When Is Reliance on Voluntary Approaches in Agriculture Likely to Be Effective?

That's the title of a paper by Kathleen Segerson recently published in the Applied Economics Perspectives and Policy.  Although I think she under-estimates the power of factors like reputation and over-estimates the ability of government solutions to efficiently coordinate actions, she offers a useful discussion that we ought to have more often.  The abstract:

Voluntary approaches have been used in a variety of contexts and for a variety of purposes in agriculture, including voluntary conservation programs and product labeling. This paper provides an overview of some of the general principles that emerge from the literature on voluntary approaches and their application in agriculture. The literature suggests that, to be effective, voluntary approaches must provide sufficiently strong participation incentives to a targeted population, clearly identify standards for behavior or performance that ensure additionality and avoid slippage, and monitor outcomes. Thus, reliance on voluntary approaches in agriculture is likely to be effective only if there is sufficient market demand for certain product characteristics, significant public funds are committed to pay for voluntary actions, or the political will exists to impose regulations if voluntary approaches fail.

Farm Subsidies and Input Use

I was recently looking back at The Undercover Economist written by Tim Hartford about 8 years ago.  It definitely belongs in the cannon of pop-econ books along with The Armchair Economist (my favorite), Naked Economics, and Freakonomics.  

In any event, I was intrigued to see this graph Hartford included on the relationship between agricultural subsidies and fertilizer use.  

Is Meat Production Wasteful?

About a month ago, The Council for Agricultural Science and Technology (CAST) put out a report on Animal Feed vs. Human Food.  I just got around to reading it and it has some interesting calculations and statistics.

The report addresses the common claim that livestock production is wasteful because crops that could be fed to humans (e.g., corn, soy) instead go to animals.  For example, here is an old quote from David Pimentel, a former Cornell Professor:

If all the grain currently fed to livestock in the United States were consumed directly by people, the number of people who could be fed would be nearly 800 million

For another example, here is PETA:

It takes up to 13 pounds of grain to produce just 1 pound of meat

I think one of the most colorful ways I've heard this criticism expressed is that eating meat is like going to the grocery store and buying 13 (or 6 or 3 depending on which source you read) boxes of corn flakes and throwing 12 down the garbage.

This discussion misses at least three important issues.  First, many animals (particularly cattle) eat things we humans can't - mainly grass and hay.  Second, one needs to look at more than just calories in and calories out because there are other nutrients - particularly protein - that our body needs.  I'll get to the third issue in moment.

Jude Capper had some interesting graphs in her presentation of the CAST report that directly address the first two issues.  The graphs focus on the input-output relationship between human-edible protein and calories.

The above graph shows that dairy and suckler beef (that's their name for grass fed beef I believe) generate more protein than they consume from human-edible sources.  

The next graph shows the results for calories (or energy as it is titled).  They report that dairy produces about twice as many calories as it takes in from human-edible sources

Still, even these statistics suggest that it is "wasteful" to consume certain types of meat and animal products because they yield less energy or protein than they consume.

That brings me around to the third reasons why some these comparisons are a bit misleading: they focus only on costs and ignore benefits. Here is what I had to say about that a few months ago:

One fact that is often forgotten in meat debates is that it isn't sufficient to look at the amount of energy (or crops) expended to get beef.  We also have to look at what we get.  Most people really like the taste of meat.   

Almost no one looks at their iPad and asks, "how much more energy went into producing this than my old Apple II." The iPad is so much better than the Apple II.  We'd be willing to accept more energy use to have a better computer.  Likewise a nice T-bone is so much better than a head of broccoli.  I'm willing to accept more energy use to have a T-bone than a head of broccoli.    

Now, if my T-bone consumption is imposing costs on others, let's talk about that.  But, here the focus would be on the issues causing the externality (e.g., CO2) not on meat per se.  

Economically Optimal Food Waste

It is hard to turn around without seeing another story on food waste.  The latest was this Freakonomics blog post covering an article in Foreign Policy by John Norris.  Just prior to that was a widely discussed study by Harvard Law School, which focused on the effect of expiration dates on food waste.  A widely cited statistic comes from this UN FAO publication, which suggests a third of all food produced is wasted. 

Much could be said about the methodological short-comings of many of the studies on this topic, not to say anything about the ideological motivations behind many (but certainly not all) such claims (waste is taken as some sort of condemnation of capitalism; the problem of production is “solved”, and we just need to distribute more equitably – as if one can confiscate and redistribute without destroying the incentive to produce). 

Nevertheless, when thinking about the problems of global hunger and feeding a growing population, all solutions need to be on the table, and reducing was is one of them.  As some of these publications make clear, there are legal and industry practices that could be changed to reduce waste (crazy policies like Bloomberg’s ban on food donations to homeless shelters because of salt content is one obvious example), and we should never forget technological advancements that help prevent waste. (preservatives anyone?) 

But, we will never have zero waste. 

Why?  As my friend Bailey Norwood pointed out to me the other day: there is an economically optimal amount of waste. 

Do you ever buy milk with the expectation that some of it will get thrown out?  I do.  The cost to me of running out of milk and having to go out to buy more at midnight if one of my kids has a midnight craving is much higher than the cost of buying an extra half gallon which goes sour before it can be completely consumed.  Convenience, hassle avoidance, and extra trips to the store all are valuable to me; valuable enough that it occasionally makes sense to throw away a little milk.  Otherwise, I’d be throwing away my valuable time, sleep, and gas to the store.  One thing “wasted” is another thing gained (or at least not foregone).

At each and every phase of the food production, distribution, and consumption chain, similar calculations will reveal situations in which the benefit of preventing waste simply isn’t high enough to merit the effort.

I’m sure there must be some papers on this in the economics literature, but a quick search didn’t reveal much.  Some sort of modeling would be useful to identify the determinants of waste, and reveal when it is actually economically efficient to do something about it.

The Foreign Policy article has some useful discussion of factors that could fit well into an economic model of waste.  My intuition is that it is more likely to be economically optimal to waste when:

• food prices are lower relative to fuel, storage, etc.
• incomes are higher
• food preserving technologies (e.g., infrastructure, refrigeration, sodium benzoate, etc.) are more expensive or less available
• there is greater demand for freshness, appearance, etc. (likely correlated with income)  
• laws encouraging waste are more prevalent

Thoughts?  

Reduced Meat Consumption and Environmental Impacts

It is often said by environmental groups and by many in the media that eating meat is one of the worst things one can do for the environment. 

Just to give a few examples, NPR ran a series of shows last year about this time about meat.  In one of these shows, it was said  that meat consumption has: 

more of an impact on the environment than any other food we eat.

and Dan Charles, the NPR correspondent wrote meat production:

It's one cause of deforestation, global warming, water pollution, a lot of environmental problems

To give another example, Bryan Walsh, writing for TIME magazine in 2008 said: 

It's true that giving up that average 176 lb. of meat a year is one of the greenest lifestyle changes you can make as an individual.

And, of course, one can find even more polemical arguments that make a similar case, such as Mark Bittman's TED talk.

One of the bases for these claims are the greenhouse gas emissions caused by livestock production.  Estimates widely vary, but one common stat cited from the UN FAO is that livestock are responsible for 18% of all global greenhouse has emissions (note, however, some mistakes in their calculations have come to light suggesting this figure is inflated).  Some environmental groups put the statistic much higher, saying livestock production is "tied to" 51% of global greenhouse emissions (a figure I don't find many credible scientists supporting).  But our own EPA estimates that within the US that ALL of agriculture only contributes 8% of total greenhouse gas emissions from 1990-2011, and only 6.9% in 2011.  Livestock, thus must be something less than this (it was estimated at around 3% by the EPA a few years ago).   

I mention all this because of several news reports I've heard in the past couple days, such as this one from the Washington Post, indicating:

Greenhouse gas emissions from power plants and other industrial facilities declined by 4.5 percent from 2011 to 2012 as utilities continued to switch from coal to natural gas to generate electricity and produced slightly less power overall, the Environmental Protection Agency reported Wednesday.

Greenhouse gas emissions from these sources have declined by 10 percent in the two years since the EPA began compiling the data in 2010.

A 4.5% reduction in 1 year and a 10% reduction in two years is a sizable change. According to the EPA data, power plants account for 31% of total U.S. greenhouse gas emissions emissions.  Thus, a 10% decrease in power plant emissions results in a 3.1% decrease in total US emissions.  

How much would one have to cut livestock production to achieve this same 3.1% decrease in total US emissions resulting from a switch to natural gas (primary brought about, in part, by fracking technology)?  Well, simple math shows that it if you hold the share of greenhouse gas emissions by livestock constant, you'd have to reduce livestock production by more than 100% if you believe the EPA's figure (that 3% of all GHG emissions are from livestock) or 17.2% if you believe the UN FAO's number (that 18% of all GHG emissions are from livestock) to achieve the same outcome that we've actually witnessed in the last two years in part through fracking.   Yes, reducing livestock production might reduce greenhouse gas emissions, but it seems much more has been cut by a switch from coal to gas than we can probably ever expect by reducing meat consumption.  

It is also useful to add that technological change in has led to reductions in greenhouse gas emissions in livestock production.  One study in the Journal of Animal Science by Jude Capper calculates technological change from 1997 to 2007 has reduced methane  emissions by about 23% and carbon emissions by about 20%.  Indeed, the executive summary from the EPA's report on changes in emissions indicates a major reduction in methane emissions has come from changes in livestock production (emphasis added):

CH4 emissions, which have decreased by 8.2 percent since 1990, resulted primarily from natural gas systems, enteric fermentation associated with domestic livestock, and decomposition of wastes in landfills.