Mexico Passes Soda Tax

Friday the Mexican congress passed a nationwide soda and "junk food" tax.  

l've written so much on these sorts of taxes, it is hard to know what more can be said.  I suppose the best, succinct thing I can say is what I sent in a letter to the New York Times, in response to a previous story they ran about the issue:

Writing about a proposed 7.7 cent per liter soda tax in Mexico, Elisabeth Malkin cites a Mexican corner store vendor who doubts the tax will make a dent in sales.  The economic research concurs with this assessment.  Study after study has shown that soda taxes of this magnitude will have trivial effects on weight, and yet will raise revenue from many consumers who can least afford to pay.  For example, my co-authored study in the Journal of Health Economics estimates that a 10% tax on sugar-sweetened soft drinks would reduce weight by only about two tenths of a pound.  Another study from Cornell University has even found evidence of adverse unintended effects from soda taxes that arise from increased consumption of higher calorie juices or alcohol.  Denmark recently repealed their fat tax for precisely these reasons: complications arising from unintended consequences and consumer backlash. We all want people to lead healthy, fulfilling lives but we must also marry these concerns with the evidence on whether the policies being pursued will actually create the benefits we desire.

This comes on the heels of another "simulation" study was released, this one in the journal BMJ, which concludes:

A 20% tax on sugar sweetened drinks would lead to a reduction in the prevalence of obesity in the UK of 1.3% (around 180 000 people). . . . Taxation of sugar sweetened drinks is a promising population measure to target population obesity, particularly among younger adults.

I suppose the good thing about the Mexican developments is that we can finally put to test the predictions of some of these simulation models.  

Economically Optimal Food Waste

It is hard to turn around without seeing another story on food waste.  The latest was this Freakonomics blog post covering an article in Foreign Policy by John Norris.  Just prior to that was a widely discussed study by Harvard Law School, which focused on the effect of expiration dates on food waste.  A widely cited statistic comes from this UN FAO publication, which suggests a third of all food produced is wasted. 

Much could be said about the methodological short-comings of many of the studies on this topic, not to say anything about the ideological motivations behind many (but certainly not all) such claims (waste is taken as some sort of condemnation of capitalism; the problem of production is “solved”, and we just need to distribute more equitably – as if one can confiscate and redistribute without destroying the incentive to produce). 

Nevertheless, when thinking about the problems of global hunger and feeding a growing population, all solutions need to be on the table, and reducing was is one of them.  As some of these publications make clear, there are legal and industry practices that could be changed to reduce waste (crazy policies like Bloomberg’s ban on food donations to homeless shelters because of salt content is one obvious example), and we should never forget technological advancements that help prevent waste. (preservatives anyone?) 

But, we will never have zero waste. 

Why?  As my friend Bailey Norwood pointed out to me the other day: there is an economically optimal amount of waste. 

Do you ever buy milk with the expectation that some of it will get thrown out?  I do.  The cost to me of running out of milk and having to go out to buy more at midnight if one of my kids has a midnight craving is much higher than the cost of buying an extra half gallon which goes sour before it can be completely consumed.  Convenience, hassle avoidance, and extra trips to the store all are valuable to me; valuable enough that it occasionally makes sense to throw away a little milk.  Otherwise, I’d be throwing away my valuable time, sleep, and gas to the store.  One thing “wasted” is another thing gained (or at least not foregone).

At each and every phase of the food production, distribution, and consumption chain, similar calculations will reveal situations in which the benefit of preventing waste simply isn’t high enough to merit the effort.

I’m sure there must be some papers on this in the economics literature, but a quick search didn’t reveal much.  Some sort of modeling would be useful to identify the determinants of waste, and reveal when it is actually economically efficient to do something about it.

The Foreign Policy article has some useful discussion of factors that could fit well into an economic model of waste.  My intuition is that it is more likely to be economically optimal to waste when:

• food prices are lower relative to fuel, storage, etc.
• incomes are higher
• food preserving technologies (e.g., infrastructure, refrigeration, sodium benzoate, etc.) are more expensive or less available
• there is greater demand for freshness, appearance, etc. (likely correlated with income)  
• laws encouraging waste are more prevalent

Thoughts?  

The Politics of GMOs and GMO Labels

I was fascinated by a graph Parke Wilde put up on his Food Policy blog a couple weeks ago, in which he noted that not everyone who supports biotechnology opposes mandatory GMO labels or vice versa.  He proposed segregating people based on their views to two questions.

people commonly fail two distinguish two separate issues:

Is GMO technology dangerous or beneficial?

Should GMO labeling be mandatory or voluntary?

This scatter plot separates the two issues by putting attitudes toward GMOs on the horizontal axis and attitudes toward mandatory labeling on the vertical axis.

And then he included the following graph:

I like Parke's distinction.  But, I think there is something deeper going on here.  It is politics.  

I've previously commented  on the remarkably high correlations among voter's preferences for gay marriage, GMO labels, and size of farm animal cages.  What this suggest to me is that there is a strong political-ideology undercurrent driving much of the food debates.

In the case of GMOs, the evidence I have suggests that where one falls on the labeling issue (and somewhat on the GMO issue) is driven by political ideology.   

In a survey I did with Brandon McFadden in California just prior to the vote on mandatory labeling for GMOs, we found that political ideology strongly correlated with voting intentions.  According to my calculations, moving from the "extremely liberal" category to the "extremely conservative" category led to a 22.5 percentage point reduction in likelihood of voting "yes" on Prop 37.  Liberals are much more likely to want to mandate GMO labels.

Interestingly, however, this isn't because they are more likely to think GMOs are unsafe. 

In a different survey I conducted this summer (nationwide survey, N=1010) , I asked people whether they agreed/disagreed that "genetically engineered foods are safe to eat."  On a 5 point scale (1=strongly disagree and 5=strongly agree), I find that "extremely liberal" folks answer 3.05 on average and "extremely conservative" folks answer a 2.82 on average, a statistically significant difference.  Liberals are (somewhat) more likely to believe GMOs are safe.  

So, there seems to be something of a tension between beliefs about safety and willingness to use the state to mandate outcomes one desires.  

I strongly suspect there is another dimension here that partially explains the liberal tendency to want to regulate GMOs: the tendency to see corporations and capitalism as corrupting forces - i.e., aversion to agribusiness in the food sector. Thus, even if many liberals support GMOs in theory (being "for GMOs" on Parke's graph), they may not in practice (being "for mandatory labeling" on Parke's graph).   

How has farm policy affected fruit and vegetable production?

From the journal Agricultural Economics Perspectives and Policy

Eligibility requirements for farm payments include restrictions from planting certain horticultural crops on base acres, and U.S. commitments under the WTO have brought pressure to remove such restrictions. Using a difference-in-difference estimator, we measure the effects of the planting restriction on acres planted to horticultural and program crops using U.S. county-level data from both the 1987 and 1997 U.S. Census of Agriculture, that is, both before and after the initial policy was introduced in 1990. We find that the planting restriction has crowded out fruit and vegetable acreage nationally, and most notably in selected Sunbelt states, a region that specializes in horticultural crop production. The key policy implication is that the removal of the planting restriction may have a nontrivial impact on U.S. fruit and vegetable production.

These results should not be interpreted to imply that farm policy is a major cause of obesity (here is one of the authors of the above piece on that issue) .  Nevertheless, these findings do show that farm subsidies, and planting restrictions, are distortionary.  

Wendell Berry - a Prophet?

Wendell Berry was recently featured on Bill Moyer's public television show.  Berry, for those who don't know, is a farmer and a long time critic of modern production agriculture.  He is something of a hero in the "food movement."  Indeed, Moyer's show is titled "Wendell Berry: Poet & Prophet".

There is much that could be said about Berry's views (the show is embedded below).  Berry seems like a nice grandfatherly sort of guy who would be fun to hang out with.  But, I think some of his views and prescriptions for the future are misplaced.  I'll pick just two examples.

First, Berry wants us - as a nation - to get back to the farm and to "resettle" America.  Here are a few back-and forths:

BILL MOYERS: When you and I were born in 1934 there were almost seven million family farms in this country. There are now roughly around two million family farms and most of us are further away from the foundations of nature than we’ve ever been.

WENDELL BERRY: Well, there’s another tough problem. And so you have to look ahead a little bit. I don't like to talk about the future very much because it doesn’t exist, and we don’t know anything about it. But one thing we know right now is that people want to be healthy and to be healthy you have to have a diverse diet and diverse agriculture employs a lot more people than monoculture. So you imagine people moving out into the landscape because it will pay them to do it. It’ll be what we now vulgarly call job creation.

. . .

BILL MOYERS: Resettling of America means….?

WENDELL BERRY: It means putting people on the land enough people on the land to take proper care of it and pay them decently for doing it. The fact that we and our families know the history of people having to leave the country because they couldn’t make a living there, is the history of rural America. But that they left because they couldn’t make a living is an indictment of our land policies. The idea that you have to go somewhere else, that you have to leave a fertile country in order to make a living is preposterous and it’s a result of the wrong idea of what we mean by making a living in the first place. To make a living is not to make a killing, it’s to have enough.

So, people left the countryside because of bad "land policies", and we should now "resettle" America and somehow pay people to do the resettling??

Putting aside the fact that most of the productive farm land in the US is already privately owned (the US government owns huge swaths of land in the West that it leases for grazing) by someone (most of them family farms if you look at the USDA data), and that farmers have been relatively profitable in the past decade, I think this take is a bad reading on history.  

People left the countryside because they found more profitable opportunities in town, and this transition is largely a positive development.  Technological development, to be sure, played a big role in the reduction of labor in agriculture, but so too did new opportunities off the farm.

The Harvard economics professor, Edward Glaeser, has written a book about the benefits of cities, cultural, economic, environmental, and otherwise, and he argues that the government has actually unduly subsidized rural (or suburban) living relative to city living.  

Take a look at a country like China.  As that country develops, hordes of citizens are trying to get out of the countryside and find factory jobs in town.  One of the biggest problems for the Chinese government's restrictive migration policies is keeping those people on the farms (or in trying to "manage" the transition).    

So, it can't be "our" land policies - because the rural to urban migration has happened in virtually every developed country, and it is unclear to me why or how we'd want to pay people to move back out to rural America.  

All this is coming from a guy who grew up in a town of 300 people, and who had to drive 15-20 miles to get to a grocery store.  There are some joys of small-town rural living, but I hardly think it is something many (perhaps most) Americans would enjoy.  By all means, if people want to move out and run farm, go for it!  But, why should taxpayers subsidize this activity?

A second, smaller observataion. 

Berry makes a big deal about "monoculture" and the value of diversity of diet:

WENDELL BERRY: But one thing we know right now is that people want to be healthy and to be healthy you have to have a diverse diet and diverse agriculture employs a lot more people than monoculture. 

But, there has never been a time in world history when citizens have had access to a more diverse diet than we do now.  Here is how I put it in the Food Police:

A person who restricts their diet to only those things grown locally is one restricting diversity in their diet – especially in the winter.  Walk in almost any supermarket in almost any town in America almost any time of year, and the diversity and abundance of fruits and vegetables is absolutely astounding.  Vidalia onions from Georgia, oranges from Florida, Californian lettuce, sweet corn from Iowa, mangos, bananas, and jalapenos from south of the border.   If you live in the right location, you might have access to such a cornucopia a few weeks or months out of the year but Wal-Mart offers it to us every day.  Fifty to a hundred years ago, the available transportation and storage technologies required people to eat a lot more local food.  Yet, despite weighting a bit less, people weren’t healthier then.  One reason, among many, is that our great grandparents lacked the diversity of diets that we enjoy by eating food from places that come from beyond our backyard.