Food Demand Survey (FooDS) - September 2016

The latest results of the Food Demand Survey (FooDS) are now out.  A few results of note:

• Willingness-to-pay (WTP) for beef products was essentially unchanged compared to last month, and there were small movements in pork and chicken WTP.
• Spending on food away from home increased about 8.7% from August to September.
• Compared to last month, there was an uptick in awareness and concern for bird flu.  Pink slime was less in the news and of less concern compared to September.  Both awareness and concern for GMOs fell relative to last month.  
• Respondents reported being less concerned about losing weight this month compared to last.  

We asked a few ad hoc questions, but these will be discussed at a later date as analysis is still underway.  

Evaluating the Policy Proposals of the Food Movement

That is the title of a paper I presented a few months ago at a conference put on by the American Enterprise Institute.  

The paper is a critical evaluation of the food policy proposals put forth by by Mark Bittman, Michael Pollan, Ricardo Salvador, and Olivier De Schutterand (see here, here, and here).  As I argue in the paper, these policy proposals have largely escaped serious criticism, but it is important to take a closer look for the following reasons.

“While members of the so-called food movement have historically had much less influence on farm and food policy than, for example, farm commodity organizations, recent events suggest that power dynamic could be changing. Food movement members have been extraordinarily adept in fomenting the modern day food and farm zeitgeist, selling numerous bestselling books and garnering space in influential media outlets. For example, in 2015 the New York Times hosted a “Food for Tomorrow” conference which focused on food and farm policy issues that are centerpieces of the food movement agenda. First Lady Michelle Obama made food policy a signature issue by planting a White House garden, retooling school lunches, and including the White House chef as a policy advisor. The emergence of the local food and farm-to-table movements, as well as state ballot initiatives on labeling of genetically modified food and farm animal housing, can also be seen as outgrowths of the impacts of the food movement.”

The authors first start by painting a dire picture of the state of food and agriculture.  Then they offer a set of "guiding" principles before putting forth more than 20 specific policy proposals.  In the paper, I go point by point and address each one.  Here I'll just offer my summary:

“I demonstrate that the authors offer no consistent, underlying philosophical basis for when the federal government should (and should not) intervene and offer no framework for making tradeoffs when proposed “guarantees” come into conflict. Moreover, the authors misjudge the trajectory and impacts of changes in food and agriculture and thus overstate the urgency and scope for intervention. The authors’ numerous specific policy proposals tend to represent a hodge-podge of ideas that have already been tried, are already being undertaken by the USDA, or fail to hold up under close scrutiny, although there is some common ground on a few proposals. ”

In a particularly telling example, where the authors propose funding for all sorts of youth activities to promoting cooking and agriculture, they make no mention of the largest food and agricultural youth organizations already working in schools across the country: 4-H and FFA.  

Tragedy of the commons- have we been buffaloed?

We all know the story about how buffaloes almost went extinct - it's a phenomenon economists call the tragedy of the commons.  Here's how Bailey Norwood and I described it in our undergraduate textbook:

“Consumers want beef today and they will want beef in the future. Ranchers understand this, and when they sell cattle they reserve some males and females for breeding. This is an investment. They forego the money they could have earned by selling cattle today, electing instead to produce more by breeding, earning greater profits at a later date. . . . Consumers in the nineteenth century wanted buffalo hides today and in the future, so it was in society’s interest to not kill all the buffalo. By leaving some males and females alive, one could be assured of buffalo hides in the future. Despite this obvious truth, hunters tried to kill them all. The reason is that no one owned the buffalo, so if you decided to leave some males and females alive to breed, another person may come and kill them. Better you benefit from the kill than someone else. ”

Is this common knowledge about the tragedy of the commons all wrong?  The economist Peter Hill thinks so.  Here is a snippet from his contrarian take in The Independent Review:

“The history of the American bison is one of rational individuals operating under an institutional framework that did not create a tragedy of the commons. It is true that property rights were not well defined and established for bison on the open prairies, but because bison were not a valuable resource, property-rights entrepreneurs put little effort into establishing rights for them. And even if there had been well-defined and enforced property rights, cattle would still have replaced bison as the primary converter of grass on the Great Plains. The adjustment from bison to cattle may not have been perfect, but there is no evidence of large-scale rent dissipation. When bison did become valuable as they came close to complete extermination, entrepreneurs established rights to live animals and prevented their complete demise. Thus, economists who wish to describe how rational individuals under an open-access resource will overuse that resource should turn to some other example than that of the American bison. And economists should recognize that other situations of rapid depletion of a resource do not necessarily represent the tragedy of the commons if the analysis has ignored important opportunity costs.”

Excess Supply of Cage Free Eggs?

“Many of the cage-free egg purchase pledges have implementation dates around 2025, which was thought to be the minimum amount of time required for the industry to convert from more than 90 percent cage-housed hens to being predominantly cage free. Unfortunately, many of the retail store purchase pledges don’t contain intermediate benchmarks, and they have provisions for availability and affordability of eggs. Couple this with many consumers’ reluctance to pay the premium for cage-free eggs, and we have the current confusion in the marketplace where surplus cage-free eggs are being sold to breakers at substantial losses for egg producers.”

That's from this article by Austin Alonzo and Terrence O'Keefe. 

Real World Demand Curves

On a recent flight, I listened to the latest Freakonomics podcast in which Stephen Dubner interviewed the University of Chicago economist Steven Levitt about some of his latest research.  The podcast is mainly about how Levitt creatively estimated demand for Uber and then used the demand estimates to calculate the benefits we consumers derive from the new ride sharing service.  

Levitt made some pretty strong statements at the beginning of the podcast that I just couldn't let slide.  He said the following:

“And I looked around, and I realized that nobody ever had really actually estimated a demand curve. Obviously, we know what they are. We know how to put them on a board, but I literally could not find a good example where we could put it in a box in our textbook to say, “This is what a demand curve really looks like in the real world,” because someone went out and found it.”

As someone whose spent the better part of his professional career estimating consumer demand curves, I was a bit surprised to hear Levitt claim "nobody ever had really estimated a demand curve."  He also said, "we completely and totally understand what a demand curve is, but we’ve never seen one."  The implication seems to be that Levitt is the first economist to produce a real world estimate of a demand curve.  That's sheer baloney.  

The most recent Nobel prize winner in economics, Angus Deaton, is perhaps most well known for his work on estimating consumer demand curves.

In fact, agricultural economists were among the first people to estimate real world demand curves (see this historical account I coauthored a few years ago).  Here is a screenshot of a figure out of a paper by Schultz in the Journal of Farm Economics in 1924 who estimated demand for beef.  Yes - in 1924!  I'm pretty sure that figure was hand drawn!

Or, here's Working in a paper in the Quarterly Journal of Economics in 1925 estimating demand for potatoes.

Two years later in 1927, Working's brother was perhaps the first to discuss "endogeneity" in demand (how do we know we're observing a demand curve and not a supply curve?), an insight that had a big influence on future empirical work.

Fast forward to today and there are literally thousands of studies that have estimated consumer demand curves.  The USDA ERS even has a database which, in their words,  "contains a collection of demand elasticities-expenditure, income, own price, and cross price-for a range of commodities and food products for over 100 countries."   

Here is a figure from one of my papers, where the demand curve is cleanly identified because we experimentally varied prices.  

And, of course, I've been doing a survey every month for over three years where we estimate demand curves for various food items.

In summary, I haven't the slightest idea what Levitt is talking about.