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What Do Food Stamp Recipients Buy?

This editorial in the LA Times sounds an "alarm" about our lack of knowledge about how food stamp recipients spend their money:

The debate in Congress  about cutting the food stamp program has sparked predictable clashes between those who want to help the poor and those who want to cut government spending. But strangely missing from the arguments is a shocking fact: The public, including Congress, knows almost nothing about how the program's $80 billion is spent.

The underlying premise of article seems to be a notion that we need to know how food stamp recipients spend their money so we can decide if they are using it wisely.  That is, should purchases of food stamp recipients should be restricted to exclude unhealthy items?  I'm a bit skeptical of the impacts of such policies for reasons I talked about previously:

we have to realize that restricting [food stamp] use may not have the intended effect.  Money is fungible.  If you can't use food stamps to buy sodas, you'll use them to buy more of something else - freeing up money to buy soda.

But, that's not the reason I'm weighing in here.  Coming off a highly successful meeting of the Agricultural and Applied Economics Association earlier this week, I was again reminded of the exciting and energetic work being done by my fellow food and agricultural economists.  I can only think that many of them who study food stamp (SNAP) issues would bristle at the statement in the LA Times that: 

SNAP is kept under wraps. And Congress acts blindly, with the House voting to remove SNAP from the farm bill altogether and the Senate proposing to cut $4 billion from the program.

If Congress acts blindly, it is only because they (or their staffers) are unwilling to read the peer-reviewed research.   The fact is that there are large number of studies that, by merging various data sets, have investigated what SNAP recipients eat, how their purchases differ from non-SNAP recipients, and whether SNAP participation causes things like obesity.  

True, we may not have scanner-type data from grocery stories tied to EBT cards, but that is a far stretch from claiming we know nothing or act "blindly". 

 

Another study raises questions about sweetened beverage taxes

A small group of food and agricultural economists have been quietly releasing research that questions the argument that sweetened beverage taxes will have any meaningful impact on the rates of obesity.  First was a French study showing fat taxes to be quite regressive (i.e., the burden is most heavily paid by the poor) having very small effects on nutritional content.  Then was a UC Davis study showing that the only kind of tax to have much effect on weight would be an across-the-board food or calorie tax.  After that, I discussed a Cornell study showing that sweetened beverage taxes are likely to be far less effective than previously predicted if food taxes are only calculated at the register and not posted on the shelf (as is the case in virtually all US retail outlets).  I then talked about my own research on the issue, pointing out some weaknesses in much of the conceptual reasoning about fat taxes. 

Now, comes this paper just accepted for publication in the American Journal of Agricultural Economics.   The authors find: 

A half-cent per ounce increase in sugar-sweetened beverage prices is predicted to reduce total calories from the 23 foods and beverages but increase sodium and fat intakes as a result of product substitution.

The authors also showed that previous studies, which failed to account for the full substitution effects across foods (an issue we highlighted back in 2008 in this paper), would over-estimate the effectiveness of a sweetened beverage tax.  They also estimate that the consumer welfare losses that results from paying higher prices from a tax are higher among the poorer consumers than the richer consumers.  

Ultimately, the authors predict that a one-half cent tax per once of sweetened beverages would cause

reductions of 0.37 and 0.16 kg/person in 1 year

for low and high income consumers.

McDouble: The Cheapest, Most Nutritious Food in Human History?

That provocative claim was originally made bay a commentor at the Freakonomics blog. Freakonomics co-author, Stephen Dubner, turned the claim into an interesting podcast for NPR. Then Kyle Smith wrote an editorial on the topic for the New York Post celebrating the McDouble.  The Wall Street Journal picked up the story, and predictably, a number of outlets offered a counter-response.  It seems the story has gone viral.

If you care to hear my thoughts on the subject, I had to opportunity to briefly expound on it a bit this morning on Fox and Friends.  

 

The one thing I didn't say is that it is not necessarily true that more nutritious food is always more expensive.  The USDA published a report on this issue a few months ago. Basically, it comes down to how you measure it.  If you measure the cost of nutrition as the price per calorie, then lettuce is going to look really expensive because lettuce doesn't provide many calories.  But, if you measure the cost as the price per gram (or pound), then fruits and veggies don't look so costly compared to other foods.        

Some people point out that it is more expensive to order a salad than a McDouble at McDonald's.  Doesn't that prove it is more expensive to eat healthy?  Well, first, a McDonald's salad is not necessarily better for you.  It's important to actually look at the nutritional content of salads at McDonald's; you can easily eat more calories by ordering a salad - especially if you add chicken or use salad dressing.  But, even if the salad is more nutritious, it is likely more expensive because there is more volume to the salad than the burger (i.e., there are more oz in the serving of salad than burger) so you're getting more with the salad; also, there is the extra storage costs required with the bulkier packaging, not to mention the costs associated with keeping salads fresh and dealing with spoilage and waste.   

Finally, on this point, Adam Drewnowski - who was done a lot of research on this topic - sent me this recently published paper, where he calculated the cost of various fruits and veggies according to a nutrient score.  I pulled out the second figure from the paper and reproduced it below.  If I'm not mistaken, it looks like there is a positive correlation here: the higher the nutrient score, the more affordable the food is. 

One take-away from the figure: if you want inexpensive nutrients, eat sweet potatoes!

costofnutrient.JPG

Most overpriced items in the grocery store

Yesterday I received a phone call from a producer for a major cable news station asking if I'd be willing to come on a show and talk about this story that appeared in Business Insider entitled: "5 Of The Most Overpriced Items In The Grocery Store".

After reading the story, I gave the following response to the producer (slightly edited here for the blog).  Although it would have been nice to have a little air time, I'm happy to report that they decided not to run with the story, at least as it was originally premised.

The story equates “overpriced” with the “percent markup”, which is pretty shaky.  There are a lot of good reasons why the percent mark-up may vary across products that has little to do with being “overpriced”.  For example, differences in demand for convenience and other characteristics, differences in costs of packaging, storage, transportation, etc. will cause differences in the percent markup.  
Nonetheless, let’s play along.
1) Bottled water.  On the surface, it does seem crazy that there is a 4000% mark-up for bottled water.  But, part of the reason for the high percent is that the price of water is REALLY cheap to begin with (so the percent will look very high though the actual dollar mark-up in absolute terms is small).  More importantly, how valuable is convenience to you?  A lot of people are willing to pay an extra buck to have more convenient water and not have to fiddle with refilling and refrigerating a re-usable water bottle.  Who am I to say that an extra $0.50 or $1 isn’t worth it to the person whose paying for it?  If it were really the case that bottle water sellers were ripping us off, why doesn’t some entrepreneur enter the market and start selling cheaper bottled water and corner the market?  The fact is that most of the cost is in the packaging, transportation, etc.  When you buy bottled water, you’re paying for packaging and convenience.
The same arguments apply even more forcefully for pre-cut produce.  Who cares if pre-cut carrots and onions are marked up 40%?  I’m not having to do the work!  That’s an extra $1-$2 I’m definitely willing to pay.  And if someone else can figure out a way to do it for less than 40%, you can bet they’d have my business.  Competition – in the long run- will eventually drive down prices to their approximate costs. 

2)   In general, I would characterize something as “overpriced” if people have mis-perceptions; if they believe they’re getting something from a product that they’re not actually receiving.  Two of the examples in the story potentially fit that criteria: name-brand spices and brand-name cereal.  One way to know whether you’re being fooled by marketing is to do a blind taste test.  It is often the case that our brain is more powerful in influencing how we think something tastes than our tongues.  So, with a neutral friend, try it out: can you REALLY taste the difference?  If not, you may be over-paying.
3)  In this light, there are a number of products that many people have “incorrect” beliefs relative to what scientific studies say – thus, they may be paying a premium for characteristics that they’re not actually recieving.  One example is food with a "natural" claim. A “natural” label is pretty vacuous, and I've previously touched on those issues here and here.  Another example is organic food.  People believe a lot of things about organic foods that just aren't true: that they’re pesticide free, that they support small farms, that they are more nutritious, etc.  I’m not saying there are NO benefits to organic, only fewer benefits than most believe.  A lot of the same arguments apply to local foods.  Chapters 5 and 9 in The Food Police have all the details and citations.