Nightly Show on Food Policies

A colleague alerted me to this episode of the Nightly Show on Comedy Central.  The entire show focused on two food polices: restrictions on food stamps and minimum wage for fast food workers.  Maybe I'm getting old, but I didn't find much of it very funny.  Which is too bad, because I agree with the underlying premise of at least one of their arguments.  Which also happens to undermine their other argument.

First, the episode takes issue with state laws that would restrict what food stamp recipients can buy with the money they receive.  I've written before about how food stamp restrictions are unlikely to have much effect.  But, here they focus on the paternalism of it.  Should the government tell people what they should and shouldn't eat?

I'm somewhat sympathetic to the conservative argument that these are not "earned" dollars but rather a government handout, and as such the state might have some leeway in dictating how they're spent.  However, as I explain at the above link, the restrictions are really an allusion anyway in the sense that most recipients can "get around" them by simply reallocating their budget.  Moreover, if the government can assume the right to tell food stamp recipients what to eat, what's to stop regulators from assuming they know better how you and I should eat?  In short, we ought to respect the choices of others.  We may not agree with everyone's choices, but we live in a free country.  Give people the dignity of the presumption that they know best how to better their own situation with whatever resources they might have.  

The Nightly Show

In the second half of the show, they take on minimum wage.  I find this a bit ironic because the first half of the show repeatedly makes the case that we shouldn't tell people what they can and cannot do with their money (in this case money received by the state).   But, apparently when it comes to minimum wage, the government SHOULD tell people what they can and cannot do with their money (in this case money that employers have earned in the market).  You can't pay people a wage they'd willingly accept.  It's not a ban on soda, it's a ban on hiring low skill workers at a wage  equal to their marginal productivity.

The show also seem to miss the potential substitutions between labor and mechanization that will be hastened with higher worker wages.  As I said in a tweet  last week: Here's how I ordered at McDonalds the last time I was in France where minimum wage is ~12/hr

California's Water Problems

Kevin Williamson has an excellent article in the National  Review on how California is (and how it should be) dealing with it's drought-induced water shortage.

He frames the problem as one that should be familiar to any economist: how do we allocate a scarce resource.  He also makes the point that scarcity is a fact of reality that cannot be wished away or swept under the rug.  

About agriculture, he writes:

“Farmers, who by some estimates consume about 80 percent of the water used in California. Agriculture is a relatively small component of California’s large and diverse economy, but California nonetheless accounts for a large share of the nation’s agricultural output. Both of those things are, in a sense, the good news: If market-rate water costs were imposed on California farms, as they should be, then any higher costs could be passed along — not only to consumers, but up and down the supply chain — in a very large global market, where they should be digested more easily”

So, how should we allocate water?

“There are two possible ways to allocate water in California: The people in Sacramento, Governor Brown prominent among them, can pick and choose who gets what, with all of the political shenanigans, cronyism, inefficiency, and corruption that brings. Or Californians can get their water the same way they get most everything else they need and value: by buying it on the open market. This is an excellent opportunity to apply the cap-and-trade model that many progressives favor when it comes to carbon dioxide emissions, with an important difference: This deals with real, physical scarcity, not artificial scarcity created by regulation.””

More precisely, here's a route forward.

“As noted, the water-rights picture is complicated, but it is not so complicated that California could not 1) calculate how much water is available for consumption; 2) subtract preexisting claims; 3) auction off the remainder, with holders of preexisting water rights allowed to enter that market and trade their claims for money. A gallon of water used to green up a lawn in Burbank and a gallon of water used to maintain a golf course in Palm Springs and a gallon of water used to irrigate almonds in Chico would be — and should be — on exactly the same economic and political footing.”

To the extent one is worried about the poor being able to afford water, use block rate pricing or take some of the receipts from the sale of water and re-allocate to the poor to let them decide whether it is worth buying.  

Economists weight in on sugar tax

Tamar Haspel has another sensible article in the Washington Post, this time on the potential effects of a soda tax.

She interviewed a slew of top food and agricultural economists, and by and large, I agree with most of what they had to say.  There were three points I would have added.

First, Haspel discusses the potential of sugar (rather than soda) taxes without mentioning the fact that sugar is ALREADY taxed (indirectly via various government programs).  Here's what I wrote in a short piece for the Congressional Quarterly on the issue:

“Should the government tax sugared soda? It already does. Farm policies make U.S. sugar prices two to three times higher than elsewhere. Moreover, ethanol policies have led to a more than doubling of the price of high fructose corn syrup since 2005. It’s no wonder that per capita sugar consumption has fallen precipitously over the last decade.”

Second, while Haspel mentions a quote from the industry that the taxes are "unfair", she doesn't mention that they're regressive -meaning  the costs being born relatively more by those who can least afford to pay them.  Yes, we need to raise government revenue some way, but as I've noted before, even some good economists seem to miss the fact that we should choose taxes in a way to minimize dead weight loss, not how taxes feel or appeal to a particular cause.

Finally, despite acknowledging that soda taxes are likely to have very little benefits, Haspel concludes,

“If the choice is to do this or do nothing, I choose this. ”

I'm sorry, but if my choice is between nothing and a policy that is paternalistic, regressive, will create economic distortions and deadweight loss, and is unlikely to have any significant effects on public health, I choose nothing.   

Why don't people vote like they shop?

There have been several recent cases where there is an apparent disconnect between the way people vote on food issues and how they shop for food.  Examples include votes on GMO labeling or bans (which are more popular with voters than non-GMO products are with shoppers) and animal welfare issues (voters in several states have banned cages/crates employed in the vast majority of purchased retail products).  The issue is of importance to agricultural producers, who must adopt costly new practices that consumers haven't been fully willing pay a premium for in the marketplace.  

There has been a lot of academic speculations about the causes of this vote-buy gap, but we still aren't sure why it exists.  I'm now working on a research project with Bailey Norwood here at OSU, Kate Brooks at University of Nebraska, and Glynn Tonsor at K-State to delve a bit deeper into the issue.  

In the most recent Food Demand Survey (FooDS), I thought I'd ask every day people why they think the vote-buy gap exists.  Here's the question I asked:

“In 2008, 63% of voters in California voted to ban the use of small cages for egg-laying hens. However, at the time around 90 to 95% of the eggs Californians purchased came from small cages and only 5 to 10% were cage free. So, a majority of voters voted to ban a product that a majority of shoppers routinely bought. Why do you think there is such a gap between how people voted and how they shopped for different types of eggs?”

The question was open-ended and respondents could type anything they wanted in an empty box. 

I went through the answers and tried to categorize them into competing explanations for the gap.  Not all answers were mutually exclusive, so I put some of them in more than one category.  

Here were the common responses (note that 46% of responses responded with some form of "I don't know" or did not provide a cogent response).

The information hypothesis (mentioned by 27% of all respondents and 59% who provided an answer).  The gap is caused by a lack of information: people did not know they were buying cage eggs in the grocery store, and they wouldn't have bought them if they knew more.  Example responses include things like "Because they did not realize what they were purchasing" and "shoppers didn't know that eggs were coming from small caged hens" and "Most people don't understand where their food comes from."

The price hypothesis (mentioned by 14% of all respondents and 29% who provided an answer).  The gap is a result of the high price of cage free eggs in the grocery store: prices are more salient in the store than when voting.  Example responses include "price is everything, people buy what is available at  a cheap price" and "Because people do not have money to pay for more expensive eggs."

The consumer vs. citizen hypothesis (mentioned by 8% of all respondents and 17% who provided an answer).  People have two selves: the citizen who wants to do the "right thing" in the voting booth and the consumer who pays more attention to themselves and prices when shopping.  Example responses include, "sometimes people say what they think is politically correct but don't act in the same manner" and "People voted with their hearts/ethics" and "I don't think they considered how they bought the products.  They voted as they did because they know it is the right thing to do."

The availability hypothesis (mentioned by 5% of all respondents and 11% who provided an answer).  More consumers don't buy cage free eggs because they aren't available (or aren't convenient) in the stores in which they shop.  Example responses include, "cage free are less available and cost more" and "There wasn't many choices available for eggs in the supermarket.  You purchase what you can see" and "Consumers want cruelty free eggs but are frustrated that they aren't available at convenient stores where they already shop."

The apathy hypothesis (mentioned by 4% of all respondents and 9% who provided an answer).  Consumers don't care (or don't think) about animal welfare when shopping, but they might vote for an animal welfare policy when confronted. Examples include, "i don't think they cared much" and "I don't think about it when buying my eggs. I'm sure most people don't think about it."

Selection hypothesis (mentioned by 2% of all respondents and 1% who provided an answer).  A sample of voters is not the same as the sample of shoppers.  The types of people who vote have a stronger preference for  cage free eggs than the population of people who shop.  An example includes, "I think in general people who are passionate about an issue such as animal welfare are more likely to vote and participate in "get out the vote" campaigns to encourage voting. So in elections when many people choose not to vote (or are unable to for economic reasons), it is easier for groups who feel strongly about an issue to pass such bans." 

Induced innovation hypothesis (mentioned by 2% of all responses, and 1% who provided an answer).  People don't buy cage free eggs now because they're too expensive, but voting for the policy will force producers and retailers to price them lower at a point consumers are willing to pay.  An example response includes, "Some cannot afford the higher price eggs, but if all producers were forced to have better living arrangements the prices would then drop."

A number of hypotheses that I often hear mentioned among academics were rarely if ever mentioned by the respondents.  For example, the free riding/public good hypothesis (that even though my individual purchase doesn't much affect animal welfare my vote might matter because more animals are affected) or the commitment hypothesis (I really want to buy cage free eggs but I keep backsliding; a ban can force me to behave as I really want to).  

There were a number of mentions of food safety and health.  It wasn't clear to me precisely how these translated into a vote-buy gap, but I thought it was worth mentioning nonetheless.  

TSE Economist weighs in on nutrient taxes

In the most recent issue of the Toulouse School of Economics (TSE) Magazine (pg 8) features some work by Vincent Requillart and Celine Bonnet on ability of nutrient taxes (like soda taxes) to fight obesity. 

Soda and sugar taxes don't always have the anticipated effect:

“The fact that we take into account the way the industry and retailers react via their pricing decisions. Most research assumes that the tax is passed on to the consumer. There’s no reason that should be the case! Firms are not passive, they develop strategies. They can raise prices more than is strictly necessary to cover the tax or, on the contrary, reduce their profit margins so as to maintain their sales.”

The point out that the effects of a sugared-soda tax are small, and that the actual policy passed in France (taxing all sweetened drinks - even those with artificial sweeteners) would not be expected to reduce weight.

“Taxing all drinks, be they sugar-sweetened or light, is counter to health recommendations. In practical terms, the tax implemented does not reach its goal of reducing sugar consumption. It acts primarily as an instrument to increase the State’s budget revenue.”

They seem to favor voluntary arrangements between food companies and the government to reduce sugar and salt content.  Even still, in places like the UK, where such an approach has been taken, the effect appears to be virtually nil.

“Having said that, despite all the measures implemented, obesity has not been eliminated. ”

One of the challenges is the complexity of it all

“ In the case of food, defining what is good and what is bad when dealing with a large number of nutrients, is complex.What’s more, eating habits change very slowly.”

For a more in depth and academic treatment of the topic, you might check out some of the published work by these authors.