached its highest point since FooDS began in May 2013. Compared to one year ago (July 2015), WTP is higher for all food products. 

Results also suggest an increase in spending at food away from home. Compared to June expenditures on food away from home were up 6.3% and there was a near doubling in plans to eat out more in July compared to June.  

Another major development was that this was the first time that farm animal welfare ranked in the top three issues of concern (behind E. Coli and Salmonella) since the beginning of FooDS.  

This month three new ad-hoc questions were added.  

The first dealt with the new GMO labeling bill I mentioned a couple days ago, which has been passed by the Senate and currently being considered by the House.   Participants were asked: “The US Congress is considering a bill that would require food companies to disclose whether a food contains genetically engineered ingredients. Food companies can comply by placing
text on packaging, provide a QR (Quick Response) code, or by directing consumers to a phone number or website. Do you support or oppose this legislation?”.

Approximately 81% of respondents stated they would support the bill, 7% said they would oppose the bill, and just over 12% of respondents stated “I don’t know”. 

At this point, we should all know these sorts of questions can be a bit misleading as consumers have very little information about the issue and can be shown to support other absurd policies like DNA labeling.  However, I'd read these results to suggest that mandatory GMO labels that include disclosure via QR codes do not substantively decrease consumer support for the policy.  

Second, participants were asked “Where do you tend to receive the most helpful and accurate information about food health and safety issues? (pick one issue)” Then 14 different sources were listed.

Local television news was listed most frequently as the most helpful and accurate information source (17%), while 11.7% of respondents said evening or nightly television news shows were the most helpful. Only 2.54% of participants listed books are their most helpful source of information. 5.37% of participants stated “other” as their most helpful source of information. Those who selected “other” gave examples including “”, “my own online research”, “Institute of Food Technologists mailing list”, “local highly educated farmer”, and “internet”.

Last, respondents were asked: “Where do you tend to receive the least helpful and inaccurate information about food health and safety issues? (pick one)” The same 14 sources were listed as in the previous question.

By far, social media was the most frequently listed least helpful and inaccurate source of information about food health and safety issues at 27%. 11.5% of participants stated that restaurant servers or chefs were the least helpful and inaccurate source of information. Friends and family was ranked third, with 10.1% of participants. 1.6% of participants selected “other” as their least helpful and inaccurate source of information. Those who stated other, listed examples including “internet news”, “nurses”, “family who think they know”, “Youtube”, and “Packaging”. 

To further flesh out the results, the following chart plots the sources according to the percent of respondents indicating the source as most accurate vs. the percent indicating the source as least accurate. Sources on the bottom right of the figure would be more universally seen as most helpful land accurate, where as those on the top left of the figure would be just the opposite.

Restaurant chefs and servers are among least helpful/accurate with local television
news being among the most helpful/accurate. Friends and family are the most polarized group, with roughly equal numbers of consumers listing the source as most accurate and least accurate.

A few items

I was recently interviewed for the Food Sommelier podcast.  I had a fun conversation with the host Annette Hottenstein, and we had a wide-ranging discussion that ranged from soda taxes and local foods to obesity and food innovation.   

Hopefully the podcast will tide you over while I'm finishing up another great summer school on Experimental Auctions.  This year the course has been in Sicily, and its been a great class with lots of discussion on how we can figure out what consumers really want and what they're really willing to pay.  Here's a group photo on our weekend excursion to Mount Etna, the largest active volcano in Europe (yes, that's smoke coming from the mountain!).  

Mandatory GMO Labeling Closer to Reality

I've written a lot about mandatory labeling of genetically engineered foods over the past couple years, and given current events, I thought I'd share a few thoughts about ongoing developments.  Given that the Senate has now passed a mandatory labeling law, and discussion has moved to the House, it appears the stars may be aligning such that a nationwide mandatory GMO labeling will become a reality.  

The national law would preempt state efforts to enact their own labeling laws, and it would require mandatory labeling of some genetically engineered foods (there are many exemptions and it is unclear whether the mandatory labels would be required on only foods that contain genetic material or also those - such as oil and sugar - which do not).  Food manufacturers and retailers can comply with the law in a variety of ways including on-package labeling and via QR codes.  Smaller manufacturers can comply by providing a web link or phone number for further information.  

Many groups that have, in the past, advocated for mandatory labeling are against the bill because, they say, it doesn't go far enough (e.g., this group is upset because it doesn't "drive Frankenfoods . . . off the market."). Other anti-mandatory labeling folks also don't like the bill because of philosophical opposition to signalling out a technology that poses no added safety risks.  

I suppose this is how democracy works.  Compromise.  Neither side got everything they wanted, but at least from my perspective, this is a law that provides some form of labeling, which will hopefully shelve this issue and allow us to move on to more important things in a way that is likely to have the least detrimental economic effects.   

I'm sympathetic to the arguments made by folks who continue to oppose mandatory labeling on the premise that our laws shouldn't be stigmatizing biotechnology.  Because a GMO isn't a single "thing" I agree the law is unhelpful insofar as giving consumers useful information about safety or environmental impact.  The law is also a bit hypocritical in terms of exempting some types of GMOs and not others.  One might also rightfully worry about when the government should have the power to compel speech and when it shouldn't.  And, I think we should be worried about laws which potentially hinder innovation in the food sector.  

But, here's the deal.  The Vermont law was soon going into effect anyway. The question wasn't whether a mandatory labeling law was going into effect but rather what kind.   The Vermont law was already starting have some impact in that state and would likely have had nationwide impacts.  Moreover, there didn't seem to be a practical legal or legislative way to prevent the law from going into effect in the foreseeable future.  

The worst economic consequences of mandatory labeling would have come about from those types of labels that were most likely to be perceived by consumers as a "skull and cross bones".   In my mind the current Senate bill avoided this worst case scenario while giving those consumers who really want to know about GMO content a means for making that determination.  That doesn't mean some anti-GMO groups won't use the labels as a way of singling out for protest companies that use foods and ingredients made with the technology, but at least the motives are more transparent in this case.  For some groups it was never about labeling anyway - it was about opposition to the technology.  That, in my opinion, is a much less tenable position, and is one that will hopefully be less successful in the long run.