Incentives for Safer Food

Over at the US Food Policy blog, Parke Wilde writes about the terrible track-record Foster Farms had with noncompliance leading up to it's widely publicized Salmonella outbreak.

Parke advocates for better public access to food safety information (such as, I presume, the public release of noncompliance reports written by food safety inspectors) as one approach to partially deal with food safety issues.  

He also points out the main challenge with food safety: as consumers we often cannot directly observe whether a food is contaminated before purchase.  Parke writes:

“Food safety problems are fundamentally about lack of public information. If consumers had magic sunglasses that displayed the presence of Salmonella on chicken in the grocery store, there would be no need for government regulation. Immediately, faced with market consequences for distributing chicken with Salmonella, the companies would clean up their product. ”

Well, they may not be magic sunglasses, but it appears entrepreneurs are working on hand held sensors, chopsticks, and iPhone apps that may one day let us quickly check for food contaminants.  

These innovations may, one day, prove to be a very powerful incentive for companies to provide safe food.  The nice thing - from the consumers' perspective - is that they let us take action before an illness happens.

Food Fads and Fears

I've been reading the book Fear of Food by Harvey Levenstein.  It is a fascinating read, chronicling the history of food fears and fads that hit Americans in the 19th and 20th centuries.  I have a few quibbles with some of the material in the chapter on "Bacteria and Beef", but overall, good stuff.

One passage showed how at least one version of the Paleo diet had been advanced since the early 1900s for many of the same reasons it is advocated today, almost 100 years later:

“In 1920 Fleischmann’s urged eating its yeast cakes because ‘the process of manufacture or preparation’ removed from many foods the ‘life giving vitamine’ that provided the energy people needed. ‘Primitive man,’ it claimed, ‘secured an abundance of vitamines from his raw, uncooked foods and green, leafy vegetables. But the modern diet - constantly refined and modified - is too often badly deficient in vital elements.’”

Levenstein also chronicles the emergence of food scientists and nutritionists who often had significant effects on dietary fads and public policies.  It is remarkable the hubris with which many of these men made dietary advice and public policy, particularly because we now know they were often quite wrong in their scientific knowledge.  Whether it was Metchnikoff and Kellogg and their views on autointoxication and the merits of yogurt, or Horace Fletcher's method of chewing to "Fletcherize" food,  or Harvey Wiley and his war on benzoate of soda, or Elmer McCollum and his promotion of acidosis, or Russell  Wilder's belief that thiamine deficiencies would cause the nation to loose their will to fight the Nazis - there seems to be a continual stream of people willing to use scant evidence to promote their favored cause to promote public health.  Not just idly promote - but with often with righteous indignation and certitude of belief.  I have no doubt many of these men passionately believed the diets they promoted but that didn't ultimately make them right.  

Levenstein writes, in the midst of concern of lack of vitamin consumption in 1941, that

“The New York Times said, ‘The discovery that tables may groan with food and that we nevertheless face a kind of starvation has driven home the fact that we have applied science and technology none too wisely in the preparation of food.””

Unfortunately, something similar could be said about how applied science and technology have often been used none too wisely to promote various public policies and best selling books.   

It is true that science has progressed and we know more than we used to.  One of the things we've hopefully learned is that we often need to exercise a bit of humility.

Food Demand Survey (FooDS) - September 2014

The September 2014 edition of the Food Demand Survey (FooDS) is now out.

How do consumers respond to rising food prices?

That's the question asked in this working paper by Rachel Griffith, Martin O’Connell and Kate Smith.  The abstract: 

“Over the Great Recession real wages stagnated and unemployment increased. Concurrently, food prices rose sharply, outstripping growth in food expenditure, and leading to a reduction in calories purchased. This has led to concern about rising food poverty. We study British households to assess how they adjusted to changes in the economic environment. We show they switched to cheaper calories; implying food consumption was smoother than expenditure. We use longitudinal data to quantify the way households lowered their per calorie spending, and show they done this in part by increasing shopping effort, and without lowering the nutritional quality of their groceries.”

When we feel the pinch, we can substitute away from more expensive to less expensive foods.  But, we can also increase the effort we expend in finding better prices.  In short, our time is a valuable commodity that we treat like other economic goods.  

That fact was also emphasized in a paper by Broda, Leibtag, and Weinstein in the Journal of Economic Perspectives in 2009.  They used some creative methods to ask the question: do the poor pay more or less than the rich?  They write:

“In this paper, we circumvent the problems of previous studies by using a dataset that contains actual purchases of around 40,000 households collected by Nielsen. By focusing on the actual prices paid by households, we show that poor households systematically pay less than richer households for identical goods. The poor pay less in part because they shop in cheaper stores and in part because they pay less for the same goods even in the same store. This latter effect probably arises because poorer households are more likely than richer households to buy goods on sale, even in the same store. We also confirm that the poor shop more in convenience stores—where prices are 11 percent higher than in traditional grocery stores—but show that this effect is dominated by their higher share of expenditure in supercenters where prices are 10 percent lower than in grocery stores.”

Note that these authors aren't comparing apples to oranges.  They compare the prices paid by rich and poor households for exactly the same goods.  

When asked how consumers respond to higher prices or lower incomes, so often we economists refer to indifference curves and budget constrains or do a fair amount of hand-waving.  Yet, as these studies show, reality is more complex.  We can use our time to find better prices, or we can alter out consumption bundle to provide the same nutritional quality in a less expensive fashion.   

How Animal Welfare Labeling Affects Egg Purchases

A couple of weeks ago in Slovia I saw a presentation of a paper authored by Alexander Schjøll, Frode Alfnes, and Svein Ole Borgen.

The authors conducted an interesting experiment with a Norwegian grocery store chain called REMA 1000 to see how different labels and information campaigns changed sales of cage vs. cage-free eggs.  

For the first part of the study, the authors simply changed labels.  At the beginning of the study, the "battery" or caged eggs simply had the descriptor "12 farm eggs."  The authors replaced this with a new carton that had "BATTERY HENS" printed in large letters in mid 2011.  The new cartons also had the following text in smaller font (translated from Norwegian):

“From 2012, you can only buy eggs from barn systems at REMA 1000. Eggs from hens in cages, as these, are not available from 2012 for purchase in REMA 1000 stores. Battery hens live in cages with little opportunity to move freely. Hens living in barn systems can move indoors in environments similar to their natural environment. This contributes to good health and welfare. REMA 1000 knows you are concerned about quality. We believe animals that thrive provide the best ingredients.”

The authors looked to see what happened when the new labels were introduced, and watched sales for about 6 months.  Then, at the beginning of 2012, the grocery chain completely removed the "battery" cage eggs from their stores.

So, here are the key questions:

• Did shoppers respond to the label change?
• Did the label cause people to switch to cage-free barn eggs or to the even more expensive organic with more stringent standards?
• What happened when the "battery" eggs were completely removed?  Did sales of organic jump or did they just shift to the next lowest price alternative, the "barn" system?

Here is a graph with the results.

The authors write (in a newer version of the paper I couldn't find online):

“In mid-July, REMA 1000 introduced its new battery egg package in some stores, and had a nationwide rollout of the new package in August 2011. As shown, the market share of battery egg packages fell from 54% in June to 28% in September 2011, after varying between 51% and 61% in the month before the introduction of the new package. From September 2011, the sales of battery eggs were relatively stable until they were finally withdrawn from the market at the end of the year.

On January 1, 2012, the retail chain removed battery eggs from its shelves. . . .

The market share for organic eggs remained constant both when the negative battery egg cartons were released and when the battery eggs were removed from the stores.”

I interpret this to mean that these consumers viewed the cage, "battery cage" and cage-free "barn" eggs (what these authors call indoor free-range) as close substitutes.  This is also supported by the fact that the authors also note that total egg sales did not much change when the labels were added or when the battery cages were removed.  That primarily means, most people just paid more for eggs (although the authors do not report any information on the relative prices of the eggs).

Other experiments in the store looked at various posters and displays that tried to increase organic sales, but as the authors report, none of them had any substantive effect.

Are there any implications we can draw from this experiment for what is going on in California - assuming that their ban on sales of battery cage eggs withstands legal challenges?  

The above experiment suggested that about 25% of consumers in Norway willingly switched from cage to cage-free eggs when they had added information.  However,  about 30% of consumers still preferred the cage eggs when these were remove from the store. These 30% of consumers were essentially "forced" to buy a higher price option that they didn't previously pick (I use the word "forced" loosely because the consumers presumably could have chosen not to buy eggs at all).  It's hard to know how big the economic loss was for this 30% without knowing more about relative prices, quantities purchased, and consumer characteristics.  Where these 30% on the lower or upper end of the socio-economic ladder?