New Research on the Berkeley Soda Tax

You may remember the discussion surrounding a research paper released back in August that used interviews and survey data to suggest that the tax on sodas that went into place in Berkeley caused a significant reduction in soda consumption.  

As several other locales are considering new soda taxes in the upcoming election season, this sort of research is valuable in trying to sort out the potential effects of the policies.  

Now there is new research by Scott Kaplan, Rebecca Taylor, and Sofia Villas-Boas at UC Berkely.  The authors utilize a dataset on retail sales of various drinks in dining locations at "a large university" - presumably Berkeley.  Importantly, the authors do not actually look at the effect of the implementation of the tax, but rather they look at what happened to soda sales because of the publicity and information surrounding the vote.  That is, they look at soda sales surrounding the time of the vote but before the tax actually went into place.

Here is a figure from the paper summarizing the main findings: 

The authors write:

“We find a 30% drop in soda sales relative to other product groups during the post-election
period. In a related and contemporaneous study using survey data, Falbe et al. (2016) find
an average 21% drop in SSB quantity sold. However, because the surveys were completed
only before the election and after the tax implementation, Falbe et al. (2016) are unable to
distinguish whether this effect was from the campaign and election or from the tax itself.
Our results show that soda sales fell on-campus after the soda tax election yet before prices
changed due to the tax. This suggests that comparing pre-campaign to post-implementation
consumption may confound a tax effect with an information effect. This has important
implications for external validity. If the Berkeley SSB tax is replicated elsewhere without
a proceeding campaign war and affirmative election outcome, its effects on consumption
may differ substantially. In other words, given the amount of money spent in the Berkeley
campaign on each side of the battle, it is important to understand how much behavioral
change was due to the election and how much was due to the tax itself.”

My take on the results is that these soda tax policies may well have sizable "signaling" or "information" effects aside from whatever pecuniary effects exist.  I have found similar results related to animal welfare regulations: that the publicity surrounding a vote has a significant impact on what people buy aside from whatever impacts the policy actually has on the price or foods offered.  In short: information dissemination campaigns may be as important or more important than taxes or bans on products.  In my assessment, information policies are often far more justifiable than are more coercive policies that restrict choice. 

It will be interesting to see as future research emerges whether and how the actual implementation of the tax changes soda consumption and how long lasting are these information effects.  

Assorted Links

• A Nielsen report on the market for "clean" and "natural" meats
• David Zilberman at UC Berkeley has a nice post summarizing the ups and downs in the history of Monsanto
• A report, based on USDA data, suggests that there has been a rapid rise in the number of hens in cage free systems 
• Remember the controversy over the World Health Organization's cancer agency classifying glyphosate (aka Roundup) a probable carcinogen?  According to this story, the agency is now asking experts who participated in the decision not to share emails an communications in response to freedom of information requests.  

How much do millennials like to eat out?

A recent article in Forbes discussed millennial's eating habits utilizing, it seems, a report from the Food Institute and USDA Economic Research Service Data.

The Forbes article writes:

“Millennials spend 44 percent of their food dollars – or $2,921 annually – on eating out, according to the Food Institute’s analysis of the United States Department of Agriculture’s food expenditure data from 2014. That represents a 10.7 percent increase from prior data points in 2010.

In contrast, baby boomers in 2014 spent 40 percent of their food dollars on eating out or $2,629 annually.”

It's a little hard from this article to really get a nice comparison of millennials food spending without controlling for differences in income and total spending on food at home and away from home.  Thus, I turned to the data from my Food Demand Survey (FooDS) where we've been asking, for more than three years, how much people spent on food at home and away from home.

Here is a breakdown on spending on food away from home (expressed as a share of total household income) by age and by income.  The black and red dashed lines are the two age groups that could be considered millennials.  The results show that for incomes less than about $80,000/year, millennials do indeed spend a larger share of their income on food away from home than do other generations; however, the same isn't necessarily true for higher income households.  People in the two oldest age categories spend a lower share of their income on food away from home at virtually every income level.  For each age group, the curves are downward sloping as suggested by Engle's Law: the share of income spend on food falls as income rises.   

The next graph below shows the same but for spending on food at home.  For the lowest income categories, the youngest individuals spend more of their income on food at home than do older consumers; however, at higher income levels, all age groups are fairly similar.  Coupling the insights from the two graphs suggests that, at incomes less than about $60,000, younger folks are spending more of their income on food (combined at home and away from home) than older folks.   

Finally, here is the share of total food spending that goes toward food away from home by age group and income level.  In general, as incomes rise, people spend more of their food budget away from home.  That is, richer people eat out more.  No surprise there. 

Generally speaking, consumers younger than 44 years of age spend more of their food budget away from home than do older consumers.  The 24-34 year old age group that is firmly in the millennial generation consistently spends more of their food budget away from home than other age groups at almost every income level.   

Social Isolation and the Food Police

Last week on the Econ Talk podcast, Russ Roberts had Chris Arnade on as a guest.  Arnade is a former Wall Street trader who became disillusioned with his work and began (first as a way to just relieve stress) going on long walks to poorer neighborhoods in New York where he would meet people and take pictures.  He's since expanded the enterprise and has visited disadvantaged areas all across the U.S.  

There was a bit near the end of the discussion that hit home for me and helps explain a bit of the motivation that led me to write the Food Police several years ago.  

From the transcript, here is Chris:

“They do see themselves as victims of policy decisions. They may not be actually informed about those policy decisions as people would like them to be. You know, I think what sticks out to me is the anger. The anger is kind of 3-pronged. One of it’s very much social. It’s a sense of feeling kind of diminished in terms of people caring about them, being made fun of: everything they do is laughed at. If they like NASCAR (National Association for Stock Car Auto Racing.), that’s made fun of. If they vape, then that’s considered wrong. They eat at McDonald’s, that’s cheap. So that’s kind of just—if they go to church, they are considered silly. So there’s a sense of just feeling like very much they are being mocked in terms of their lifestyle.”

After a bit more discussion, Russ Roberts the asks:

“I want to talk about the first one, because it interests me. I am constantly trying to remind economists that money isn’t everything. And that, although work is nice when it brings money, one of the things it also brings is meaning. And I think the problem of the lack of employment in the United States as we’ve recovered from this recession, especially among less educated Americans, is a huge problem, not because they are poor and unemployed—which is unpleasant, no doubt about it—but because their life is not as meaningful and worthwhile. So, I totally understand that. What I wonder about is this idea of respect. Certainly respect is hugely important to our sense of wellbeing. But when you say things like, ‘People don’t respect NASCAR,’ or church, they being—McDonald’s. And among my friends, that’s true. Among the people I hang out with generally, higher educated people, those are all the attitudes they hold. But are the people who are enjoying those things—McDonald’s, etc.—why do they—how do they perceive that they are not respected? I don’t hang out much with people on the Coast, say, who are telling them that—is this something they are perceiving on television? Is it something they are reading about?”

And Chris responds:

“I don’t want to get overly simplified but I guess I really do think there’s two Americas. And I think the America that’s doing well dominates the media, dominates the culture in terms of—you know, Sociologists always talk about there’s an in-culture and there’s an out-culture. And we signal [?] ways of being in the in-culture, in terms of the television shows, in terms of what’s on, movies, and what’s kind of made fun of. And I think there’s a fair amount of people who make fun of the culture of poverty, in terms of how people get by. If people go to church. If people, you know, go to NASCAR. Or those sort of things. I think it does filter across through the media. And I think some of it also is, comes from a place of being frustrated already and then taking any perceived slights, you know, magnifying them. So, you know, we may not be as—they may be more overly sensitive than they should be, but that comes from a place of also being just frustrated, economically—feeling very much like they are left behind.”

There are not doubt many good people in the so-called "food movement" who care about the downtrodden and are motivated by the belief that the food system they envision will help poorer people.  But, I think this exchange also reveals that we need to also respect and look at things through the eyes of the people we're trying to help.  

Trade Matters

Trade has been taking it on the chin as of late.  Leading politicians are decrying trade partnerships like TPP and NAFTA.  In addition, the Environmental Working Group (EWG) released a report a few weeks ago challenging the argument that US agriculture needs to "feed the world".  While I happen to agree that "we need to feed the world" is not perhaps the best way to frame the future challenges, I'm not so sure about the arguments they make either.   Basically they argue something along the lines of the following: well, we don't really export that much anyway, and the people we export to are pretty rich, so we're not really feeding the world.  More on that in a minute, but first on the statistics.  

Trade is a big deal for U.S. agriculture.  The data from the USDA shows that we export about 20% of all the agricultural output (both in terms of volume and in terms of dollars).     

And, the share of agricultural output that is exported is much higher for particular commodities.  As the below graphs shows, for example, more than 80% of the U.S. cotton crop and over half the U.S. wheat crop was exported to other countries in 2013.  

While trade has no doubt has some deleterious effects on certain kinds of manufacturing jobs, these data make it quite clear that if you're a wheat or cotton farmer, trade is a very big deal.  Most of their customers reside outside the United States.  

Let's take a look at wheat since it is mainly used as human food.  Where does that wheat go?  Here's some USDA data.

Yes, some of these countries, like Japan, are relatively wealthy.  It shouldn't be surprising that relatively wealthy countries are relatively big importers of U.S. products: they have the money to buy things that poorer countries can't afford (this shows up particularly when one looks at meat exports because meat is a relatively expensive food).

Back to the Environmental Working Group's argument.  Many, if not most, of the countries in the above list have hunger and food insecurity rates far above that in the US Moreover, their per-capita GDP is far below that of the U.S.  What would be interesting to see, but I don't have the time to compile, is how these trade statistics look compared to domestic production in say, Japan, Mexico, Nigeria, etc.  That is, of all the food eaten in these countries, how much comes from the US?

A couple other points about trade are worth noting.  First, there are other large producers of wheat, corn, soybeans, etc.  And we all compete for international customers (and sometimes we trade with each other).  That is a very good thing because if we have a drought in the U.S. or in China, trade allows us to smooth out the impacts.  So, even if one looks just at a snapshot in time and says, "see trade isn't that big a deal", look again when we have a major crop failure in a particular part of the world.  Prices and food consumption in the U.S. would be more volatile if we didn't have world trade buffering the shocks.  

Second,  many developing countries have really restrictive trade policies and trade barriers.  Thus, in some cases we don't send food to hungry people in other countries because their governments don’t allow it (here's a great paper comparing agricultural policies across the world).  

Finally, I'm not sure whether and to what extent food donations and assistance to developing countries are counted in trade trade statistics.  To the extent they're not, people in the developing world are eating more U.S. food than the trade statistics would suggest.   

So, the next time the issue of trade comes up, don't forget about the diverse foods we enjoy at lower prices than we otherwise would because we buy from farmers in other countries, and don't forget the extra income that U.S. farmers enjoy from being able to sell to customers in other parts of the world.  

P.S.  After some Twitter feedback, I should clarify that not ALL farmers benefit from trade.  Here is data on U.S. food and agricultural imports (the biggest are seafood and fruit).  U.S. farmers who, for example, grow catfish are indeed in competition with foreign fishermen and fish farmers.  However, for most agricultural goods, the U.S. is a net exporter.  But, even if we weren't, it wouldn't mean trade is bad.  Even in this case, U.S. consumers would benefit by having access to less expensive food (and different types of food) from other parts of the world.  It isn't helpful to think of trade as a zero-sum game (or in the old mercantilist mindset), but rather trade expands the size of the pie making more food available for consumers everywhere (though of course there are some winners an losers along the way).  It isn't just the volume of trade that matters either.  For example, we export beef to Mexico and we import beef from Mexico.  How does this make sense?  Because it isn't the same type of beef: we're importing high value steaks and we're exporting different cuts that Mexicans prefer in their cuisine.