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Meat Demand in an Era of High Prices

The journal Applied Economic Perspectives and Policy just accepted a paper I've written with Glynn Tonsor, which provides new estimates of consumer demand for different meat products using what is probably one of the largest and longest-running surveys choice experiments (a survey method) to date.  

The graph below showing changes in retail meat prices from January 2010 to January 2015 is  what motivated the paper. Beef and pork prices rose dramatically over this period (note: in the past few months they've come back down) whereas chicken prices were and still are fairly stable.   The following is further motivation from the paper:

“Industry observers have expressed surprise about how consumers have responded to recent price changes (Ishmael, 2014). In particular, expenditures for beef and pork have not fallen as much as some people expected given the high prices. Industry analysts have asked “where is the tipping point” when consumers will stop buying beef and pork (Rutherford, 2014), but it may be that demand elasticities are more non-linear than previously realized. Moreover, relative price swings would have seemed to have favored chicken over beef and pork, and yet there does not seem to be a high degree of substitution in the current market environment. Such observations raise the possibility that cross-price elasticities have changed or are lower at higher price levels.”

You can read the paper for the methods.  Here I'll just highlight what we found.

First, people with different incomes choose different things.  High income consumers are more likely to choose steak and chicken breast than are low income consumers, and the opposite is the case for chicken wings, ground beef, and deli ham.  

Second, beef prices are more sensitive to changes in the price of chicken than the reverse.  Here's an illustration of that phenomenon using our estimated model for middle income consumers.

Third, and somewhat surprisingly (though consistent with industry observations over this period), the quantity of beef and pork demanded is less sensitive to price changes when prices are high as compared to when prices are low.  In econ-jargon, demand is more inelastic as prices rise.  You can see that in the graphs above, and the paper fleshes out that finding a bit more by showing the bias in models that ignore this non-linearity in demand. 

Hopefully these new estimates will help us better predict in the near future what happens when beef and pork prices fall, and will help producers better anticipate the impacts of future price hikes.

This analysis used a huge data set (110,295 choices made by 12,255 consumers) collected over a year and half long period.  This is of course from my Food Demand Survey (FooDS).  The present analysis assumed people's preferences staid the same over this period.  Up next on the research agenda is to look at how these demand estimates have been changing (or not) over time using even more data over a longer time period., and investigating whether these survey-based demand changes can forecast changes in retail meat prices.   

Ethics of Meat Eating

About a month ago, Nathanael Johnson wrote a piece for Grist asking: Is there a moral case for meat?  In the piece, he writes: 

“The arguments against eating animals are pretty convincing. But surely, I thought, there were also intellectuals making convincing counterarguments. Right? Nope. Not really.”

His sentiment reflects a common theme, it seems, in writing about animal welfare and vegetarianism.  In fact, back in 2012, the New York Times ran a contest for people to write essays justifying that it is ethical to eat meat.  The premise was essentially the same as that put forth by Johnson:

“those who love meat have had surprisingly little to say. . . few have tried to answer the fundamental ethical issue: Whether it is right to eat animals in the first place . . .”

A blog post for the New York Times by Bob Fischer and James McWilliams earlier this week attempts to adjudicate between competing factions within the vegetarian/vegan movement.  In the nearly 1000 comments on the post, again and again, crops up the same premise mentioned above: that there is no intellectually sound ethical case for eating meat. 

Ultimately, however, I think this premise is wrong.  There are many intellectually sound, internally consistent arguments for eating meat.  I think what many of these people are saying is "well, I'm not convinced by those arguments."  But, that's not the same thing as saying such arguments are non-existent or bereft of intellectual punch.  I will be the first to admit that there are a number of well written, internally-consistent philosophical discourses that make a compelling case against eating meat. But, that doesn't imply there aren't good counter arguments on the flip side.   

A first place to start would be with the winner (and runners up) of the aforementioned New York Times Essay Contest.  

I also suggest a chapter by the Judge Richard Posner in the book Animal Rights edited by Sunstein and Nussbaum.  

Another good place to turn would be this intelligence squared debate, where four invited guests debate the motion: don't eat anything with a face.  Chris Masterjohn and Joel Salatin make the case against the motion.  After the debate, the audience was just about split between the for and against side (also note that 95% of Americans routinely eat things that had faces).  Now, you may not agree with Masterjohn and Salatin's arguments, but are you comfortable calling 43% of the audience in New York City at the debate (and 95% of the consuming public) illogical, unthinking, or immoral? 

 

Personally, I've written a number of pieces that attempt to grapple with this issue.  I'll share several of them below.  I'm not saying I fully endorse any of the positions, but I think they provide a flavor for how one might go about tackling the issue.

Attempt 1 (the Utilitarian case; written with Bailey Norwood a couple years ago).

“Who is more ethical: a vegan whose diet prohibits the existence of suffering animals or an omnivore whose desire for meat brings into existence happy animals? Vegans have gained the moral high ground by pointing out that their choices prevent the existence of suffering animals, but seldom do we realize that their actions also prevent the lives of what would be happy animals. Making the world a better place involves more than just preventing the bad. It also means promoting the good.

An ethical justification for meat-eating must ultimately revolve around the actual outcomes experienced by animals—something too often forgotten when a dietary choice becomes a salient part of one’s identity. We can all agree that a sad animal is less preferred than a happy animal, and that two sad animals are less preferred than one sad animal. That is why vegans tout the absence of meat in their diet. Some farm animals live unpleasant lives and the less meat consumed, the less misery the world contains.

However, if we accept this premise, we must also agree that it is better for a happy animal to exist than no animal at all, and that two happy animals are better than one happy animal. While it is certainly true that many animals (farmed and wild alike) live miserable lives, it is also true that many farm animals experience more positive than negative emotions throughout life. Beef cattle, for instance, live most their lives with ample food, protected from predators, and in natural, comfortable habitats. In such cases, it is in the animals’ best interest that they live, and because livestock producers do not raise millions of cows as pets, these happy animals will only live if farmers are paid to raise them—paid by omnivores.

An omnivorous diet that includes food derived from happy animals—and only happy animals—is ethical because it brings into existence animals who live in merriment and precludes the existence of animals who would live in misery.


The ethics of meat eating are more vividly seen by imagining the reality of animal abolition. Attempts to ethically equate ownership of livestock and ownership of human slaves are shaky because the abolition of human slaves and livestock entail vastly different outcomes. Humans can care for themselves. Yet if livestock ownership ceased, we would not witness freedom-loving cows but the near extinction of a species. Farm animals are raised for profit. Animal abolition eliminates the possibility of profit, and implies that many millions of animals will not come into existence. So long as we believe two happy animals are better than one, and one happy animal is better than no animal, animal abolition is unethical.


It would be wrong to categorically assert that meat-eating is ethical. So too would it be wrong to universally claim veganism is the pinnacle of ethical eating. Meat comes from some animals who lead pleasant lives and some who did not. A diet is made ethical when it creates greater happiness, and the only way to effectively ensure that more happy cows exist is to buy meat from farmers who treat their animals well, and to refuse meat from farmers who do not. Instead of asking ourselves whether we should eat meat or go vegan, we should be asking which type of happy animal we will eat today.
”

Attempt 2: (The Exchange argument; also with Norwood in chapter 6 of our book Compassion by the Pound)

“One of the difficulties many people have with utilitarianism is that it can easily justify things like “steeling from the rich to give to the poor.” Many libertarian-minded individuals espouse a ethical and moral rules along the following: i) Each man is an end unto himself, ii) each man determines his own happiness, and iii) each man is entitled to their own life and to the results of their labor, and no other man may infringe upon those without consent. Under this line of thinking, an action between people is moral if it results from an un-coerced, mutually agreed upon exchange. Alas, the cognitive capacities of the hog prohibit a definitive answer to whether they are willing to engage in a voluntary exchange, but as we must do with much of philosophy, we might assume – on the animals’ behalf – whether they would willingly enter an exchange.

Pet owners engage in exchange with their dog. The dog is provided with comfortable housing, ample food, nightly walks, and ample medical care. What does the dog give in return? Companionship and entertainment. A pet owner and his dog engage in mutually beneficial and voluntary exchanges that enhance both lives. What about a pig? The pig is provided shelter, food, water, comfortable temperature, and protection from predators. What does a human get in return? Ultimately, the pig’s life – its meat. But, wait a minute – this is hardly a voluntary exchange – did the hog engage in a trade that was of its own free will of its own consent? Hard to say. The hog owed its very existence to the fact that people want to eat pork. Is the hog willing to trade a short and uneventful existence for the sake of life itself? Would the hog trade ample food and shelter and a certain but short life in the factory farm for the random and capricious conditions of the wild? We can never know for sure, but under certain conditions, we might presume that the hog is indeed willing – that if they could say, they would chose life in a factory farm to no life at all, and that they exchange this meager existence in return for their meat.

No doubt an animal rights proponent would argue that the presumption is invalid, but the activist is simply exchanging one presumption for another: that the hog would rather willingly never exist than live on a factory farm. Both positions are based on presumptions that cannot be validated. But, the truth is this: farm animals can never be placed in a situation where their lives are solely determined by their own actions – their lives are invariably affected by the decisions of humans. Dealing with farm animals will always entail some degree of paternalism and presumption about what is in their interest.”

Attempt 3: (The stewardship argument leading to religious argument; also with Norwood in chapter 6 of our book Compassion by the Pound)

“As we have noted, some animal rights groups are even opposed to owning animals as pets. They only want animals to exist in a wild state, but nature imposes its own distinct forms of cruelty. Wild animals, though adapted to their environment, face many obstacles to receiving adequate nutrition, and most face constant pursuit as prey. In our assessment, wild animals do not generally have a high level of well-being. . . .

Let us now combine this views – that wild animals suffer – with that of a thinker like Gary Fancione who argues that it is that it is impossible for humans to hold animals as property and for those animals not to suffer. The implication of these two views is that it is undesirable for animals to exist either as wild animals (if you hold our view that wild animals lead mostly miserable lives) or as property. The way to alleviate suffering, therefore, is to destroy institutions of livestock and pet ownership, and then engage in an all-out assault on wildlife. Only when humans remain as the last living creatures will suffering be minimized. Whether it be pigs destined for slaughter or dogs destined for doting, nature’s hand apparently has no choice but to be cruel. But, consider another possibility – one that is quite opposite from the view that humans are the cause of animal suffering and/or must eradicate all wildlife. It is possible that the only way in which animals can enter this world and to experience more happiness than suffering is for them to be under the stewardship of humans.

We end this discussion with a final line of reasoning often used to justify meat eating – Christian theology. Although some might be reluctant to admit it, theology – the rational and systematic inquiry into religious questions – bears much similarity with philosophy. One thing can be sure – neither philosophy nor theology can be classified under the heading of “science,” but this need not imply that neither can impart knowledge.

Many of the animal rights activists take great strides in their writings to ridicule Christian beliefs on the nature of man and animals, but it would be foolish to equate ridicule with some proof of error. Even the most outspoken atheist of our time, Richard Dawkins, admits the possibility (though he sees it as highly unlikely) of the existence of a God. And if a God possibly exists, might he have some preference or intention regarding the relationship between humans and animals? The distain for the Judeo-Christian view by many animal rights activists is, in many ways, rather transparent because belief in such a God undercuts the premise that there is nothing particularly different about humans and animals. Once this premise is undercut, so too is the much of the argument for animal rights.

It is commonplace for animal rights activist to focus on the Judeo-Christian belief that God gave humans dominion over animals. And indeed, they are correct in this assertion. What is often forgotten, however, Judeo-Christian doctrine asserts that not only were humans given dominion over animals, but that humans were also given responsibility for their care. Any careful reading of the Bible makes clear the idea that humans have a moral obligation to care for those things with which they have been entrusted, e.g., see Proverbs 12:10 or Exodus 20:10.

Proponents of animal rights make much of the analogy to slavery. It is instructive, then, to consider the arguments of people like Rodney Stark, who persuasively argues that slavery was ended not by humanist or enlightenment thinking, but by Christians who began to recognize that slavery was inconsistent with the underlying message of Jesus. It is true that some Christian societies might have been callous toward the treatment of animals, but as was the case with slavery, Christianity provides a moral foundation for arguing for improvements in the way we treat animals.

Judeo-Christian beliefs about the relationship between humans and animals can adequately rationalize the position that it is both proper to raise and use animals for human purpose, but that we should be good stewards in so doing. In a rebuttal of Posner’s “humancentric” arguments for our use of animals, Singer rightfully asks, “Why then should humans incur any costs in order to reduce the suffering of farm animals?” A Judeo-Christian answer might be that we should take care of our animals because we have a moral obligation to do so, not because humans are the same as animals, but because they are much more.”

Ultimately, I'm asking for less intellectual dogmatism on the side of some non meat eaters.  After sifting through all the philosophical cases for and against eating meat, here's where Norwood and I wound up:

“we are not naïve enough to believe there is a single system of thought on which all can agree regarding the proper relationship between man and animal. If even the world’s brightest animal welfare philosophers cannot arrive at a single answer as to what we should do with farm animals, it is unrealistic to believe all humans will agree.

. . .

For us to conclude that the animal rights activists are weirdoes is to deny the truth in some of their arguments. Conversely, to conclude the animal rights activists are correct (take your pick which one), while the majority of consumers are wrong, is conclusion we are unwilling to draw. We do not believe ourselves so smart and knowledgeable that we know best how to dictate your choices. ”

Big Fat Surprise

I just finished reading Nina Teicholz’s best selling book The Big Fat Surprise, which takes issue with our long-held belief that low-fat diets in general, and diets free of animal fat in particular, best promote good health.  

It’s been an enjoyable read, and the history of the development of our dietary beliefs and guidelines is both fascinating and eye opening.  There is a bit of a tendency in the book for the author to nit pick any study which doesn’t support her hypothesis without applying the same skepticism of those studies which do support it, but overall, she makes a compelling case.  I probably found chapter 10 on "Why Saturated Fat is Good For You" most interesting in that regard.  Teicholz lays bare the sad state of affairs associated with the science behind much of the nutritional advice we’re given.  One takeaway is that we really don’t know as much as is often presumed about what sorts of diets increase/decrease chances or heart attack or cancer.  

There is one nit I want to pick with a phrase in Teicholz’s book.  It is a technical one, but because it is the sort of thing I expect my students to fully understand, I'll delve into it.  On page 167 of the paperback version she writes (about an epidemiological study finding no relationship between breast cancer and consumption of dietary fat), “These conclusions were all associations.  But although epidemiology cannot demonstrate causation, it can be used to reliably show the absence of a connection.” (the emphasis is hers)

That claim is patently false (I'm presuming by "connection" she means "causation").  The trouble with the sort of correlation analysis used in many epidemiology studies is that of missing variables.  We can't observe everything about people's behaviors or about the effects of dietary changes, and that results in "omitted variable bias."  That bias can inflate or reduce the size of a measured effect.   In fact, contrary to Teicholz's claims, omitted variable bias can make a "real" effect look like nothing.

Wikipedia describes the problem, but similar treatments can be found in almost any introductory econometrics textbook.     

Suppose we have the following true relationship:

y=b0 + b1*x + b2*z + e

where y is the chance of breast cancer among women, x is amount of fat consumed, and z is a personality trait reflecting the person's overall health conscientiousness.  The "true" relationship we want to know is given by b1.  

But, suppose we only observe y and x and we don't observe z.  Also suppose that z is related to x in the following way: z = a0 + a1*x + u.  Substituting this equation into the first means that when the epidemiologist runs their analysis they calculate:

y = b0 + b1*x +b2*(a0 + a1*x + u)+ e

or, re-writing:

y = b0 + b2*a0+ (b1+b2*a1)*x + b2*u+e.

So, the researcher looks at the relationship between x and y, and thinks they're estimating the "true" effect b1, but in reality, they're estimating the effect (b1+b2*a1), which could be larger or smaller than b1.  

Suppose b2 takes the positive value of +1.5 (more conscientious women are less likely to develop breast cancer) and a1 is also positive and takes the value of +2 (more conscientious women pay more attention to all that health advice and eat less fat).  This means the effect b2*a1 is positive at the value of +3.  But b1 could be negative (more fat = more breast cancer).  Say, b1=-3.  If the positive effect of b2*a1=+3 outweights the negative effect of b1=-3, so the estimated effect is 3-3=0.  It will look like there is no effect even though there really is one.  Even if the effects don't precisely outweigh each other, the estimated effect could be small enough that it the research concludes it isn't statistically different from zero.

Now, I'm not saying that there is a relationship between fat consumption and breast cancer - rather, I'm just making a conceptual point that omitted variables can result in upward or downward bias.  What I can more confidently say is that only the last part of Teicholz's claim is right:  "epidemiology cannot demonstrate causation."  

Now, there are regression methods that can get us much closer to the truth, but I don't often see these used in epidemiology studies.  In economics, the so-called "credibility revolution" has led to more specification testing and attention to causal-identification using instrumental variables, discontinuity designs, differences-in-differences, and others.  A good introduction to the topics and methods is given in Mostly Harmless Econometrics.

  

 

 

What do consumers do when the price of beef rises?

A reader recently sent me an interesting set of questions that I've actually been thinking about for a while.  

The context is the rising price of beef.  As I've written about several times in the past, beef prices have increased steadily for the past two years.  Here is data from the BLS for the price of all 100% ground beef ($/lb) over the past four years.  Over this time period, nominal prices have almost doubled. There were big jumps in retail prices in 2014, but throughout much of 2015, prices have leveled off. 

The questions:

“has the increased cost in beef caused people to eat “healthier” foods like vegetables? Are people substituting beef for cheaper, processed meats? Or perhaps chicken? Is there any indication that people are consuming less beef and replacing it with “healthy” alternatives? ”

The first thing to note is that if the price increases are caused by supply shocks (as is almost certainly the case),  higher beef prices are unambiguously bad news for consumers.  So, even if consumers are today eating "healthier", they aren't happier.  If people really wanted to be eating more veggies or chicken, they could have voluntarily chose to do so five years ago without a beef price spike forcing them into that outcome.  

The core of the question relates to substitutability.  When the price of beef rises, what do people substitute toward?  This is the so-called cross-price elasticitiy of demand.  There is an enormous academic literature in agricultural economics estimating  the cross-price elasticity of demand for beef and other types of food.  

The problem with a lot of this literature is that, due to data limitations, all beef is lumped together as an aggregate  category and the researchers study how consumers substitute aggregate beef for aggregate pork and aggregate poultry.  Most of the studies I've seen put the cross-price elasticities between aggregate beef and aggregate pork/poultry at something less than 0.3 and often much smaller than that.  So, a 1% increase in the price of beef causes a less than 0.3% increase in pork and poultry.  A 100% increase in the price of beef (something like what we've seen over the last 5 years) causes a less than 30% increase in quantity of pork an poultry demanded.

There are a few studies that look at how demand food categories is affected by aggregate meat (lumping together beef, pork, and poultry).  This study, for example, estimates that a 1% increase in the price of meat would cause a 1% increase in quantity demanded for eggs, a 0.32% increase in demand for fruits and vegetables, a 0.24% increase in alcoholic beverages, and smaller effects on other categories of foods. 

But, most of these types of studies only study the inter-related demands for different aggregate meats and do not include effects on fruits and vegetables or other foods.  In so doing, the researchers are assuming beef demand is "separable" from demand for other foods.  Separability is a bit of a complicated concept but it basically means that my demand for one good is not directly affected by the price of another good (though it may well be indirectly affected as I have to re-allocated my budget to different categories in light of the price increase).  

There are some studies that have relaxed this separability assumption to look how consumers substitute among different types of meat.  For example, when the price of steak rises, are consumers more likely to substitute toward another beef product (like roast or ground beef) or similar product from a different species like a pork chop or chicken breast?   This older paper suggests in fact suggests that the latter is the case:  

In any event, one of the big challenges with answering these sorts of questions is that we simply don't have good data.  We can get aggregate "disappearance" data from the USDA which lumps all beef together.  We can get grocery store scanner data, but most of that is of limited use for fresh meat products or fresh veggies because these are "random weight" items and the datasets don't have information on product weights (it's tough to estimate demand when you don't know exactly how much people are buying).  That's one of the reasons I've been running the Food Demand Survey (FooDS) survey for over two years now, to provide better data to answer these questions.  My colleague Glynn Tonsor (whose written a lot on the very issues I mention here) from K-State and I are polishing up a paper now that uses the FooDS data to look at substitution patters among different types of meat and non-meat items in this period of high beef prices, but it's not quite ready for preview yet.