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Food Environment or Food Preferences?

The public health literature has documented that lower income neighborhoods suffer from lower availability of healthy groceries and that lower-income households tend to eat less healthfully. In some circles, this relationship has been taken as causal, with significant policy attention devoted to improving access to healthy groceries in low-income neighborhoods.

That's from a new paper by Hunt Allcott, Rebecca Diamond, Jean-Pierre Dubé.  This is one of the most rigorous investigations I've seen of the causal impacts of the "food environment" (in this case, the presence of grocery stores and movements of people into "healthier" neighborhoods) on dietary choice. 

What did they find?  From the conclusions:

Entry of a new supermarket has a tightly estimated zero effect on healthy grocery purchases, and we can conclude that differential local access to supermarkets explains [no more] than about five percent of the difference in healthy eating between high- and low-income households. The data clearly show why this is the case: Americans travel a long way for shopping, so even households who live in “food deserts” with no supermarkets get most of their groceries from supermarkets. Entry of a new supermarket nearby therefore mostly diverts purchases from other supermarkets. This analysis reframes the discussion of food deserts in two ways. First, the entire notion of a “food desert” is misleading if it is based on a market definition that understates consumers’ willingness-to-travel. Second, any benefits of “combating food deserts” derive less from healthy eating and more from reducing travel costs.

and

we find that moving to an area where other people eat more or less healthfully does not affect households’ own healthy eating patterns, at least over the several year time horizon that the data allow.

The authors end by concluding that policy efforts to alter local food supplies are likely to be ineffective.  Their data strongly supports this conclusion.  They recommend, instead, to use public policy to improve health education.  I'm surprised they make this recommendation because their study provides no indication that more education would be a cost-effective intervention.  If anything, what their study shows is that economic development (turning low-income households into high-income households) is the most effective way to improve the healthiness of dietary choice.  

Hat tip to Alex Tabarrock at the Marginal Revolution blog who is highly skeptical of the food desert concept.  

Are Organic and Non-GMO Labels Substitutes or Complements?

For the first time today, I saw the following label on a packaged food.

organicisnongmo.JPG

In a way, the label seems a little odd.  An organic seal on a product should already convey to consumers that the ingredients came from a process that excluded GMOs.  However, the very presence of the label suggests many consumers may not be aware of this fact.  

I have a paper with Brandon McFadden forthcoming in journal Applied Economic Perspectives and Policy (sorry, I don't yet have a link to the paper on the AEPP's website; I'll pass it along when I get the link and discuss the whole paper in more detail).  In the paper we delve into this issue and others.  Here's part of the motivation.  

It appears that organic organizations are concerned that consumers perceive non-GM and organic labels to be substitutes. Although many organic food companies supported the general idea of mandatory labeling, now that the policy has passed, organic producers have expressed concern that non-GM verification may be perceived as a substitute for the more expensive and encompassing organic certification. For examples, California Certified Organic Farmers (CCOF) initiated a campaign “Organic is Non-GMO and More” to highlight the differences in the two claims, and the Organic Trade Association (OTA) emphasizes, “Organic = Non-GMO…and so much more!!” Despite these concerns, little is known about the extent to which the two most common non-GM labels, USDA Organic and Non-GMO Project, are demand substitutes or complements. Whether the labels are demand substitutes or complements can be determined, in our context, by investigating whether WTP [willingness-to-pay] is supra- or sub-additive when the labels are combined. If the premium for displaying both labels is less than the sum of individual premiums for each label, then the two labels must be providing some of the same underlying characteristics of value to the consumer and implies the two labels are substitutes. By contrast, if the premium for displaying both labels is greater than the sum of individual premiums, then the two labels are complements and provide more value when provided together.

We ultimately find that products with the organic seal and products with the non-GMO verified seal are indeed demand substitutes.  Here's one paragraph related to those results:

For apples, the results revealed large and statistically significant substitution effects for Non-GMO and USDA Organic labels. In fact, results indicated that the two are almost perfect substitutes as WTP [willingness-to-pay] premiums for apples with both Non-GMO and USDA Organic labels roughly the same as WTP premiums for apples that display only one label. This result is made obvious by the third column of results. The WTP premium for apples with the Non-GMO label only (vs text label) is $0.446, the WTP premium for apples with the organic label only (vs text label) was $0.474, and the WTP premium for apples with both Non-GMO and USDA Organic labels was $0.446+$0.447-$0.461=$0.432, which is actually lower than when either label is present in isolation.

Because it is more costly to be organic than non-GMO (since the latter is a subset of the former), it is easy to see why many food companies would want to add the additional label that "Organic is non-GMO and more".

Labeling Food Processes: The Good, the Bad and the Ugly

That's the title of an interesting new article in the journal Applied Economic Perspectives and Policy by Kent Messer, Marco Costanigro, and Harry Kaiser.  Here's the abstract:

Consumers are increasingly exposed to labels communicating specific processing aspects of food production, and recent state and federal legislation in the United States has called for making some of these labels mandatory. This article reviews the literature in this area and identifies the positive and negative aspects of labeling food processes. The good parts are that, under appropriate third-party or governmental oversight, process labels can effectively bridge the informational gap between producers and consumers, satisfy consumer demand for broader and more stringent quality assurance criteria, and ultimately create value for both consumers and producers. Despite the appeal of the “Consumer Right to Know” slogan, process labeling also can have serious unintentional consequences. The bad parts are that consumers can misinterpret these labels and thus misalign their personal preferences and their actual food purchases. The ugly parts are that these labels can stigmatize food produced with conventional processes even when there is no scientific evidence that they cause harm, or even that it is compositionally any different. Based on this review of the literature, we provide three policy recommendations: (i) mandatory labeling of food processes should occur only in situations in which the product has been scientifically demonstrated to harm human health; (ii) governments should not impose bans on process labels because this approach goes against the general desire of consumers to know about and have control over the food they are eating, and it can undermine consumer trust of the agricultural sector; and (iii) a prudent policy approach is to encourage voluntary process labeling, perhaps using smart phone technology similar to that proposed in 2016 federal legislation related to foods containing ingredients that were genetically engineered.

Food Demand Survey (FooDS) - April 2017

The April 2017 edition of the Food Demand Survey (FooDS) is now out. 

A few comments on the regular tracking portion of the survey:

  • Willingness-to-pay for all meat products (except deli ham) fell from March to April.
  • WTP for pork chops reached the lowest point in the almost four-year history of food.  
  • Comparing April 2017 to April 2016, only WTP for hamburger is higher than was the case a year ago.
  • Awareness of bird flu in the news fell this month and concern for bird flu as a food safety issue experienced the smallest increase of any of the issues studied.  Awareness and concern for animal welfare issues rose this month.

We added several new ad-hoc questions to the survey this month.  

There has been a lot of discussion in the news about whether hydroponics should be able to be labeled organic.  We put the question to our participants.  They  were asked: “Do you think hydroponic vegetables should be allowed, under certain conditions, to be labeled organic? (note: hydroponic vegetables are grown without soil - their roots grow in water with added nutrients and minerals)” 

About 46% of participants stated “yes”, hydroponic vegetables should be labeled organic, 24% said “no”, and the remaining 29% said “I don’t know”.   It should be noted that due to a glitch in survey administration, only 250 people answered this particular question and as such, the sampling error is higher than usual (it is +/-6% rather than the usual +/- 3%).

A couple weeks ago, I discussed some research we'd conducted studying when consumers don't want to know about certain agricultural production practices.  We followed up on this research in this month's edition of FooDs.  We were interested in whether people actively sought to avoid information they may find undesirable.  

We split people into two equal sized groups.  Those in the first group were asked: “On the next page you have two choices of what to see.  You can either see a picture of how pregnant hogs are housed on a typical farm or a picture of a blank screen.  Which do you prefer?”

To check whether people simply preferred to see a blank screen in general, respondents randomly allocated to the second group were asked a similar question but instead of the option to see a picture of “how pregnant hogs are housed on a typical farm”,  they could choose between “a picture of a nature scene or a picture of a blank page.”

Fifty four percent said they wanted to see the picture of how pregnant hogs are housed.  By contrast, 46% preferred instead to see a blank page.  Thus, slightly less than half the sample actively chose to ignore free information about hog housing.  Those who preferred to see the blank screen were less concerned about farm animal welfare as a food safety risk (mean of 3.2 vs. 3.6 on the 5-point scale of concern) and placed less relative importance on animal welfare as a food value (mean of -0.116 vs. -0.097). 

Ninety one percent of respondents choose to see the nature scene.  Overall, the results suggest just about half the respondents preferred not to know how pregnant hogs are housed. 

Finally, we added some questions about food insecurity.  I'll discuss these in a separate post.   

Does everybody prefer organic?

A few years ago I was giving a talk at a conference in Europe, and I showed the following figure illustrating demand curves for organic milk.  The curves were created based on an analysis of grocery store scanner data (the underlying estimates and analysis are in this paper in the journal Food Quality and Preference).  

I showed the graph to illustrate to the group how demand for organic milk was lower for people that placed a higher relative importance on food safety than it was for people who placed a lower relative importance on food safety.  But, almost in passing, I told the audience that they might take the figure with a grain of salt because it shows that even if organic was the same price as conventional (i.e., the organic premium was $0), the demand curves predict market shares for organic of only about 8% and 14% (depending on the importance of food safety), which I thought was implausibly low.  

After my presentation, an individual who worked for a European food retailer asked why I thought the figures were implausibly low.  I said that I presumed most people would choose organic if it were priced the same as conventional. He said, however, that his retail experience was fully consistent with the graph I showed - even when he substantially lowered the price premium for organic, the market share remained relatively low.   

I've had those anecdotal thoughts in my mind for a while and recently was able to test them out in a more controlled, survey setting where we could vary product price in a way that there aren't confounds.  One of the "confounds" with the European's observation was likely the fact that the organic attribute was likely to appear on less-well-known brands, so we don't know if it was the lesser-known brand or the organic attribute causing the low market share.  Our attempt to remove these confounds is this new paper in the journal Applied Economics Letters co-authored with Seon-Woong Kim and Wade Brorsen.  

We conducted studies with apples and with milk.  In the studies, people made choices between different apples that varied by color (red or green), condition (bruised or not bruised), price, and production method (organic or conventional).  Alternatively, people made choices between milk that differed by fat content (skim, 1%, 2%, or whole), package type (cardboard or plastic), price, and production method (organic or conventional).  

We used the choices to infer the demand curves for organic vs. conventional, allowing for the fact that different consumers are likely to have different preferences for organic and other milk/apple attributes.  Here's what we found.

Even in these controlled studies, we find that if organic were priced the same as conventional (a price premium of 0%), not everyone would buy organic.  Priced evenly with conventional, organic would pick up only about 60% of the apple market (the remaining 40% going to conventional), and organic would pick up only about 68% of the milk market (the remaining 32% going to conventional).  

Given differences in yield and production costs, organic is almost surely going to be routinely higher priced than conventional. But, even if this weren't the case and organic could be competitively priced, these survey results show us that not every prefers organic food.