Reducing Food Insecurity

Last week, I mentioned the new USDA report on food insecurity.  I also mentioned a WSJ editorial by James Bovard arguing that food stamps don't reduce food insecurity because the number of people enrolled in food stamps has risen dramatically while food insecurity remains essentially unchanged.

I noted that we don't know the counterfactual (i.e., how much food insecurity would have changed had enrollment in food stamps not increased).  And, I also noted that there is some good academic research on the relationship on food insecurity and food stamp participation.

One of the big problems with trying to tease out the link between these two is that they are jointly determined.  That is, I may enroll in food stamps precisely because I'm food insecure. This sort of selection effect will make it look like being on food stamps is associated with food insecurity, but clearly this is just correlation, not causation.

Here is a careful paper published in the Journal of the American Statistical Association that tries to get at the issue:

“Under the weakest restrictions, there is substantial ambiguity; we cannot rule out the possibility that SNAP increases or decreases poor health. Under stronger but plausible assumptions used to address the selection and classification error problems, we find that commonly cited relationships between SNAP and poor health outcomes provide a misleading picture about the true impacts of the program. Our tightest bounds identify favorable impacts of SNAP on child health.”

One of the measures of "child health" is food insecurity, and this research seems to suggest null to positive effects of food stamp participation and child food insecurity.  

A lot of the discussion on the web related to the USDA report seems to be wrapped up in ideological baggage associated with beliefs about the desirability of cutting or expanding the food stamp program (or, for example, utilizing work requirements).  Those who would like to reduce the size and scope of the food stamp program often try to argue that food stamps do not reduce food insecurity and may actually increase it.  My view is that the best analysis doesn't support such an argument.  There may be other good reasons for reducing the size of the food stamp program, but the food security argument isn't one of them.  

Another argument I made in my previous post was that technological development that leads to lower food prices seems a comparatively good strategy for reducing food insecurity.  

As such, I was intrigued to see this white paper by Graig Gundersen at the University of Illinois on food insecurity.  One of the five drivers he discusses to reduce food insecurity is to focus on the importance of low food prices.  

He also writes, when discussing, what food groups can do (or perhaps what they shouldn't do):

“Third, they can view proposals encouraging organic foods and local foods with skepticism. While proposals to encourage, say, local food procurement by supermarkets can have ancillary benefits, these benefits do not generally extend to low-income households because they cannot afford these items. Instead, the benefits are more likely to extend to upper-income households that can afford these items. Moreover, by devoting scarce resources to encouraging the entrance of these into the food supply chain, this diverts resources away from factors that would help low-income households. ”

Calorie Labeling at Harvard

“There have been some suggestions that we need to post calories at schools and certainly in college dorms … it’s not really a good solution, and Harvard recently removed this information for fear of contributing to eating disorders, because students were going in and selecting their foods based on the calories and not necessarily the nutritional value.”

That's from Anding, Roberta A. Professor, Baylor College of Medicine and Texas Children’s Hospital. “Lecture 20: Obesity—Public Health Enemy Number One.” Nutrition Made Clear from the Teaching Company (HT Bailey Norwood; one transcript is here)

Food insecurity remains essentially unchanged

Yesterday the USDA Economic Research Service released a report on the prevalence of food insecurity in the U.S.  Over 14% of US households (that's 17.5 million households or 49 million people) remain food insecure, a number that hasn't much budgeted since the recession began in '07-08.

As pointed out in a Wall Street Journal editorial today, the USDA's measure of food insecurity isn't a direct measure of hunger.  Rather, the measure is derived from responses to a set of survey questions.  Respondents are shown 10 questions (18 if they have children), and if they respond "yes" more than three times to questions like, "In the last 12 months, did you or other adults in the household ever cut the size of your meals or skip meals because there wasn’t enough money for food?" then the household is classified as food insecure.  

Over at the US Food Policy blog, Parke Wilde remarks:

“In previous years, the United States solemnly adopted targets for reducing the prevalence of food insecurity from 12% (the level observed in the mid-1990s) to 6%. As my chart (based on USDA data) shows, this effort to improve U.S. food security has failed. Yet, neither Democrats nor Republicans talk much any more about any substantial realistic strategy for poverty reduction — with serious objectives, quantitative targets, and implementation steps. Though food assistance is of course important, poverty reduction is the most promising approach to improving household food security in the United States.”

James Bovard in the WSJ notes that the food insecurity results are surprising given the rise in food stamp participation over this period

“In 2013 the USDA reported that federal food programs—most notably food stamps provided by the Supplemental Nutrition Assistance Program (SNAP)—“increase food security by providing low-income households access to food, a healthful diet, and nutrition education.” But food insecurity was more widespread in 2013 (14.3%) than in 2007 (11.1%), while food-stamp recipients rose to 47 million from 26 million.”

Bovard makes an interesting and relevant observation.  However, I'm not sure that I fully agree with his characterization of the literature on the (lack of) causal relationship between food stamp participation, food insecurity, and hunger.  It could be that we would have had even higher rates of food insecurity had enrollment in food stamps not swelled.  As econ-speak: we didn't observe the counter-factual.  

A few comments I've read point out that food insecurity would likely have been lower in 2013 had we not experienced higher food prices over the last several years (particularly for protein over the past year).  That's almost certainly is true.  Just last year, two USDA-ERS researchers (two of the same people who authored the recent report on food insecurity) published a paper (which I previously discussed here) in the journal Applied Economic Perspectives and Policy showing that food stamp participants who live in areas with higher food prices are more likely to be food insecure than food stamp participants who live in areas with lower food prices.  They write:

“We find that the average effect of food prices on the probability of food insecurity is positive and significant: a one-standard deviation increase in food prices is associated with increases of 2.7, 2.6, and 3.1 percentage points in household, adult, and child food insecurity, respectively. These marginal effects amount to 5.0%, 5.1%, and 12.4% increases in the prevalence of food insecurity for SNAP households, adults, and children, respectively.”

If we want less food insecurity, one way to achieve that outcome is to have lower food prices.  How to we get lower food prices? Rain would help (but not too much rain).  The primary systematic way to achieve long-term reduction in food prices is through scientific development and technological innovation that increases agricultural productivity.    

When fat taxes meet the supply side

Last week at the European Association of Agricultural Economist's meetings, I saw Louis-George Soler present a keynote talk on food and nutrition policies.  The paper-version of the talk, written with Vincent Réquillart  is being published in the European Journal of Agricultural Economics.

One of the key points of his talk was that much of the policy analysis on effects of fat taxes, soda taxes, veggie subsidies, etc. only consider consumer responses and ignore how firms will react to the policies.  It is often the case that such supply-side responses will substantively reduce the health impacts of the policies.

For example, suppose Congress passed a law banning advertising of sweetened sugared cereal to children.  How might Kellogg's or General Mills respond?  Given that the firms can no longer  use their revenue on promotion and advertising, they might instead re-direct those funds to cost-cutting efforts that reduce the cereals' prices.  Competition moves from who has the most compelling ad to who has the lowest price.  Lower prices will encourage more consumption: exactly the opposite of what was intended by the ban.

Another point they raise is related to the "pass-through" effect of taxes on firms profits and retail prices.  Given the nature of competition between firms and the type of tax (excise or ad valorem), a tax can be "over-shifted" or "under-shifted" to consumers.  Thus, tax policies might cause a larger or smaller reduction in consumption than anticipated.

Take another example.  Suppose the government requires firms to add "high fat" labels to certain products.  The research cited in the Requillart-Soler paper suggests that firms may respond by lowering the price of the high fat items and increasing the price of the low fat items.  While the "high fat" label will tend to discourage consumption, the now lower relative price for high fat items will tend to encourage consumption.  

None of this is to say that food policies won't have any impact on health, only that studies which ignore food companies' responses to the new policy environment will often overestimate the health impacts of food policies.   

Livestock, Externalities, and the Environment

The Wall Street Journal published a piece  today that I wrote dealing with externalities in livestock production.  I didn't choose the title - my argument isn't that livestock production doesn't have environmental impacts, rather I question the relative size of the impacts and discuss the best way to handle those impacts.

A few snippets:

“That the price of meat is too low might come as news to food consumers who, according to data from the Bureau of Labor Statistics, paid 14% higher prices for ground beef this June than they did in June 2013 and 29% more than two years ago. Recent droughts and high corn prices—due in part to Washington’s support for ethanol—are largely to blame. It is unclear how high prices must rise to overcome the view that meat is “too cheap.” Some industry critics have even called for new “meat taxes” to discourage consumption.”

and

“The Environmental Protection Agency estimates that U.S. agriculture, including livestock production, accounts for only about 8% of total greenhouse-gas emissions in the country. Livestock in the U.S. have lower greenhouse-gas footprints than in other parts of the world. This is partly because American producers generally use higher-quality feeds, higher-yielding breeds, and more productivity-enhancing technologies such as probiotics, vaccines and growth hormones. Future improvements in feed and animal genetics could further reduce animal-agriculture’s impact. As economists have shown, one should not underestimate the ability of innovation, markets, the courts and private negotiation to resolve the adverse effects of externalities.

Moreover, the concept of externalities when applied to food is nebulous. At a recent Institute of Medicine meeting I attended, a room full of Ph.D.s struggled to understand exactly what to measure.”

and

“Let us also not gloss over what is beef’s most obvious benefit: Livestock take inedible grasses and untasty grains and convert them into a protein-packed food most humans love to eat. We may be able to reduce our impact on the environment by eating less meat, but we can also do the same by using science to make livestock more productive and environmentally friendly.”

For more on that last point, see my previous post.

The piece was in part motivated by the fact that social commentators’ accounts of externalities often reflect a shallow understanding of complexity of the subject.  The economists A.H. Barnett and Bruce Yandle accurately discerned the fact that, “economists unwittingly developed a weapon of mass destruction that, in the hands of journalists and popular policy analysts, at times corroded almost to the point of uselessness the beneficial theory of markets and competition.”  As a participant in one of the CDC-IOM planning workshop on “Exploring the True Costs of Food”, I have witnessed the disconnect that often exists between public health advocates and economists on the nature and role of externalities (I discuss some that disconnect and the complexity of externalities in this article published in Agricultural and Resource Economics Review).  Often, factors that are argued to be externalities are simply zero-sum transfers (as is the case for health care costs paid by public insurance programs like Medicaid), have effects that are actually internalized in other market prices (such as the risk of injury to workers in meat packing plants), or are not externalities at all. 

If the issue is that livestock are consuming "too much" water and that water isn't appropriately priced, the key is to think about how to develop water rights and markets so that the price of water reflects its relative scarcity.  But, it should also be clear - given the correlation between drought and beef prices - that a lot of the water use is factored into the price of beef.

That there are externalities in beef production is hardly news.  The much more difficult question is how to address them.  Technological progress is a key solution.  Research shows that the carbon footprint of beef production fell 16% from 1977 to 2007, with much of that reduction resulting from responsible use of technologies.  Many consumers are averse to these externality-reducing practices and technologies, but more “natural” production systems are often associated with lower productivity, greater water and land use, and higher carbon footprints.