Effect of GMOs in the Developing World

To hear many anti-GMO activists talk, one would think farmers are merely whims of greedy agribusinesses.  They have no power or choice to deny Monsanto.  In the developing world, we hear such outlandish assertions as GMOs causing suicide (see this paper for a thorough debunking of that claim).

The truth is that farmers adopted GMOs because they thought it would make them money, save them time, and improve their health and that of the environment.  Yes, Monsanto has made some money along the way, but farmers have benefited too (so too have consumers I might add).   

For the latest evidence on that front, I ran across this research by Kousesr and Qaim in the journal Agricultural Economics.  Here's the abstract:

Data from a farm survey and choice experiment are used to value the benefits of Bt cotton in Pakistan. Unlike previous research on the economic impacts of Bt, which mostly concentrated on financial benefits in terms of gross margins, we also quantify and monetize health and environmental benefits associated with technology adoption. Due to lower chemical pesticide use on Bt cotton plots, there are significant health advantages in terms of fewer incidents of acute pesticide poisoning, and environmental advantages in terms of higher farmland biodiversity and lower soil and groundwater contamination. Farmers themselves value these positive effects at US$ 79 per acre, of which half is attributable to health and the other half to environmental improvements. Adding average gross margin gains of US$ 204 results in aggregate benefits of US$ 283 per acre, or US$ 1.8 billion for the total Bt cotton area in Pakistan.

Drink more water?

According to one article, Michelle Obama has come out with a new campaign to solve our nation's health problems: 

I’ve come to realize that if we were going to take just one step to make ourselves and our families healthier, probably the single best thing we could do is to simply drink more water,” Obama said in a press release. “That’s it – it’s really that simple. Drink just one more glass of water a day and you can make a real difference for your health, your energy, and the way you feel.

This really stains credibility.  The "single best thing" to make yourself healthier is definitely NOT drinking more water.  There is no good scientific evidence that drinking more water has any effect at all on health. 

Why do women tend to earn less than men?

A Facebook friend linked to this Georgetown paper showing the earnings of people with a terminal BS in different college majors.  Looking through some of the tables, I was struck by how big a difference there was between the share of women vs. men in different college majors.  I was reminded of a point made by my friend Matt Rousu, who has done some analysis showing that choice of college major went a long way toward explaining the often-discussed gap between the pay of men and women.

So, I cobbled together some data from the Georgetown paper, looking specifically at the most popular college majors.  Here is the table I pulled together: 

Among the most popular majors, those with a major in computer science earn the most (the median is $75,000 per year).  Interestingly, however, only 22% of computer scientists are women.  By, contrast, the lowest-earning major (among the most popular majors) is elementary education at $40,000, and a whopping 91% of elementary education majors are female.

A simple correlation between % female and median earnings is -0.76.  There is strong evidence that women are choosing majors (or if you want to think conspiratorially, are being keep out of majors)  that have relatively higher earnings.  If I use the numbers above to do a back-of-the-envelope calculation, I figure that for the average man and women in this sample of popular majors, there will be a "gender gap" in median wage of about $5,640 (or a roughly 10% earnings discount for women) that is completely explained by differences in the choice of major.  

There has been research attributing the "gender gap" to factors like discrimination, differences in time off for child care, differences in willingness to negotiate, etc., but I think it is also safe to say that choice of major matters a great deal. 

So choose wisely. 

I might add that one can do a lot worse than majoring in agricultural economics.  We are in the top 10 majors in terms of employment, with a 94% full employment rate and a 98% employment rate; see tables 39 and 41 in the report), and BS graduates have a median income of $60,000.  However, only 18% of our graduates are women and 90% of graduates are white.  So, help improve diversity in our profession, find some great professors and topics, AND make a little more money.  Choose Ag Econ!   

Are US Farmers More or Less Productive Than They Once Were?

That's the question asked in this recently published paper by authors at the USDA Economic Research service appearing in the journal Applied Economics Perspectives and Policy.  They find: 

Our empirical results show that two types of structural change have occurred since WWII, and both have influenced the U.S. agricultural productivity. First, we identified a break in trend in 1974. Prior to 1974, productivity grew at an average annual rate of 1.71%, but this rate slowed to 1.56% per year after 1974. The break in trend coincided with the 1973 oil embargo, which resulted in a rapid and unexpected rise in energy prices.

and

A different type of structural change occurred in 1985 when we observed an upward intercept shift for the level of productivity. This may have been due to a number of factors including a U.S. economic recovery, and a liberalization of farm policy since the mid-1980s. The 1.56% annual trend rate of growth persisted after the 1985 breakpoint.

Farmers are getting more productive, just not as fast as they once were.  

How much do you value the present over the future

Economists have long been interested in people's "discount rates" - the rate at which people discount the value of a dollar in the future as compared to a dollar today.  If given the choice between being given a dollar today or a dollar ten years from now, I suspect almost everyone would take the dollar today.  The key question researchers try to answer is this: exactly how many dollars would you have to be given in, say, 10 years to make you indifferent to 1 dollar today?  

What this number is has important implications for how we should "discount" the value of projects that provide benefits in the future by incurring costs today.  Examples where a discount value is needed include road building, going to college, and building a factory.  But, the issue has become particularly heated in relation to debates over climate change.  Whether and to what extent one is willing to incur costs today to mitigate carbon emissions depends critically on the extent to which the future benefits (and potential costs) are discounted.   

One can get a feel for this time trade-off by looking at market interest rates but that doesn't tell the whole story.  As a result, many economists have turned to laboratory experiments where people make choices like the one I described above.  The trouble has been that such experiments have been limited to making future payoffs that are typically only 1 to 6 months away.  My co-authors, Threse Grijalva and  Douglass Shaw, and I found away around this, and the results are discussed in a paper forthcoming in the journal Environmental and Resource Economics: 

We use a laboratory experiment to elicit discount rates over a 20-year time horizon using government savings bonds as a payment vehicle. When using a constant (exponential) discount rate function, we find an implied average discount rate of 4.9 %, which is much lower than has been found in previous experimental studies that used time horizons of days or months. However, we also find strong support for non-constant, declining discount rates for longer time horizons, with an extrapolated implied annual discount rate approaching 0.5 % in 100 years. There is heterogeneity in discount rates and risk preferences in that people with more optimistic beliefs about technological progress have higher discount rates. These findings contribute to the debate over the appropriate discount rate to use in comparing the long-term benefits of climate change mitigation to the more immediate costs.