Double Dipping?

With debates over the farm bill likely to heat up over the next year, it's interesting to see the lines of arguments coming out from different camps.  Today, the Environmental Working Group, an opponent of many farm subsidies, came out with a new publication.  They focus on what they call "double dipping", in which farmers receive payment when a loss occurs both from commodity programs (ARC or PLC) and from subsidized crop insurance programs.  

In their words:

“But farmers can – and hundreds of thousands do – participate in either ARC or PLC and in the crop insurance program. Most of the double dipping in the 2014 and 2015 growing seasons came from duplication of crop insurance and ARC payouts.

You don’t need a degree in agricultural economics to see the result: multiple payments going to the same farmers in the same counties to cover the same “drop” in revenue from crop sales. The interactive map below shows the counties where farmers received duplicate payments from at least two of the three programs.

In 2015, more than 2,300 counties received an ARC or PLC payment for losses incurred in 2014. Crop insurance policies paid out in more than three-fourths of those counties in 2014. The pattern was repeated the following year. ”

They created several maps illustrating where they argue "double-dipping" has most occured.

Over the last few farm bills, there seems to be less emphasis on traditional commodity programs and more focus on crop insurance.  To the extent arguments like this hold sway, I suspect that transition will continue.   

Food Flows

Last week I posted some crude calculations on how much states import and export various foods from other U.S. states.  Sandy Dall'erba from the University of Illinois alerted me to a dataset that gets at this question in a different way through records of interstate shipments (the FAF database from the Bureau of Transportation).  Sandy graciously agreed to let me share this figure he created based on these data.

You can read more about Sandy's work with Zhanglaing Chen here or contact Sandy to get a copy of their working paper "Drought, Interstate Trade and Agricultural Profit: Theory and Evidence" presented this year at the North American Regional Science Conference in Vancouver.

Inequalities of Fat Taxes and Thin Subsidies

I was excited to see The Economist ran an article on my paper with Laurent Muller, Anne Lacroix, and Bernard Ruffieux, which appeared in the Economic Journal.  In typical Economist fashion, they didn't mention us by name, but here's their summary of our findings:

“The study found that the taxes and subsidies actually widened health and fiscal inequalities. Fat taxes meant the women on lower incomes paid disproportionately more for food—their habits changed less. They preferred to buy food they liked rather than what made nutritional sense. Taxing the food they eat most made the poor poorer.

Subsidies encouraged all income groups to buy more fruit and vegetables. But those on higher incomes proved more responsive and so benefited most. Interestingly, richer folk were also more likely to buy the subsidised healthy food and then spend the savings they had accrued on yet more healthy food. But poorer women, if they responded to lower prices, often used the money saved to buy unhealthy items or something else entirely. Once the nutritional price policies were applied, the average share of budget spent on healthy food actually increased for the better-off. ”

Paarlberg on Farm Policy

Yesterday, I posted on a paper I wrote critiquing some of the proposals of the food movement.  As such, its probably only fair that I share a paper sent to me by a reader.  It was written by Don Paarlberg in 1987 and takes issue with farm policy from the Depression up to that date.  I found the history fascinating; the paper is short and well worth a read.  By the way, Don was a Professor of Agricultural Economics at Purdue and was a former Assistant Secretary of Agriculture.  

Here's an excerpt that shows some of the challenges with trying to manage agricultural prices and supplies.

“Some of the antics of the commodity programs are so ludicrous as to be almost unbelievable. Dairy programs are perhaps the most fantastic. The government supported the prices of dairy products with the intention of increasing dairy farm incomes. But, as every student who has taken a beginner’s course in economics knows, the result was to stimulate production, reduce consumption, and accumulate a surplus. The surplus of butter, cheese, and dried milk was then donated to those on the welfare rolls. This proved to be an inadequate outlet so then these products were donated overseas. The surplus was still growing so the government bought and slaughtered whole herds of dairy cattle. Thereupon the beef cattle producers, who are self-reliant and are not shielded by price supports or production controls, complained of this subsidized competition with their product and the government responded by purchasing beef for donation to the school lunch program. This did not adequately alleviate the complaints of the beef producers so the government exported beef from the slaughtered dairy herds, a strange action indeed since we suffer from beef shortages and import substantial amounts. Our forced exports of dairy beef disturbed other beef exporters, making an additional problem for the GATT multinational trade negotiations in Geneva. All of these questionable strategies were undertaken because the government was unwilling to follow the most simple and effective expedient: lowering the official price.

Meanwhile, those dairymen who stayed in business currently anticipate a reduced supply of milk and a better market. They are increasing their herds and laying the basis for a larger supply of milk. Like the sorcerer’s apprentice, they have heard the signal for delivering more water (in this case, milk) and have heard no credible signal for stopping. The commodity programs create surplus. They make a burden of what should be a blessing—our capability to produce food.”

Labeling Food Processes: The Good, the Bad and the Ugly

That's the title of an interesting new article in the journal Applied Economic Perspectives and Policy by Kent Messer, Marco Costanigro, and Harry Kaiser.  Here's the abstract:

“Consumers are increasingly exposed to labels communicating specific processing aspects of food production, and recent state and federal legislation in the United States has called for making some of these labels mandatory. This article reviews the literature in this area and identifies the positive and negative aspects of labeling food processes. The good parts are that, under appropriate third-party or governmental oversight, process labels can effectively bridge the informational gap between producers and consumers, satisfy consumer demand for broader and more stringent quality assurance criteria, and ultimately create value for both consumers and producers. Despite the appeal of the “Consumer Right to Know” slogan, process labeling also can have serious unintentional consequences. The bad parts are that consumers can misinterpret these labels and thus misalign their personal preferences and their actual food purchases. The ugly parts are that these labels can stigmatize food produced with conventional processes even when there is no scientific evidence that they cause harm, or even that it is compositionally any different. Based on this review of the literature, we provide three policy recommendations: (i) mandatory labeling of food processes should occur only in situations in which the product has been scientifically demonstrated to harm human health; (ii) governments should not impose bans on process labels because this approach goes against the general desire of consumers to know about and have control over the food they are eating, and it can undermine consumer trust of the agricultural sector; and (iii) a prudent policy approach is to encourage voluntary process labeling, perhaps using smart phone technology similar to that proposed in 2016 federal legislation related to foods containing ingredients that were genetically engineered.”