Lost Pleasure

I'm confused by this article by Sharon Begley that appeared in Reuters yesterday.  She writes:

“U.S. health regulators estimate that consumers will suffer up to $5.27 billion in “lost pleasure” over 20 years when calorie counts on restaurant menus discourage people from ordering french fries, brownies and other high-calorie favorites.

The lost-pleasure analysis, which is criticized by some leading economists and public health groups, was tucked into new regulations published last month by the U.S. Food and Drug Administration which require chain restaurants, grocery store chains selling prepared food, large vending machine operators, movie theaters and amusement parks to display calorie counts.

Public health advocates alerted Reuters to the inclusion of the analysis, which they say makes such regulations more vulnerable to challenges by industry because it narrows the gap between the government’s projections of a regulation’s benefits and costs. ”

Here's the problem - I can't find any evidence the FDA did such a thing in relation to calorie counts on menu labels.  Here is the FDA's final rule, which puts total costs at about $1.7 billion, which is far less than the $5.27 billion from "lost pleasure" cited in the article.  Indeed, the net benefits cited in the final rule are only $510 million - far less than the supposed "lost pleasure". Maybe there is another cost-benefit analysis not mentioned in the federal register?

Also, the article makes reference to a paper by Jason Abaluck, but the only paper of his I can find that seems to have any relation to this topic is this one, and it includes no such "lost pleasure" calculations that I see in my quick look at it.  Again, the paper may very well be out there and I've overlooked it. 

What I can find, after a bit of internet searching, is much concern about including "lost pleasure" in relation to tobacco labeling policies from back this summer, including the concern mentioned by some economists about using "lost pleasure" in this context.  

It's clear why many public health advocates don't like the idea of "lost pleasure" in a cost benefit analysis.  However, a good cost benefit analysis needs to include ALL the costs and ALL the benefits; and it must also consider the longer-term second order effects.  Moreover, many of the articles seems to suggest that "good economists" would never include "lost pleasure" in a cost benefit analysis - an implication that is wholly false.   

A lot of the discussion in these articles, including the one in Reuters, seems to suggest that "consumer surplus" is an invalid way to measure the benefits/costs of a policy.  That's baloney.  And, indeed I think you'd have a hard time finding many economists who wouldn't say that any policy analysis of food (or tobacco) taxes or bans SHOULD use "consumer surplus" which captures "lost pleasure" from being unable to consumer the same consumption bundle as was the case pre-policy.    

At issue seems to be the question of whether the same holds true for a mandatory labeling policy.  The argument is that information does not change prices or available options per se, and as such more information can only make consumers better off (more consumer surplus).  On the surface that's true - and I suspect that is the point the cited economists are making in objecting to using "lost pleasure" in this particular context.  However, it is not unreasonable to include "lost pleasure" in a cost benefit analysis of a label or information policy if:

• food/tobacco companies respond to the new law by removing some options;
• food/tobacco companies respond to the new law by changing prices; or
• consumers continue making the same purchases after the policy, but only do so now with more "guilt" (there can only be a value of information if people change behavior; if you just reduce the pleasure they get from buying a product without changing behavior, then there is indeed "lost pleasure").

Vitamins made by GMOs?

At NPR's blog The Salt, Dan Charles has some interesting discussion on the change in the nutritional profile for Cheerios after they went "non-GMO." 

“Remember when Cheerios and Grape-Nuts went GMO-free? That was about a year ago, when their corporate creators announced that these products would no longer contain ingredients made from genetically modified organisms like common types of corn, soybeans or sugar beets.

When they actually arrived on supermarket shelves, though, there was a mysterious change in their list of ingredients. Four vitamins that previously had been added to Grape-Nuts — vitamins A, D, B-12 and B-2 (also known as riboflavin) — were gone. Riboflavin vanished from Cheerios.”

Charles speculates on what caused the change.  One possibility is that some vitamins these days are apparently produced with genetically modified bacteria and yeast.  These microbes can reproduce quickly, and as a result they can efficiently produce vitamin B-12 or riboflavin, if they've got the right genes.  It's a fascinating process that holds much promise in other applications as well.   

Charles ends with what may be an interesting irony for companies who go GMO and maintain the same vitamin content:

“That leaves one method of vitamin production that’s cheap, industrial-scale, and reliably non-GMO: synthetic chemistry. Vitamins are commonly manufactured from scratch in chemical factories, using ingredients that cannot be linked to any genes or biological process at all. That technology may not inspire great affection, but it does, at least, qualify as non-GMO.”

Assorted Links

I watched part of the live stream of the Intelligence Squared debate last night on GMO foods.  The "pro-GMO" side won the audience vote handily.  I'll link later to the video/podcast when it is put up. You know the debate went bad for the "anti-GMO" side when their own supporters throw them under the bus afterward.  

A new report warning again about livestock and climate change.  While they do mention possibility to address the problems with improved technology (something I've previously argued), it is only done so dismissively.

I really enjoyed this NPR: Planet Money podcast on cattle rustling in Oklahoma

Local Foods are Subsidized

Given some of the things I've written about local foods, people often get the impression I'm against the movement.  But, as I like to remind people: I'm not against local foods - I'm against bad arguments for buying local foods.  And I am in no way convinced we should subsidize local foods.  When I say that people often retort that local foods aren't subsidized.  That's baloney.  Aside from the various calls for additional subsidies, this news release reminds us that local foods are indeed subsidized.  

“Agriculture Secretary Tom Vilsack Tuesday announced more than $5 million in grants for 82 projects spanning 42 states and the U.S. Virgin Islands that support the U.S. Department of Agriculture’s (USDA) efforts to connect school cafeterias with local farmers and ranchers through its Farm to School Program. The program helps schools purchase more food from local farmers and ranchers in their communities, expanding access to healthy local food for school children and supporting local economies.”

If the goal is to help schools expand access to healthy food, why not give them money to do that?  Why add the extra restriction that it needs to be local?  You can get more healthy food for a lower cost without the constraint that it must be local.  If the goal is to enrich certain farmers, why not simply give the money to them? Why add the further restriction that it needs to go to schools?  If the goal is rural development, why not let rural communities decide what is the highest value use of additional grant dollars rather than tying it to a particular cause?  The idea that local foods are "good for the economy" is one that has been thoroughly debunked in chapters in my Food Police book and in Norwood's soon-to-be released Agricultural and Food Controversies book.  For more general critiques see The Locavore's Dilemma: In Praise of the 10,000-mile Diet by Pierre Desrochers  and Hiroko Shimizu or Just Food:  Where Locavores Get It Wrong and How We Can Truly Eat Responsibly by James McWilliams.

In praising the latest announcement, U.S. Senator Debbie Stabenow, Chairwoman of the Committee on Agriculture said, somehow without the slightest hint of irony:

“As I visit schools with local farm to table programs, I continue to be impressed to see students enjoying broccoli and pineapple from salad bars”

Unless you happen to live in Hawaii, I doubt the program is supporting local pineapple.  And, unless you live in California or Arizona, there isn't a sufficient amount of broccoli grown to support local schools either.  All of which goes to show, if you really want kids to eat a diverse, nutritious diet, it pays to look a little further away from home.  

In the grand scheme of things, this isn't all that big a deal.  An extra $5 million on local food grants isn't going to be the thing that breaks the bank.  And, there are likely much more distortion policies that could be picked on.  But, I think what bothers me the most about this one is that so many people buy into really poor economic arguments for promoting local foods.  It makes me think we haven't done a very good job as economists educating our students and the public.

Effects of Plant Variety Protection

New varieties of "self pollinated" crops have, in the past, been released by the public sector.  Self pollinated crops refer to those where farmers can save the seed after harvest, replant next year, and expect to have a new crop that is the same as the previous year (i.e., the "kids" are the same as the "parents").  Wheat is a staple crop that his both "self pollinated" and "inbred."

A lot of the research on wheat breeding has occurred in the public sector because of the belief that it would be difficult for private companies to recoup their investments when farmers can save their seed.  As a result, it is thought that private investment in wheat breeding would be "sub optimal" from a social welfare standpoint.

However, in recent years, a variety of changes have led to public and private companies being able to license new varieties and capture some of the benefits of the improvements in genetics.  Most controversial is the specter of GMO wheat, in which new varieties may have genes protected by intellectual property laws.  Unsurprisingly, some farmers and industry organizations don't like variety protection because it raises the cost of seed.  A cost that was previously borne by all taxpayers is now borne by the smaller group of farmers, millers, and bread consumers.  

A new paper in the American Journal of Agricultural Economics by Russell Thomson studies the effect of the introduction of new plant variety protection laws in Australia that allowed breeders to capture royalties on their new varieties. Thomson argues that the protection laws in Australia are "stronger" than in the US - giving breeders greater potential returns to their investments.

I have to admit that the findings are not what I would have expected.  Thomson writes: 

“The results indicate that varieties released by royalty-funded breeders are less valuable than those released by breeders operating under the alternative, prereform regime. The data provide no evidence that the transition to royalty-funded breeding is associated with an increase in the rate of variety release. Taken together, these findings suggest that the reform led to a fall in breeder output relative to what would have otherwise been the case. This statistical analysis is supplemented with a series of semistructured interviews with senior scientists, who were employed at Australian breeding programs over the period of reform. This qualitative evidence suggests that the fall in breeder output was caused by a combination of fewer research spillovers, lower release standards, and a possible fall in total investment in breeding. Analysis presented in this article suggests that plant variety protection alone does not ensure socially optimal breeding outcomes in the case of open-pollinated varieties.”

It is a little unclear whether this paper (which compares outcomes before and after a reform) is picking up the effect of the change in the law or some other secular trend.  Could it be the case that breeder output was falling everywhere even outside Australia (perhaps all the low hanging fruit had already been picked)?  The paper also doesn't tell us much (beyond anecdote) about whether total investment (public and private) in wheat breeding was steady or falling in real terms over this time period.  We also aren't told whether there were changes in how breeders who remained in the public sector were compensated after the law change.  Nonetheless, this is an interesting paper that should provoke more research in the area.