Krugman on Food Policy

As incoming president of the Agricultural and Applied Economics Association, I would have loved to have seen one of our food or agricultural economist members featured at the New York Time's Food for Tomorrow conference that focused on food policy earlier this week.  That didn't happen, but at least they did have a prominent general economist on  program.  Paul Krugman's remarks are below.

He talked a bit about externalities.  I wrote on that topic in this paper.  I also brought it up when recently discussing nutritional guidelines: 

“But, what about externalities? To the extent beef production uses a lot of corn or land, that’s already reflected in the price of beef. But, does the price of beef reflect water use and potential (long run) impacts of greenhouse has emissions? Probably not fully. So, the key there is to try to get the prices right. Well functioning water markets would be a start. Greg Mankiw recently had an interview on getting the price of carbon right. Once the prices are right, then “recommendations” regarding resource use are somewhat meaningless: you’re either willing to pay (and able) the price to buy the items you like to eat or not. ”

He argues that if the externalities were properly priced organic would be no more expensive and "industrial" food would be more expensive.  I'm not so sure about that and he doesn't cite any actual evidence to support the claim.  But, here's the thing.  Let's say we had a carbon tax or carbon market.  Now we wouldn't need to answer that question or cajole people about eating organic or non-organic.  I think that was basically his answer to the 1st question that was asked.  

I was also happy to hear him say at some point, "I'm not an expert on any of this" because at a few points he seemed a bit out of his depth on the subject matter and was pandering to the audience.  That being said, I'm at least happy a good economist was in the room contributing to the debate.  His answer to the last question (at about the 22 minute mark) was pretty much right on target.

Potential Impacts of GMO Cowpeas in Africa

The journal Agricultural Economics recently published a paper I co-authored with Sika Gbègbèlègbè who now works for the International Livestock Research Institute (other coauthors are Jess Lowenberg-DeBoer, Razack Adeoti, and Ousmane Coulibaly).  

The abstract:

“Genetically modified (GM) crops could increase economic growth and enhance living standards in Africa, but political issues have slowed the use of biotechnology. This is the first study that assesses the potential impact of GM crops in Africa while considering the preferences of producers and consumers towards GMOs as well as the income and price risks they face. The study uses a choice experiment to estimate the ex ante economic impact of a novel technology, Bacillus thuringiensis (Bt) cowpea, on producers and consumers in Benin, Niger and northern Nigeria. The experiment involves the simulation of a market transaction similar to those in open air markets in West Africa. During the market simulation, respondents are informed about the advantages and disadvantages, including health risks, of Bt cowpea. The results from the study suggest that cowpea growers and consumers in Benin and northern Nigeria prefer Bt to conventional cowpea for health safety reasons. The results estimate that social welfare in Benin, Niger and northern Nigeria would increase by at least US$11.82 per capita annually with Bt cowpea, if seed sectors are operating smoothly. With inefficiencies in seed sectors and the potential for cowpea acreage increase, the estimated social welfare increase in the region would be about US$1.26 per capita annually.”

Assorted Links

How dangerous is obesity, high blood pressure, and high cholesterol?  This post helps put our fears in perspective.  A quote:

“if you’re 35 and not a smoker, you have a 98.5% chance of making it to 45. At 45, you would re-calibrate with those that are still alive and there is a 96% chance of living ten more years, then 93% for the next ten, then 90% for the next. Finally, at age 75, life gets a little risky and the chance that you will live another ten years drops to only 65%. Essentially, the ten year risk of death is almost negligible until we get to our 70s.”

File in the folder "Unintended Consequences".  Researchers find that a ban on bottled water on the University of Vermont campus (presumably to cut down on waste) led to more plastic bottles being shipped to campus and to more soda consumption.

Ways to promote animal welfare without being a vegetarian.  (though not explicitly acknowledged, some of the thoughts flow from my book with Bailey Norwood, Compassion by the Pound)

A great summary article by Phil Pardey and colleagues in the American Journal of Agricultural Economics on funding for research and development in agriculture.  They write:

“We reveal that the U.S. position in the global R&D landscape has changed in substantive ways, especially over the past decade, partly as a result of investment decisions taken by governments and private entities elsewhere in the world, but also as a consequence of changed investment priorities in the United States”

Later they write:

“While the United States is arguably still the predominant source of innovation in global agriculture, the tide appears to be turning”

What happens when Big Food buys Little Food?  File under: organic isn't little anymore . . .

Food Demand Survey (FooDS) - October 2015

The October 2015 edition of the Food Demand Survey (FooDS) is now out.

There were sizable declines in willingness-to-pay (WTP) for all food products; meat and non-meat alike.  At this point, it's unclear what is driving the decline because other measures on the survey, such as food expenditures both at home and away from home remained steady and slightly increased.  In the coming months, I hope to find time to do some serious analysis on effects of seasonality and day-of-week effects given that we now have about two and a half years of data.

Another notable result from the survey is a decline in price expectations for beef, pork, and poultry.  In some cases, the percentage of people anticipating higher prices is less than half of what it was a year ago at this time.  

Consumers reported hearing more about antibiotics and less about Salmonella in the news this month.  

Several new ad hoc questions were added to the survey this month. One set of questions related to food waste. These will be reported separately at a later date.

Another set of questions dealt with consumers’ opinion on policies related to farm animal confinement, similar to Proposition 2 that passed in California in 2008. Of particular interest was whether the framing of the issue affected voting outcomes.

Respondents were randomly allocated to one of three conditions. One third of participants in the first condition were asked to vote on an initiative that: “requires that all animals in your state live in production systems where the farm animals are confined only in ways that allow
these animals to lie down, stand up, fully extend their limbs and turn around freely.”

Respondents in the second condition were asked a similar worded question except it was framed as a ban on the sale rather than production. The initiative: “requires that all animal-derived food sold in your state comes from production systems where farm animals are confined only in ways that allow”.

Respondents in the third condition were asked the same question as in the second condition but “requires” was replaced with “prohibits”. The initiative: “prohibits the sale of all animal-derived food in your state from production systems where farm animals are confined in ways that do not allow”.

Participants were asked to respond “Yes, in favor”, “No, in opposition”, or “Unsure”.

Overall, the majority of respondents stated they would vote “Yes, in favor” in each of the three conditions. Despite the very different implications of the first and second initiatives, voting outcomes were nearly identical in the two conditions. In fact, framing had very little effect, aside from a “prohibition” eliciting more yes votes than a “requirement”. 

Nutritional Guidelines Redux

By now, I'm sure many readers have seen the announcement that the secretaries of the USDA and HHS have announced that the latest dietary guidelines will NOT include issues of sustainability.

This is a topic I've commented on several times in the past, and I was interviewed by Stewart Varney on the Fox Business Network yesterday about the development (I haven't found a link yet to post).

Here are just a few scattered thoughts and comments.

First, it is a bit odd that the nutritional guidelines don't consider behavioral responses of consumers.  That is, if it is recommended not to eat food type X, then what will consumers switch to eating instead?  Note that the question isn't: what do we wish consumers would eat instead, but rather what substitutions will actually occur?  This issue was highlighted in a post by Aaron Carroll on the NYT Upshot blog when discussing a large study that showed reducing saturated fat intake didn't produce noticeable health benefits: 

“The study also resulted in a reduction of unsaturated fats and an increase in carbs. That’s specifically what the committee argues shouldn’t happen. It says that bad fats should be replaced with better fats. However, people did reduce their saturated fats to 10 percent of intake, and didn’t see real improvements in outcomes. This has led many to question whether the quantitative recommendation made by the committee is supported by research.”

In a day and age when behavioral economics is all the rage, and is even being required by the White House, it is a bit absurd to believe consumers will follow all the guidelines and recommendations to-a-tee.  A more pragmatic approach is to realize most people will devote enough attention to get a couple take-home messages, and then act.  We need to study how consumers will actually substitute given their preferences and the messages they digest.  This isn't necessarily a critique of information behind the guidelines themselves (after all, we do want some systematic, scientific summary of the state of nutritional knowledge), but rather a call for research on how the guidelines are actually implemented and communicated and are ultimately used by consumers.

Second, this article by Tania Lombrozo at NPR touches on an issue I addressed several months ago: when guidelines mix nutrition and "sustainability", it necessarily involves value judgments not  science.  She writes:

“Science can (and should) inform our decisions, but you can’t read off policy from science. Invoking science as an arbiter for questions of values isn’t just misguided, it’s dangerous — it fails to recognize what science can (and can’t) provide and it fails to make room for the conversations we should be having: conversations about the kinds of lives we ought to live, the obligations we have to each other, to future humans and to other animals, and — among other things — what that means for the food choices we make every day.”

Finally, looking at a lot of discussion surrounding this issue, while the guidelines purportedly discuss "sustainability" - the issue is often boiled down to a single issue: greenhouse gas emissions.  While it is clear that beef is a larger emitter of greenhouse gasses than most other animal and plant-based food, the impacts need to be placed in context.  In the US, livestock production probably accounts for a very small percentage of all all greenhouse gas emissions.  Telling people to eat less meat will likely have small effects on greenhouse gas emissions.  My gut feeling is that further investments in productivity-enhancing research will have a larger effect on greenhouse gas emissions than cajoling consumers.  

In other places discussing "sustainability" the issue of food security is mentioned, as is resource use.  To an economist's ears, when I hear "resource use", I immediately think of prices.  Prices are the mechanism by which resources get efficiently allocated in a market-based economy.  As such, it gives me pause when I think of a report by a a group of nutritionists making recommendations on proper resource use.   I'd never trust a dictator (or even a group of economists) on having enough knowledge to making optimal decisions on resource use.  Beef is a relatively expensive food.  That tells us it is using a lot of resources, and that higher price causes us to eat less than we otherwise would.  

But, what about externalities?  To the extent beef production uses a lot of corn or land, that's already reflected in the price of beef.  But, does the price of beef reflect water use and potential (long run) impacts of greenhouse has emissions?  Probably not fully.  So, the key there is to try to get the prices right.  Well functioning water markets would be a start.  Greg Mankiw recently had an interview on getting the price of carbon right.  Once the prices are right, then "recommendations" regarding resource use are somewhat meaningless: you're either willing to pay (and able) the price to buy the items you like to eat or not.