Did the Cancer Announcement Affect Bacon Demand?

On October 26, 2015 the International Agency for Research on Cancer (IARC) — an agency within the World Health Organization — released its report indicating that processed meat is carcinogenic.  

The announcement sparked a lot of media coverage with titles like: "Bad Day for Bacon".  (Here were my thoughts shortly after the announcement, along with some survey responses based the news).

Despite the news coverage after the announcement, I haven't seen much investigation of whether it impacted meat markets.  Thus, I thought I'd take a look at the data, recognizing it is probably impossible at this point to conclusively identify whether the IARC report caused a shift in demand.

I turned to the USDA Ag Marketing Service's daily reporting of pork primal composite values.  Rather than just looking at what happened to the prices of bacon (or rather pork belly) in isolation, it is probably useful to look in relation to another cut that may be less affected by the announcement.  I chose the pork loin.  This is an attempt to control for any changes over time happening on the supply-side (the quantity of loin from a pig is, at least in the short run, in fixed proportion to the quantity of pig belly).

I calculated the ratio of pork belly prices to pork loin prices over the past year.  The graph below shows the price ratio before and after the IARC announcement.  In the few weeks before the announcement, bellys were selling at 1.9 times the price of loins.  In the few weeks after the announcement, bellys were selling at only 1.5 times the price of loins.  Thus, there has been a roughly 26% drop in the relative value of bacon. 

At this point, I'd be hesitant to say that the IARC announcement is THE cause of this change, but the large immediate drop just following the release date is suggestive of some impact.  

The Cost of Others Making Choices for You

The journal Applied Economics just released a paper entitled "Choosing for Others" that I coauthored with Stephan Marette and Bailey Norwood.  The paper builds off our previous research that aimed to study the value people place on the freedom of choice by trying to explicitly calculate the cost of others making choices for you (at least in our experimental context).  

The motivation for the study:

“It is not uncommon for behavioural economic studies to utilize experimental evidence of a bias as the foundation for advocating for a public policy intervention. In these cases, the paternalist/policymaker is a theoretical abstraction who acts at the will of the theorist to implement the preferred plan. In reality, paternalists are flesh-and-blood people making choices on the behalf of others. Yet, there is relatively little empirical research (Jacobsson, Johannesson, and Borgquist 2007 being a prominent exception) exploring the behaviour of people assigned to make choices on another’s behalf.”

The essence of the problem is as follows:

“When choices are symmetric, the chooser gives the same food to others as they take for themselves, and assuming the recipient has the same preferences as the chooser, the choice inflicts no harm. However, when asymmetric choices occur, an individual receives an inferior choice and suffers a (short-term) welfare loss. Those losses might be compensated by other benefits if the chooser helps the individual overcome behavioural obstacles to their own,
long-run well-being. However, the short-term losses that arise from a mismatch between outcomes preferred and received should not be ignored, though they often are, and this study seeks to measure their magnitude in a controlled experiment.”

What do we find?

“We find that a larger fraction of individuals made the same choices for themselves as for others in the US than in France, and this fraction increased in both locations after the provision of information about the healthfulness of the two choices. ”

and

“What is interesting is that the per cent of paternalistic choices declined in both the US and France after information was revealed, with a very small decline in France and a considerable decline in the US. The per cent of indulgent choices also declined after information, so the effect of information was that it largely reduced asymmetric choices. Information substituted for paternalism. After information, choosers selected more apples for themselves and more apples for others, such that there was less need for paternalism to increase apple consumption.”

The Future for GMO Foods

On a number of occasions, I've been asked questions like, "What will it take for consumers to become accepting of GMO foods?"  My guess is that we probably aren't going to see much movement resulting from new information or new communication strategies, but rather I suspect a bigger catalyst may be the technology itself.  When scientists produce a product people really want, consumers probably won't care whether it's labeled and they'll overlook whatever small perceived risks are present.  

A while back when writing about the duplicity of a many food companies on the issue of GMO labeling, I wrote

“For now, food companies are not required to add labels indicating the presence of genetically engineered ingredients. But, it might ultimately be in their best interest to do it voluntarily, and in a way that avoids the negative connotations implied by the labels that would have been mandated in state ballot initiatives.

Some day in the near future, after concerted efforts to educate the public and create consumer-oriented biotechnologies, we may see food companies clamoring to voluntarily add a label that proclaims: proudly made with biotechnology.”

I've been reading Dan Charles's 2001 book Lords of the Harvest.  While I could quibble with some of the book's tone and framing of the issues, overall it is an educational and fascinating historical account of the emergence of biotech crops, including many first-hand interviews with the key players (many of whom are still active today).  

Writing about a new genetically engineered tomato that had longer shelf life and better processing characteristics that preserved taste, Charles includes a passage that indicates how GMOs might have evolved  differently (and might still evolve differently) in the public perception.  He writes the following about activities circa 1996:

“Best and his colleagues at Zeneca Plant Sciences had spent an enormous amount of time cultivating British journalists and lining up partners in the food business. They’d already decided that this tomato paste would be packaged in special cans and labeled as the product of ‘genetically altered tomatoes,” even though such labels weren’t required. Two large supermarket chains, Sainsbury and Safeway, agreed to carry the product and promote it. They even turned genetic engineering into a marketing gimmick, advertising the launch of the tomato paste as ‘a world-first opportunity to taste the future.’

The Zeneca tomato paste was in fact purely an experiment in marketing. The tomatoes were grown during a single summer in California and processed using conventional methods, then packaged and flown to Europe. As a consequence, the genetically engineered paste actually cost more to produce than conventional tomato paste and tasted exactly the same. Yet Zeneca and its partners decided to charge less than the going rate for it. They were willing to take a financial loss just to find out if the British public would buy a genetically engineered product.

The answer turned out to be an unequivocal ‘yes.’ Through the summer of 1996 Zeneca’s red cans of tomato paste, proudly labeled ‘genetically altered,’ outsold all competitors.

‘You need to give the consumer a choice,’ says Best. ‘Once they had that choice, eaten it for a couple of years, found that there was no big deal, I think the whole thing would have gone away.’”

So, what happened?  A confluence of events.  Mad Cow was soon discovered in Britain, which heightened food fears and undermined food regulatory agencies (who'd previously promised it was safe to eat beef).  Charles seems to blame Monsanto who he argues focused more on gaining regulatory approval than on charting a path that would engage the public on the issue. In several spots in the book, Charles talks about how Best, and Salquist with Calgene in the US,  masterfully shaped public acceptance for their tomatoes products before bringing them to market.   

 But, as I see it, it was also the technology itself.  While farmers could clearly see the benefits of herbicide-resistant and Bt crops, and they quickly snatched them up in every location where they were allowed, consumers couldn't and still can't.  Fast forward 20 years, and while "GMOs" have become a lighting rod and a proxy-fight for all sorts of agricultural issues,  the underlying reality of "who is  perceived to benefit" still hasn't changed.   I think the anti-biotech crowd knows this because they've fought hard to keep some of the most promising consumer-oriented products from the market.  

So, what will it take to change consumer acceptance of GMOs?  New companies with new products who want to sell and tout the use of biotechnology rather than hide it.  One of the implicit lessons of Charles's book is that companies who seem dominant and powerful today are often upended by entrepreneurs with a new products and a new vision for the future.  My bet is that the same forces will eventually end our current and long-standing quagmire related to public perceptions of GMO foods.  

The Behavioral and Neuroeconomics of Food and Brand Decisions

That's the title of a special issue I helped edit with John Crespi and Amanda Bruce in the latest issue of the Journal of Food and Agricultural Industrial Organization.  

Here's an excerpt from our summary:

“To economists interested in food decisions, progress seen in other fields ought to be exciting. In the articles for this special issue, we gathered information from a wide range of research related to food decisions from behavioral economics, psychology, and neuroscience. The articles, we hope, will provide a useful reference to researchers examining these techniques for the first time…The variety of papers in this special issue of JAFIO should provide readers with a broad introduction to newer methodological approaches to understanding food choices and human decision-making”

A complete listing of the authors and papers are below (all of which can be accessed here)

•       The Behavioral and Neuroeconomics of Food and Brand Decisions: Executive Summary
o   Bruce, Amanda / Crespi, John / Lusk, Jayson

•       Cognitive Neuroscience Perspectives on Food Decision-Making: A Brief Introduction
o   Lepping, Rebecca J. / Papa, Vlad B. / Martin, Laura E.

•       Marketing Placebo Effects – From Behavioral Effects to Behavior Change?
o   Enax, Laura / Weber, Bernd

•       The Role of Knowledge in Choice, Valuation, and Outcomes for Multi-Attribute Goods
o   Gustafson, Christopher R.

•       Brands and Food-Related Decision Making in the Laboratory: How Does Food Branding Affect Acute Consumer Choice, Preference, and Intake Behaviours? A Systematic Review of Recent Experimental Findings
o   Boyland, Emma J. / Christiansen, Paul

•       Modeling Eye Movements and Response Times in Consumer Choice
o   Krajbich, Ian / Smith, Stephanie M.

•       Visual Attention and Choice: A Behavioral Economics Perspective on Food Decisions
o   Grebitus, Carola / Roosen, Jutta / Seitz, Carolin Claudia

•       Towards Alternative Ways to Measure Attitudes Related to Consumption: Introducing Startle Reflex Modulation
o   Koller, Monika / Walla, Peter

•       I Can’t Wait: Methods for Measuring and Moderating Individual Differences in Impulsive Choice
o   Peterson, Jennifer R. / Hill, Catherine C. / Marshall, Andrew T. / Stuebing, Sarah L. / Kirkpatrick, Kimberly

•       A Cup Today or a Pot Later: On the Discounting of Delayed Caffeinated Beverages
o   Jarmolowicz, David P. / Lemley, Shea M. / Cruse, Dylan / Sofis, Michael J.

•       Are Consumers as Constrained as Hens are Confined? Brain Activations and Behavioral Choices after Informational Influence
o   Francisco, Alex J. / Bruce, Amanda S. / Crespi, John M. / Lusk, Jayson L. / McFadden, Brandon / Bruce, Jared M. / Aupperle, Robin L. / Lim, Seung-Lark

Nutritional Guidelines Redux

By now, I'm sure many readers have seen the announcement that the secretaries of the USDA and HHS have announced that the latest dietary guidelines will NOT include issues of sustainability.

This is a topic I've commented on several times in the past, and I was interviewed by Stewart Varney on the Fox Business Network yesterday about the development (I haven't found a link yet to post).

Here are just a few scattered thoughts and comments.

First, it is a bit odd that the nutritional guidelines don't consider behavioral responses of consumers.  That is, if it is recommended not to eat food type X, then what will consumers switch to eating instead?  Note that the question isn't: what do we wish consumers would eat instead, but rather what substitutions will actually occur?  This issue was highlighted in a post by Aaron Carroll on the NYT Upshot blog when discussing a large study that showed reducing saturated fat intake didn't produce noticeable health benefits: 

“The study also resulted in a reduction of unsaturated fats and an increase in carbs. That’s specifically what the committee argues shouldn’t happen. It says that bad fats should be replaced with better fats. However, people did reduce their saturated fats to 10 percent of intake, and didn’t see real improvements in outcomes. This has led many to question whether the quantitative recommendation made by the committee is supported by research.”

In a day and age when behavioral economics is all the rage, and is even being required by the White House, it is a bit absurd to believe consumers will follow all the guidelines and recommendations to-a-tee.  A more pragmatic approach is to realize most people will devote enough attention to get a couple take-home messages, and then act.  We need to study how consumers will actually substitute given their preferences and the messages they digest.  This isn't necessarily a critique of information behind the guidelines themselves (after all, we do want some systematic, scientific summary of the state of nutritional knowledge), but rather a call for research on how the guidelines are actually implemented and communicated and are ultimately used by consumers.

Second, this article by Tania Lombrozo at NPR touches on an issue I addressed several months ago: when guidelines mix nutrition and "sustainability", it necessarily involves value judgments not  science.  She writes:

“Science can (and should) inform our decisions, but you can’t read off policy from science. Invoking science as an arbiter for questions of values isn’t just misguided, it’s dangerous — it fails to recognize what science can (and can’t) provide and it fails to make room for the conversations we should be having: conversations about the kinds of lives we ought to live, the obligations we have to each other, to future humans and to other animals, and — among other things — what that means for the food choices we make every day.”

Finally, looking at a lot of discussion surrounding this issue, while the guidelines purportedly discuss "sustainability" - the issue is often boiled down to a single issue: greenhouse gas emissions.  While it is clear that beef is a larger emitter of greenhouse gasses than most other animal and plant-based food, the impacts need to be placed in context.  In the US, livestock production probably accounts for a very small percentage of all all greenhouse gas emissions.  Telling people to eat less meat will likely have small effects on greenhouse gas emissions.  My gut feeling is that further investments in productivity-enhancing research will have a larger effect on greenhouse gas emissions than cajoling consumers.  

In other places discussing "sustainability" the issue of food security is mentioned, as is resource use.  To an economist's ears, when I hear "resource use", I immediately think of prices.  Prices are the mechanism by which resources get efficiently allocated in a market-based economy.  As such, it gives me pause when I think of a report by a a group of nutritionists making recommendations on proper resource use.   I'd never trust a dictator (or even a group of economists) on having enough knowledge to making optimal decisions on resource use.  Beef is a relatively expensive food.  That tells us it is using a lot of resources, and that higher price causes us to eat less than we otherwise would.  

But, what about externalities?  To the extent beef production uses a lot of corn or land, that's already reflected in the price of beef.  But, does the price of beef reflect water use and potential (long run) impacts of greenhouse has emissions?  Probably not fully.  So, the key there is to try to get the prices right.  Well functioning water markets would be a start.  Greg Mankiw recently had an interview on getting the price of carbon right.  Once the prices are right, then "recommendations" regarding resource use are somewhat meaningless: you're either willing to pay (and able) the price to buy the items you like to eat or not.