Information manipulation revisited

A few days ago, I posted on an article by Fuhai Hong and Xiaojian Zhao forthcoming in the American Journal of Agricultural Economics entitled "Information Manipulation and Climate Agreements."

I raised some questions about the ultimate desirability of information manipulation, and Fuhai and Xiaojian responded with a thoughtful email.  They agreed to let me share part of it here:

1. Our paper consists of two parts of messages, one positive (why there is media bias), while the other normative (what is the outcome of media bias). For the first part, media bias emerges as the unique perfect Bayesian equilibrium in our model. This provides an explanation on the phenomenon we observe from reality. Our abstract thus states that "This article provides a rationale for this tendency by using a modified International Environmental Agreement model with asymmetric information." By the Longman Dictionary of Contemporary English, rationale means "the reasons and principles on which a decision, plan, belief etc is based." Our "rationale" is essentially an explanation on why the media has incentives to accentuate or even exaggerate climate damage. It belongs to the approach of positive economics and is value neutral, up to this point.

2. Then we do have a "normative" analysis on the media bias. The main difficulty of the climate problem is that it is a global public problem and we lack an international government to regulate it; the strong free riding incentives lead to a serious under-participation in an IEA. We show that the media bias may have an ex post instrumental value as the over-pessimism from media bias may alleviate the under-participation problem to some extent. (In this sense, we are close to Dessi's (2008, AER) theory of cultural transmission and collective memory.) Meanwhile, we also address the issue of trust/credibility as people have Bayesian updating of beliefs in our perfect Bayesian equilibrium. We show that, ex ante (when there is uncertainty on the state of nature), the media bias could be beneficial or detrimental, due to the issue of credibility; as a result, the welfare implication is ambiguous.

The Dust Bowl

I just finished the Worst Hard Time by Timothy Egan, published back in 2006, about the Dust Bowl.  

On several levels, I had a deep connection to the themes in the book.  I can recall stories from both my mother's and father's mothers (my grandmothers) about growing up in the dust bowl era in and around the regions Egan discusses in his book.  As a child I can remember going with my dad to a nearby shelter-belt (which I presume was part of Roosevelt's plan to avert the dust bowl, at least according to Egan) to chop wood for our fireplace.  

Egan repetitively makes the argument (with a tedium that bored me at times) that the the great plains should have never been plowed.  It should, in his assessment, have been left in natural grasses.  The dust bowl itself, in Egan's account, was a result of man's hubris that nature could be tamed.  

Egan's account paints both a cynical and overly-optimistic view of government.   On the one hand, the government partially caused the great plow up (citing mainly from government reports at the time):

"Mistaken public policies have been largely responsible for the situation," the report proclaimed.  Specifically, "a mistaken homesteading policy, the stimulation of war time demands which led to over cropping and over grazing, and encouragement of a system of agriculture which could not be both permanent and prosperous."  

...

"The settlers lacked both the knowledge and the incentive necessary to avoid these mistakes.  They were misled by those who should have been their natural guides.  The Federal homestead policy, which kept land allotments low and the requirement that a portion of each should be plowed, it now seems to have caused immeasurable harm.  The Homestead Act of 1862, limiting individual holding to 160 acres, was on the western plains almost an obligatory act of poverty."

On the other hand, Egan suggests the government-man Hugh Bennett's plans of contour plowing and grass-reseeding along with Roosevelt's plan of shelter-belts and farm price support policies saved the day.  

I'm not so sure.  It is tough to separate compelling journalistic story from data-driven explanations.  My own  sense coming into the book is that much of the land I grew up around, which falls within the area Egan draws around the dust bowl era, is as plowed up as it ever has been.  The data would seem to support that too.  I dug up USDA data on the number of acres planted to wheat in Cimarron Co, OK (which is where Boise City is located - one of the spots featured in Egan's book).

While there was indeed a big plow-up just prior to the dust bowl (which occurred in the 1930s), we can see that we've had just as much land in wheat production in the late 1940s and almost as much in the late 1970s.  To the extent that the same is true in other regions and with other crops, it doesn't seem that replanting back to grass is THE explanation (although it might have played some role on more erodible lands in other areas).

A better question.

In the past several years, we've had severe droughts in the great plains similar to the one in the 1930's.  Why no repeat of the dust bowl?  

Egan asks a similar question, and he points mainly to the aforementioned government policies. He also gives the impression in the end that big corporate agribusinesses have taken over this land (which is largely false; there are fewer farmers today and those farmers are indeed bigger, but they are family farms; moreover his statements on this topic are somewhat ironic given the aforementioned quote that larger farm sizes were needed to avoid poverty).  As indicated in the graph above, I don't think the full answer can be that the land has reverted back to idyllic native grasses.  

My sense is that it is mainly a result of two factors: better farming technologies/practices and irrigation.  To be fair, Egan points to these as potential answers too.  Many of the people who moved out to farm the great plains had no prior farming experience.  Its no wonder they adopted some practices that were doomed for failure (I'm sure I'd have done the same thing; I'd hate to think what would happen if I were forced to try to make a living at farming today!)  Knowledge and experience matter.  And sometimes it takes really bad consequences to teach us to do things differently.

On the issue of irrigation, there was an interesting paper (earlier ungated version here) that recently appeared in the American Economic Journal: Applied Economics by Richard Hornbeck and Pinar Keskin.  They write:   

Agriculture on the American Plains has been constrained historically by water scarcity. Post-WWII technologies enabled farmers over the Ogallala aquifer to extract groundwater for large-scale irrigation. Comparing counties over the Ogallala with nearby similar counties, groundwater access increased agricultural land values and initially reduced the impact of droughts. Over time, land use adjusted toward water intensive crops and drought sensitivity increased. Viewed differently, farmers in nearby water-scarce areas maintained lower value drought-resistant practices that fully mitigate naturally higher drought sensitivity. The evolving impact of the Ogallala illustrates the importance of water for agricultural production, but also the large scope for agricultural adaptation to groundwater and drought.

Ultimately, we may never know the ultimate causes and consequences of the dust bowl.  It seemed to arise from a unique combination of an adverse turn in weather/climate, poor farming practices, poor economic conditions (the Dust bowl and the Great Depression occurred at the same time - how's that for bad luck!), unscrupulous land salesmen, and bad government policies.  The consequences, it seems, were long lasting.

Hornbeck has another 2012 paper (earlier ungated version) specifically on the dust bowl in the American Economic Review related to how long the impacts of the dust bowl were felt.  He wrote:

The 1930s American Dust Bowl imposed substantial agricultural costs in more eroded Plains counties, relative to less-eroded Plains counties. From 1930 to 1940,
more-eroded counties experienced large and permanent relative declines in agricultural land values: the per acre value of farmland declined by 30 percent in high erosion counties and declined by 17 percent in medium-erosion counties, relative to changes in low-erosion counties. 

and

The Dust Bowl provides a detailed context in which to examine economic adjustment to a permanent change in environmental conditions. The Great Depression may have slowed adjustment by limiting access to capital or outside employment opportunities. Agricultural adjustment continued to be slow, however, through the 1940s and 1950s. Further research on historical shocks may help understand what conditions facilitate long-run economic adjustment. The experience of the American Dust Bowl highlights that agricultural costs from environmental destruction need not be mitigated mostly by agricultural adjustments, and that economic adjustment may require a substantial relative decline in population.

When Is Reliance on Voluntary Approaches in Agriculture Likely to Be Effective?

That's the title of a paper by Kathleen Segerson recently published in the Applied Economics Perspectives and Policy.  Although I think she under-estimates the power of factors like reputation and over-estimates the ability of government solutions to efficiently coordinate actions, she offers a useful discussion that we ought to have more often.  The abstract:

Voluntary approaches have been used in a variety of contexts and for a variety of purposes in agriculture, including voluntary conservation programs and product labeling. This paper provides an overview of some of the general principles that emerge from the literature on voluntary approaches and their application in agriculture. The literature suggests that, to be effective, voluntary approaches must provide sufficiently strong participation incentives to a targeted population, clearly identify standards for behavior or performance that ensure additionality and avoid slippage, and monitor outcomes. Thus, reliance on voluntary approaches in agriculture is likely to be effective only if there is sufficient market demand for certain product characteristics, significant public funds are committed to pay for voluntary actions, or the political will exists to impose regulations if voluntary approaches fail.

Farm Subsidies and Input Use

I was recently looking back at The Undercover Economist written by Tim Hartford about 8 years ago.  It definitely belongs in the cannon of pop-econ books along with The Armchair Economist (my favorite), Naked Economics, and Freakonomics.  

In any event, I was intrigued to see this graph Hartford included on the relationship between agricultural subsidies and fertilizer use.  

Is Meat Production Wasteful?

About a month ago, The Council for Agricultural Science and Technology (CAST) put out a report on Animal Feed vs. Human Food.  I just got around to reading it and it has some interesting calculations and statistics.

The report addresses the common claim that livestock production is wasteful because crops that could be fed to humans (e.g., corn, soy) instead go to animals.  For example, here is an old quote from David Pimentel, a former Cornell Professor:

If all the grain currently fed to livestock in the United States were consumed directly by people, the number of people who could be fed would be nearly 800 million

For another example, here is PETA:

It takes up to 13 pounds of grain to produce just 1 pound of meat

I think one of the most colorful ways I've heard this criticism expressed is that eating meat is like going to the grocery store and buying 13 (or 6 or 3 depending on which source you read) boxes of corn flakes and throwing 12 down the garbage.

This discussion misses at least three important issues.  First, many animals (particularly cattle) eat things we humans can't - mainly grass and hay.  Second, one needs to look at more than just calories in and calories out because there are other nutrients - particularly protein - that our body needs.  I'll get to the third issue in moment.

Jude Capper had some interesting graphs in her presentation of the CAST report that directly address the first two issues.  The graphs focus on the input-output relationship between human-edible protein and calories.

The above graph shows that dairy and suckler beef (that's their name for grass fed beef I believe) generate more protein than they consume from human-edible sources.  

The next graph shows the results for calories (or energy as it is titled).  They report that dairy produces about twice as many calories as it takes in from human-edible sources

Still, even these statistics suggest that it is "wasteful" to consume certain types of meat and animal products because they yield less energy or protein than they consume.

That brings me around to the third reasons why some these comparisons are a bit misleading: they focus only on costs and ignore benefits. Here is what I had to say about that a few months ago:

One fact that is often forgotten in meat debates is that it isn't sufficient to look at the amount of energy (or crops) expended to get beef.  We also have to look at what we get.  Most people really like the taste of meat.   

Almost no one looks at their iPad and asks, "how much more energy went into producing this than my old Apple II." The iPad is so much better than the Apple II.  We'd be willing to accept more energy use to have a better computer.  Likewise a nice T-bone is so much better than a head of broccoli.  I'm willing to accept more energy use to have a T-bone than a head of broccoli.    

Now, if my T-bone consumption is imposing costs on others, let's talk about that.  But, here the focus would be on the issues causing the externality (e.g., CO2) not on meat per se.