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.