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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.  

 

What caused the rise of "factory farms"?

An interesting insight into one of the key factors that precipitated  the development of "factory farms" from Maureen Ogle's forthcoming book In Meat We Trust: 

World War II also drained American agriculture of its labor supply, a fact that, as we'll see later, would have a profound impact on the way farmers raised livestock. Even before the United States entered the war, factories had geared up to supply warring countries with materiel, and men and women decamped from the farm for jobs those factories provided. In Georgia alone, between 1937 and 1941, 30 percent of agricultural workers left farm for factory. The shortage worsened after the United States declared war in late 1941. Everywhere in rural America, from dairy farms to cattle-feeding operations, from corn belt hog lots to rural Georgia chicken coops, labor vanished. When labor cannot be found, humans make a logical decision: they replace it with machinery. Americans had a long-standing tradition of doing so. For most of the nineteenth century, for example, the country suffered chronic shortages of labor that fostered a national passion for mechanization and automation. So, too, in the 1940s. Factory farming already had plenty of support both in and out of agriculture, and World War II affirmed that enthusiasm. Nowhere was this more true than in the broiler industry

The argument reminds me of an episode described by Joan Thirsk in her book Alternative Agriculture: A History: From the Black Death to the Present Day.  The severe labor shortage caused by the black death was, according to Thirsk, a big factor motivating change in the agricultural sector in the 14th century.  

It is amazing how an exogenous shock like plague or war can change perspectives on the relative risk and benefits of new food and farm technologies.