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Spending on Beef over Time

Meat demand has been a frequent topic on this blog (e.g., see here, here, here, or here). As some of the previous posts indicate, “demand” is a hard thing to measure. A slightly easier thing to measure is spending. As it turns out, the Bureau of Labor Statistics (BLS) has been tracking consumer spending at the household level on food at home in a number of categories, including beef, pork, and poultry, in their annual Consumer Expenditure Survey.

Using these data, I constructed the following animation showing the relationship between spending on beef and total household expenditures by quintiles of income.

The figure shows, at any point in time, higher income households (or those with greater total spending) spend more on beef than lower income households (or those with less total spending). In econ-speak, beef is a “normal” good. However, for any given income (or total spending) level, spending on beef has fallen precipitously since 1984 (all figures are in inflation-adjusted 2017 dollars). The change over time is most dramatic for the higher income/spending households. In 1984, the lowest and highest quintile income households spent $265 and $681 per year (in 2017 dollars), respectively, on beef for consumption at home. By 2017, these figures had fallen to $158 and 352, respectively.

These data could be reflective of downward demand shift - i.e., consumers willing to pay less for each pound of beef than they were in the past. Other possible explanations for the downward decline in spending include changing beef prices over this period, changing household demographics (the average number of people in today’s households is slightly smaller today than in the mid 1980s; fewer people normally means less spending), other protein sources, such as poultry, becoming relatively less expensive or more attractive, a shift toward more food spending away from home (the BLS only tracks spending for individual food categories for food eaten at home), and more.

How do the data in the above figure square with measures of demand (such as these constructed by Glynn Tonsor), which show no clear trend in beef demand since the early 1990s? Well, as I mentioned above, spending isn’t “demand” because while the figure controls for income, it doesn’t control for prices. Another possible explanation is that the data in the figure above are for households, while aggregate demand statistics like those created by Tonsor are calculated nationally. It is possible for total aggregate demand to rise even if each individual household’s demand is falling if population is increasing and more households are being added. That is, in fact, what has happened. There were about 86 million households in the US in 1984. Today there are about 128 million households.

Food Affordability Over Time

On a number of occasions, I’ve written about the Engel Curve, which relates the share of consumer spending on food to the consumer’s income (or total expenditures on all goods). Whether we compare consumers within a country or compare spending across countries, a common relationship holds: the higher a consumer (or country’s) income, the smaller the share of their income they tend to spend on food.*

This relationship indicates that as consumers and countries get richer, we’d expect food expenditure shares to fall, a phenomenon generally thought to be associated with higher consumer well-being. While this relationship is widely known among economists, there is another fact that is not as widely known. In particular, the entire Engel Curve has been shifting downward over time. That is, for any given level of income, consumers today are spending less on food than they were in the past.

To illustrate this phenomenon, I pulled data from the Consumer Expenditure Survey that has been collected annually since 1984 by the Bureau of Labor Statistics (BLS). The BLS report food expenditures and total expenditures by quintiles of income. These data were used to create the following animation.

The video shows that, despite the year-to-year variation, there is a fairly steady shift in the Engel Curve over time downward and to the right. That is, consumers are getting richer over time (i.e., their total expenditures are rising), and for any given level of total expenditures, the share being spent on food is generally falling. There are several possible drivers of this phenomenon, but one likely culprit is technological progress. For any given level of income or total expenditure, innovation and technological change has brought down the price of food such that consumers are able to eat what they want while being able to spend more of their income on other, non-food items. That is, food today is more affordable (at least by this metric) for households of all incomes (or total expenditure categories).


*Note: just because the food share falls, it doesn’t mean total spending on food falls as income increases. In general, richer consumers spend more on food than poorer consumers. However, spending on non-food items tends to increase at a faster rate than spending on food as income rises, leading to a smaller share of income being spent on food.

Reducing Food Waste - Where's the Incentive?

In recent years, there has been a lot attention being focused on reducing food waste. While I have argued for more nuance than one often sees in popular exhortations to reduce waste, the issue is important: it would be nice to find ways to save all the resources that go into producing food that ultimately winds up in the garbage.

A number of discussions over the past couple months have led to an aspect of this problem that hasn’t received much attention. Namely, what is the incentive of food producers and manufacturers to reduce waste? Or, what are the most effective mechanisms to reduce waste?

One way of reducing waste is what we might call the “demand side” strategy. Try to convince consumers to consume all of what they buy and throw out less. Our stomachs and pantries are only so large, and as a result, this presumably means consumers would ultimately buy less food. In economic terms, this leads to a downward shift in demand, which results in lower prices and less food sold. For producers, this is certainly a bad outcome: selling less food at lower prices means lower revenues and profits. From the perspective of a food producer, all they care about is whether the product sells. What you do with it after you buy it is of little consequence to the seller. As such, one might wonder how much incentive food producers and sellers have to reduce waste, at least via this demand side strategy. To boot - we don’t know for sure whether consumers are better or worse off. They pay lower prices but also buy less food, and as a result the impacts on consumers is ambiguous.

A different way to try to reduce food waste might be called a “supply side” strategy. One challenge with popular conceptions of food waste is that they seems to imply there are large inefficiencies in food supply chains. That some people seem to indirectly imply that farms, food manufacturers, and grocers are losing or throwing out food that they could profitably sell. To be sure, there are likely some inefficiencies in the food supply chain, but food and ag are tend to be competitive, low margin businesses which makes it hard to believe they’re leaving dollar bills lying around that they could easily pick up. To incentivize these firms to reduce waste, loss, and spoilage, something has to change to reduce the cost of preservation. That “something” is likely investment in research and the creation of technologies that enable farms and food manufacturers to affordably make use of food that might otherwise have been unsalable. An old example might be the advent of canning or refrigerated rail cars. More modern examples might include better grain storage bins or storage management practices, vacuum packaging, high pressure pasteurization, etc.

In economic terms, these technologies can be conceptualized as shifting the supply curve downward shift - i.e., lowering the marginal cost of delivering a given quantity of food to the market. Such a shift would lower the price of food while enabling more more food to be sold. Consumers are definitely better off: they get to have more food at lower prices. Whether producers as a group are better off from the supply shift depends on how sensitive producers and consumers are to price changes, but producers who are early adopters of the new technology are almost certainly better off.

Whether the demand-side or supply-side strategy leaves “society” better off (at least as defined by producer profits and consumers’ economic well-being) is not completely predictable because it depends on relative elasticities of supply and demand for the foods in question, among other factors. Ignoring any externalities from food that is thrown out, I would generally expect the “supply side” strategy to be better: we know it makes consumers better off and likely makes producers better off too (though not always). But, it ultimately results in more food being sold and potential (and perhaps ironically) more consumer waste. So, the big unanswered question is the nature and size of the “externality” of food thrown away.

The Political Polarization of Meat Demand

There is growing criticism of meat production industries in popular culture and mainstream media. Examples include the recent release of the EAT-Lancet report, the World Health Organization pronouncement on red meat and cancer, the proposed Green New Deal and “farting cows,” and much more. The result is an increasing number of news stories linking beef consumption with climate change and other adverse environmental impacts. As shown in this report (co-authored by Glynn Tonsor, Ted Schroeder, and myself), the number of news stories mentioning beef and climate change increased almost 800% since the early 2000s.

Here’s the thing. We know climate change is a politically polarized issue. Might linking beef and meat consumption to a politically polarized issue in turn cause meat consumption itself to become politically polarized? As I’ve shown in previous posts (e.g., see here or here), self defined political ideology (on a scale of very liberal to very conservative) is one of the strongest predictions of whether someone says they are a vegetarian or vegan.

To investigate this issue, I turned to the body of work that referred to as the Cultural Cognition Project that is most associated with Dan Kahan at Yale. The basic idea is that individuals conform their beliefs about disputed matters of fact to values that define their cultural identities (or match their tribe). In one of the most interesting demonstrations of this concept, Kahan shows that the likelihood of agreeing with the statement “There is solid evidence of recent global warming due mostly to human activity such as burning fossil fuels” is increasing in a person’s measured scientific intelligence (essentially a score on a science quiz) but only for people who identify as liberal democrats. For people who identify as conservative republicans, higher scientific intelligence is associated with a reduced likelihood of agreeing with the above sentence. The result is that (unlike what we’d expect if “more education” was the answer), the greatest disagreements are among the most scientifically literate but of opposite political parties. One take home message from these sorts of findings is that the smarter you are, the easier it is to fool yourself.

Ok, back to meat. As readers of this blog likely know, I ran the Food Demand Survey (FooDS), which surveyed 1,000 consumers every month (different samples of consumers were drawn every month) for five years. On the survey, we asked every respondent to answer 9 simulated shopping questions in which they choose between two beef, two pork, two chicken, and two vegetarian meal options at different prices (or a “I wouldn’t buy any of these” option). These data can be used to construct a very simple measure of demand, in which we simply count the number of times (across the nine choices) beef or any meat product was chosen (see this post for some discussion on these data). For reference beef (either ground beef or steak) was chosen about 2.2 times on average across the nine choices and any meat option was chosen a bit less than 7 times on average across the nine choices. (One important note is that despite all the negative news about beef alluded to at the beginning of this post, we do not find overall downward trends in beef demand in recent years; this is also consistent with Tonsor’s demand indices).

The question is how these measures of demand relate to political ideology and education (I use education because, unlike Kahan, I did not ask a scientific intelligence quiz on my surveys). I estimated equations that relate beef or overall meat demand to an extensive set of demographics (age, income, gender, region of residence, household size, etc.), political ideology (I asked both a party affiliation question and a very liberal to very conservative scale from which I create two groups: liberal democrats and conservative republicans), education, a time trend, and interactions between the last three sets of variables. The sample size is about 60,000 observations.

Here’s a graphical illustration of the results for beef. Beef demand is higher for conservative republicans than liberal democrats (holding constant all other demographic factors), and this demand gap grows with education. Liberal democrats reduce their demand for beef as their education increases, but for conservative republicans, beef demand is essentially flat across education levels. The other interesting result, shown in the bottom panel, is that beef demand is becoming increasingly politically polarized over time. The beef demand gap between the average conservative republican and liberal democrat is increasing over time.

beefdemand_kahan.JPG

Here is the same analysis for overall meat demand (beef + pork + chicken). The results here are even stronger. There is very little partisan gap among lower educated liberals and conservatives, but a large gap in meat demand among liberal democrats and conservative republicans who have a graduate degree. The gap results mainly from liberal democrats reducing meat demand as education increases. Again, the partisan gap is growing over time.

meatdemand_kahan.JPG

What does all this mean? Unfortunately, I suspect it implies conversations about the meat consumption will become more difficult and tumultuous in the coming years. It may also mean that disagreements about the impacts of meat consumption on the environment and health are less likely to be “settled” by science because they are becoming wrapped up in people’s cultural values and tribe identities. Fortunately, there are a number of resources provided via the Cultural Cognition Project that provide insights about effective communication in this polarized world..

Producing More with Less

I’ve given a lot of talks over the past couple years about the importance of increasing agricultural productivity. Often these discussions get couched in Malthusian terms related to the need to produce more food for a growing world population. This 2009 document from the United Nations Food and Agricultural Organization, for example, suggests agricultural production in developed countries needs to double by 2050 to meet the demands of expected population growth.

I’ve been in enough of these conversations at this point to know that a common retort is that we already produce more than enough food to feed today’s population. Isn’t this just an issue of distribution rather than supply? I’ve addressed this issue in previous posts. Here, I want to draw out an implication of productivity growth that is probably obvious to many academic economists, but perhaps not as widely appreciated as it should be.

In particular, when we talk about increasing productivity enabling us to “do more with less,” the focus is often on the “do more” part. That is, increase food production. But, one shouldn’t forget the “with less” part. In short, increasing productivity means producing more sustainably.

To illustrate, consider the figure below (this is what we economists call a production function).

productivitygraph.JPG

The bottom, lighter blue curve shows the relationship between various inputs (land, water, fertilizer, labor, etc.) and output (or food production). The figure shows that we can produce more food by adding more inputs - more land, more water, etc. However, there are diminishing returns. The first few gallons of water (or rain showers) produce a lot of extra bushels, but the next few gallons have a smaller effect. In fact, if we get too much water (i.e., a flood, as some parts of the Midwest are currently experiencing), production can actually fall. Diminishing marginal productivity was at the heart of the Malthusian concern - if we keep adding more population (or workers) to a fixed amount of land, the extra amount of food that will be produced (and available per worker) will fall, and hunger will ensue.

How do we escape this “trap”? Scientific research, innovation, and entrepreneurship allow us to shift up to a higher curve, as shown by the darker blue curve in the above graph. For a given amount of inputs (labor or land), we might actually have more food per person (now and on into the future as long as we continue to innovate and shift the curve outward).

Let’s, say, however, that one already thinks we produce “too much.” We don’t want any more food. Ok. I’ve drawn the vertical dashed line in the above figure to show a constant amount of food production. But look where this line intersects with the production functions. The figure shows that higher productivity curve allows us to use fewer inputs (less land, less water, less fertilizer, fewer pesticides, etc.) to produce the same amount of food as compared to the original lower production function.

The point? Even if one believes the problem of production is “solved”, don’t still want to find innovative ways to increase productivity to reduce our use of scarce natural resources?

So, how has US agricultural productivity fared? Here is data from the USDA Economic Research Service.

productivitygraph2.JPG

The figure shows that agricultural output has grown by factor of about 2.7 (i.e., we’re producing about 170% more food) since 1948, while use of agricultural inputs, in aggregate, have grown very little and is essentially flat. The gap between the output line at the top and the input line on the bottom is the definition of productivity.

How will this graph look in 2050? Is it possible the trend lines for outputs and inputs can flip? That is, flat output and falling inputs? If total output stays relatively constant, but we can find ways to improve productivity, then total input use will fall. That would be a great sustainability story.