Zhen et al. on Soda Taxes

Yesterday, I was browsing recent back issues of the American Journal of Agricultural Economics looking for papers on consumer demand (somebody has an AAEA presidential address to write).  

I came across two papers by Chen Zhen and co-authors published in 2014 on effects of sugared sweetened beverage taxes (or "soda taxes") that I'd previously read but not blogged on before.  I thought I'd mention them here given the ongoing policy discussions surrounding the issue (Philadelphia politicians are currently considering a soda tax; Oakland has a ballot measure planned on the issue; and there is much debate about the potential effects of the soda tax already passed in Mexico).

In the first paper, Zhen and colleagues show that the way most of these taxes are designed, on a per ounce of soda basis, is not nearly as effective as would be a tax on a per calorie basis.  The authors write:

“For every 3,500 beverage calories reduced, the estimated consumer surplus loss due to a calorie-based tax is $1.40 lower than the loss induced by an ounce-based tax. A 0.04 cent per kcal SSB tax is predicted to reduce beverage energy from ScanTrack supermarkets by 9.3%, compared with 8.6% from a half-cent per ounce tax. Applying this percentage change to beverages obtained from all sources, we calculated that a 0.04 cent per kcal tax on SSBs will reduce total beverage energy by about 5,800 kcal per capita per year.14 Compared with an ounce-based SSB tax that also achieves a 5,800 kcal reduction in beverage energy, the 0.04 cent per kcal SSB tax is estimated to save $2.35 per capita or $736 million for the U.S. population in consumer surplus per year.”

The "lost consumer surplus" means consumers are worse off with either tax.  This is an issue I've raised several times before: there have been few serious attempts to carefully articulate how a soda tax improves consumer welfare given that consumers don't like paying higher prices (e.g., see here or here).

In the second paper, the authors show how a sugar-sweetened beverage tax might have unintended consequences. 

“The preferred demand specification predicts that almost half of the reduction in SSB calories caused by an increase in SSB prices is compensated for by an increase in calories from other foods. We further found potential unintended consequences of an SSB price increase on sodium and fat intake. Because energy intake is just one of many dimensions of nutrition, the results on sodium and fat highlight the complexity of using targeted food and beverage taxes to improve nutrition outcomes.”

They predict that one half-cent per ounce tax on such beverages would reduce body weight by "0.37 and 0.16 kg/person in 1 year and 0.70 and 0.31 kg/person in 10 years for low- and high-income adults, respectively."

They also write:

“The welfare loss for low-income households is about $5 per household per year more than high-income households because low-income households reported higher SSB purchases in Homescan. This difference in welfare loss between low- and high-income households reinforces the regressive nature of an SSB tax”

Support for GMO Labeling a Left-Wing Phenomenon?

Much has been written about whether aversion to biotechnology and GMOs has ideological dimensions rooted in the left.  I've written about this before, as have many others (this paper in Food Policy extends the discussion to a whole host of food regulations beyond biotechnology).  Most of the studies I've seen (including my own data) suggest only small differences in the left and the right in terms of beliefs about safety of eating GMOs.  However, as I previously argued:

“One distinction, which I think is missing, is the greater willingness of those on the left to regulate on economic issues, such as GMOs, than those on the right. Stated differently, there are questions of science: what are the risks of climate change or eating GMOs. And then there are more normative questions: given said risk, what should we do about it? Even if the left and the right agreed on the level of risk, I don’t think we should expect agreement on political action.”

Perhaps the clearest demonstration of this difference in willingness to regulate comes from a new paper by John Bovay and Julian Alston in the Journal of Agricultural and Resource Economics. They look at precinct-level voting data on the Prop 37 mandatory labeling initiative in California in 2012. One of the best predictors of support for Prop 37?  The share of people in the precinct voting for Obama. Here's a telling graph from their paper.   It's an almost perfect positive, linear relationship. 

The authors went on to use these results to predict what would have happened in other states if they'd had an opportunity to vote on Prop 37 (I should note we did something very similar in a paper on for votes on California's Prop 2 related to animal welfare in 2008).  Bovay and Alston found the following:

“Projections using our estimated model imply that a majority of voters in only three of fifty states (Hawaii, Rhode Island, and Vermont) plus the District of Columbia would have passed Proposition 37 had it been on their ballots in 2012”

Enriched colonies

A couple months ago, I discussed the book chapter I wrote on a different type of hen housing system: the enriched colony . Today, the Wall Street Journal ran a piece I wrote about this hen housing system and the costs of alternative housing systems.   

A few snippets:

“A 2014 California voter initiative and subsequent state legislation ultimately led to a ban on sales of battery-cage eggs in the Golden State. Because eggs have few close substitutes, demand tends to be relatively insensitive to changes in price. When demand is inelastic, a small-percentage change in the quantity supplied causes an even greater increase in price.

Comparing the prices of eggs sold in California before and after the law with the prices of eggs sold in other states reveals that the legislation increased egg prices for Californians by at least 22%—or about 75 cents for a dozen. A related analysis using Agriculture Department wholesale price data indicates the California law increased prices between 33% and 70%. Poor Americans, who spend a larger share of their incomes on food, are disproportionately affected.”

and

“Rather than getting rid of the cages entirely, one answer is to use a relatively new type of housing: the enriched-colony cage system. Unlike the barren environment in the battery cages, the much larger, enriched-colonies have nesting areas for egg laying and a matted area that allows the hens to exercise their natural urge to scratch. Also available are perches that allow the hens to get up off the wire floor.

An enriched colony is not a Ritz-Carlton, and some animal advocates think the systems do not go far enough. However, they represent an innovative compromise that attempts to balance cost and the hens’ well-being.”

Food Demand Survey (FooDS) - April 2016

The latest edition of the Food Demand Survey is now out.

From the regular tracking portion of the survey:

• Willingness-to-pay for all food products was down this month, with the largest drop occurring for hamburger;
• The was a sizable uptick in consumers' anticipation of price increases for beef, pork, and chicken and a slight reduction in planned purchases of these items;
• Expenditures on food away from home were up about 5%; and
• We added "cancer and meat consumption" to the list of, now, 18 times for which we track awareness and concern.

Three new ad hoc questions were added this month.

The first set of questions was meant as follow-up to a survey Politico recently conducted of "food experts" (I was a participant in their survey).  Politico asked the following question to the experts: "Are the presidential candidates doing a sufficient job in the campaign discussing the future of food policy?" A whopping 97% said "no".  

I posed a related question to the respondents of FooDS.  Rather than just asking about the issue as a stand alone question, I put food an agricultural policy in the context of other issues candidates spend their time talking about.  In particular, participants were asked: “Are the presidential candidates spending too much or too little time discussing each of the following issues?”  

A list of nine issues was provided, which included “food policy” and “agricultural policy.”  Only about 6% of respondents thought too much time was being spent on the two issues.  44% and 46% thought about the right amount of time was being spent on agricultural and food policy, and 50% and 47% thought too little time was spent on agriculture and food, respectively.  

Immigration policy was the only issue for which more respondents thought candidates were spending too much vs. too little time.  Except for food and agricultural policy, the largest fraction of respondents thought the candidates were spending the right amount of time on the other issues.  

Secondly, we asked another question - this time exactly as it was asked in the Politico food-expert survey.  In particular, participants were asked “Should the government’s role in regulating the US food system be more active, less active, or the same?”  Here, our respondents lined up closely with Politico's food experts:  

Over half of the participants (59%) believe that the government should become more active in regulating the US food system, while less than 13% of participants believe the government should be less active in regulating the US food system.  This is consistent with other research that suggests consumers tend to be rather "statist" when it comes to food policy.

Finally, based on a suggestion from Jason Winfree at University of Idaho, who passed along an article about the (sometimes unjustified) negative perceptions of frozen food,  respondents were asked whether they agreed or disagreed with a list of nine statements related to the tastiness, affordability, and health of fruits and vegetables that are either fresh, frozen, or canned.  

In terms of taste, fresh rated higher than frozen, which was rated higher than canned.  All three had a mean score above 3, meaning respondents were more likely than not to agree that all three types of fruits and vegetables were tasty.  In terms of affordability, the ranking was exactly reversed with canned being perceived as most affordable and fresh least affordable (although all three were far about the mean of 3, implying most consumers though all three were affordable.  Finally, perceived health lined up almost exactly with perceived tasted: fresh was perceived as healthier than frozen which was perceived healthier than canned.

Farm subsidies by state

This post by Kevin Patrick at farmdocdaily alerted me to an interesting data visualization tool created by the USDA Economic Research Service (see the bottom of this web page for a three different tools).  

I used the "get to know your state" tool and pulled up Oklahoma.  I was a bit surprised to see that in 2014, total government payments to the state were over $1 billion while at the same time net farm income was $2.8 billion.  If I'm reading this right, it implies 36% of net farm income in OK in 2014 was government payments, and Oklahoma ranked 2nd in government payments while ranking only 23rd in sales.  Thinking this might be an aberration, I pulled up 2013, and then "only" 19% of net farm income in Oklahoma was government payments.  

Looking at the supposed "big government", California (which has the most ag sales of any state), only 1.5% of its net farm income was from government payments in 2014.  

The "farm income atlas" tool lets you plot government payments (and other components of income) for each state. Here's total government payments for 2014. 

There's a lot more available in the tools.  Check it out yourself.