Which other government programs are us fat?

A few days ago, I took on the claim that farm subsidies are making us fat (the answer is most likely "no").  However, there are other government programs that potentially affect food prices - what about those programs?  Have they contributed to the rise in obesity?

A new paper in by Julian Alston, Joanna MacEwan, and Abigail Okrent in Applied Economic Perspectives and Policy asks whether funding for agricultural research and development (R&D) can explain the rise in obesity.  The chain of logic goes like this: there is extensive evidence that funding for agricultural research increases productivity; higher productivity means getting more food using fewer resources; more food means lower food prices; more food at lower prices means more food intake; more food intake leads to obesity.  Ergo, government funding for agricultural research leads to obesity.  

So what did the authors find?  They found that agricultural R&D spending probably did have a modest effect on obesity rates, but that R&D also resulted in enormous benefits to consumers and producers.  The authors write:

“Our analysis of historical counterfactuals suggests that it would have been very expensive to have foregone past R&D-induced productivity growth, even if in doing so we were able to reduce obesity and related healthcare expenditures.”

And, if we had undone the R&D efforts that led to the food price changes since the 1980s:

“This would be a costly reversion; it would cost consumers $65.01 billion, of which only $4.72 billion would be offset by savings in public healthcare costs, to reduce average U.S. adult body weight by 4.85 lbs. This translates to a cost of $55.6 per pound after the savings in public healthcare costs are taken into account.”

In summary:

“The implication is that agricultural R&D policy is unlikely to be an effective policy instrument for reducing obesity, both because the effects are small and because it takes a very long time, measured in decades, for changes in research spending to have their main effects on commodity prices. Moreover, as our results and others have shown, the opportunity costs of reducing agricultural research spending in the hope of eventually reducing the social costs of obesity would be very high because agricultural research yields a very large social payoff.”

Having now discussed the effects of farm subsidies and agricultural research, what about programs like the government-sanctioned check-off programs?  That was the topic of a session at the most recent AAEA meetings in Boston.  Parke Wilde from Tufts and Harry Kaiser from Cornell debated the role of check-off programs and their role in affecting public health and nutrition.  I was unfortunately unable to attend the session, but Parke offered a preview of it on his blog.  I hope to see some research on this topic in the near future.  

10 Year Anniversary of Omnivore's Dilemma

Blake Hurst, a farmer from Missouri, takes stock of the changes in cultural views toward food in the 10 years since the publication of Michael Pollan's highly influential, Omnivore's Dilemma. 

Here's one bit that typifies some of the clash between the views of the food movement and those of a conventional farmer.

“Anybody who has followed the food movement over the last decade knows that corn is the serpent in the garden, the root of all evil, the original sin of industrialized agriculture. The writers and intellectuals who have changed the way we think about food and farming have seen the corn plant colonize, as they put it, an additional 25,000 square miles, an area almost the size of West Virginia. That’s got to hurt, if you like to eat artisanal kale in overpriced restaurants in Berkeley.

As a practical matter, agriculture has remained much the same because we farmers do what we do for good reasons. We use chemical fertilizers because people have to eat, and we can’t produce enough food without the help of commercial nitrogen fertilizer. We use chemical compounds to control weeds and insects because it’s the only way to do that without handing a hoe to millions of Americans every summer. We change corn into human food through animals (we eat the animals that eat the corn) and in food-processing factories that use corn products, because when it comes to changing changing sunshine to calories, corn is the most efficient plant known to man”

Hurst wraps up as follows:

“When it first hit the best-seller list in 2006, Pollan’s book was perfect for the times, laying out a series of challenges for the nation’s leading industry. He has changed how we think about food, increased scrutiny of those who provide that food, and spawned a growing and well-compensated cadre of chefs, documentary makers, food entrepreneurs, and other self-proclaimed food experts who are always ready with a quote or a Twitter hit about the dangers of modern food production. He hasn’t done much to change the way I farm, but he’s certainly changed the way farmers communicate with eaters.

Others will have to decide whether we’re better off for all of these changes. For farmers like me, the food movement has made life a little harder; it’s made me more conscious of how the decisions I make appear to others. I spend more time talking to people who are curious but uninformed about my industry. We now all talk like Pollan, but, a decade on, we still like a good hamburger or a perfectly prepared steak.”

There are a number of good points in the article.  Read the whole thing here.

Some Criticism

I've noticed a couple items in the news that take a critical look at two big funders of my activities: land grant universities and granting agencies.  While I don't necessarily endorse these views, some critical self reflection is often useful.  

First is an article by Michael Martin and Janie Simms Hipp arguing that land grant universities have strayed from what the authors see as the universities' original mission:

“closing the educational gap between the haves and the have-nots, which in turn would lead to greater income equality, economic development, and social justice.”

In particular, the authors want the larger, more prominent 1862 Land Grants to work more closely with the other land grants: the 1994 Tribal Land Grant Colleges,  the 1890 Historically Black Colleges and Universities, and Hispanic Serving Institutions.  The offer four suggestions, the last of which is to "unify in seeking renewed public funding for public higher education from Congress and state legislatures."

This last suggestion is related to a separate criticism offered by Tyler Cowen and Alex Tabarrok in a piece for the Journal of Economic Perspectives.  They are skeptical of the typical arguments made to increase and sustain funding for economics research. Their critiques are broad, but they focus much of their attention on the National Science Foundation (NSF) grant funds for economics research.  

A few snippets:

“In considering the case for grant-based funding of economics research by the National Science Foundation, we find that a number of pertinent questions are rarely asked, let alone clearly answered. Instead, economists often put forward relatively weak arguments that they would likely dismiss if applied to government subsidies not reserved for economists. ”

and

“Economics should think much harder about the marginal benefits of National Science Foundation grants for economics, and for other subjects, in the context of the many other ways in which society funds research, along with how such money should be spent and what the relevant alternatives might be. There is a good case for a significant change in NSF priorities towards replication and reproducibility of research, data access, and teaching. ”

See also this comment by John Cochrane.  I particularly liked this statement:

“Without data we would not exist. That strikes me as the single most underfunded public good in the economics sphere.”

Consumer Research and Big Data

Its been a great week in Boston at the Agricultural and Applied Economics Association (AAEA) annual meeting.  It's always good to see old friends, meet new ones, and learn about a wide array of topics.  

This year, I had the privileged of taking over as president and giving the AAEA presidential address.  I chose to talk about new and emerging data sets that are being used in consumer research.  I presented several short studies using data from the Food Demand Survey (FooDS) to illustrate how we might garner new insights about consumer heterogeneity and demand using new datasets.  A working draft of the paper is here. [Note: I've updated the paper (new draft here) in response to some comments, and some of the elasticity figures have change because I found a small error in my code)   I welcome any comments.   

A few key lessons.  First, there are big differences across consumers in their demands for food at home and away from home, but larger datasets that have a lot of cross-sectional and temporal variability reveals that the "representative consumer" hypothesis is probably false.  Here's a plot showing the distribution of the income elasticitities of demand for food at home and away from how (i.e., how much additional food at home or away from home a household buys as their income increases). For some households, food at home is a "normal" good (they buy more when they make more), but for other households, food is an "inferior" good (they buy less when they make more).  Food away from home is a normal good for more households than is food at home.

One of the main ways economists have studied consumer heterogeneity is by doing surveys.  However, almost all these surveys are conducted at a single point in time.  Thus, they present a "snap shot" of consumer preferences.  Using my survey data, however, I showed (using a so-called choice experiment repeated monthly) that these typical survey approaches might miss a lot of variability over time.   

Finally, one of the problems with many consumer research data sets is that they are not large enough to allow us to learn much about small segments of the population.  If one wants to learn about people with Celiac disease, for example, then a survey of a random sample of 1,000 people will only turn up roughly 20 people with the disease - hardly enough to say anything meaningful.  

In FooDS, we've been asking whether people are vegetarians or vegans for over three years now.  This group only represents about 5% of the population, so one needs a large data set to describe the characteristics of this group.  I used a machine learning method (a classification tree) to predict whether a person self-identified as vegetarian or vegan.  Here's what turned up.  Vegetarians tend to be very liberal, on SNAP (aka "food stamps"), with relatively high incomes, and children under 12 in the house.  

These are just a few examples of the growing number of questions economists can now start to answer as we get our hands on larger, richer datasets.  

Are Farm Subsidies Making Us Fat?

In the past couple weeks, there have been a number of popular press articles suggesting that farm subsidies are a big part of the reason Americans eat unhealthy and are overweight. Here's the title from the New York Times: "How the Government Supports Your Junk Food Habit", and Fox News: "Government heavily subsidizes junk food, report suggests", and NPR: "Does Subsidizing Crops We're Told To Eat Less Of Fatten Us Up?". All the hubbub seems to stem from this article by some CDC researchers in JAMA Internal Medicine, which shows people who are more overweight tend to get more of their calories from foods that happen to be subsidized.

But, as we should all know by now, correlation is not causation.  Here's Tracie McMillian in a piece for National Geographic:

“But what the study does not show is the degree to which subsidies—and, in particular, the ones that are currently in place—actually persuade people to eat more of those foods. The researchers, by the way, admit this: “We cannot say [the link between subsidies and consumption] is causal from this study,” says K.M. Vankat Narayan, a lead author.

So while there’s an accepted correlation between low prices and increased purchases, nobody really knows how much farm subsidies matter when it comes to which foods people buy—and eat.”

She's right on the first part and wrong on the second.  There are actual lots of people who know how much farm subsidies contribute to food consumption, and they're called agricultural economists (in fact, McMillian goes on to then cite two prominent food and agricultural economists on the issue: Parke Wilde and David Just).  My view is in line with Wilde's and Just's:

“Indeed, in contemporary America, “the potential impact of the agricultural subsidies on consumption right now is inconsequential,” argues David Just, an agricultural and behavioral economist at Cornell University. Subsidies for farmers are unlikely to have much impact on consumer prices, adds Wilde, because farmers’ share of what we pay at the store is so little. ”

Let me pause right here and say that the question of the causal relationship between farm policy and unhealthy food consumption is an empirical, positive question, not a normative one.  There are a variety of reasons one may think we should or should not have farm subsidies (I generally find myself in the latter camp for reasons I won't go into here), but for the moment let's set the "should" question aside and ask what the evidence actually says on the link between farm subsides and unhealthy eating.  

Here's what I wrote on the issue in a recent Mercatus paper (which came out well before all the JAMA paper and the resulting news stories):

“Despite popular claims to the contrary, research suggests that farm subsidies have likely had little to no effect on obesity rates. First, although such policies may have had some effect on farm commodity prices, these inputs account for only a small share of the overall retail cost of food. For example, in 2013, only 7 percent of the retail price of bread was a result of the farm-gate price of wheat and other agricultural commodities. Even the enormous price swing that took wheat from around $3 per bushel in 2006 to almost $12 per bushel in February 2008 (a 300 percent increase) would be expected to increase the price of bread by only about 14 percent. Second, agricultural policies are mixed, and some policies (such as those for sugar, ethanol promotion, and the Conservation Reserve Program, or CRP) push the prices of agricultural commodities up rather than down. Third, despite the widely varying agricultural policies across countries and over time (see figures 14–16), those policies do not correlate well with differences in food prices and obesity rates across countries or with changes in obesity rates over time.”

In the model I used for the forthcoming paper I wrote on the distributional impacts of crop insurance subsidies, I find that the complete removal of crop insurance subsidies to farmers would only increase the price of cereal and bakery products by 0.09% and increase the price of meat by 0.5%, and would also increase the price of fruits ad vegetables by 0.7%.  So, while these policies may be inefficient, regressive, and promote regulatory over-reach, their effects on food prices are tiny, and depending on which policy we're talking about, could push prices and consumption  up or down.  

For those truly interested, here's a small list of academic papers by economists on the relationship between farm policy and obesity/health (for links to the actual papers, just do a quick googlescholar search).

Alston, Julian M., Daniel A. Sumner, and Stephen A. Vosti, “Farm Subsidies and Obesity in the United States: National Evidence and International Comparisons,” Food Policy 33, no. 6 (2008): 470–79. 

Balagtas, J.V., Krissoff, B., Lei, L. and Rickard, B.J., 2014. How Has US Farm Policy Influenced Fruit and Vegetable Production?. Applied Economic Perspectives and Policy, 36(2), pp.265-286.

Beghin, John C., and Helen H. Jensen. "Farm policies and added sugars in US diets." Food Policy 33, no. 6 (2008): 480-488.

Miller,J. Coreyand Keith H. Coble, “Cheap Food Policy: Fact or Rhetoric?” Food Policy 32, no. 1 (2007): 98–111. 

Okrent, Abigail M.  and Julian M. Alston, “The Effects of Farm Commodity and Retail Food Policies on Obesity and Economic Welfare in the United States,” American Journal of Agricultural Economics 94, no. 3 (2012): 611–46.

Rickard, B.J., Okrent, A.M. and Alston, J.M., 2013. How have agricultural policies influenced caloric consumption in the United States?. Health Economics, 22(3), pp.316-339.

Zilberman, D., Hochman, G., Rajagopal, D., Sexton, S. and Timilsina, G., The impact of biofuels on commodity food prices: Assessment of findings. American Journal of Agricultural Economics, 95, no. 2 (2013) : 275-281.