Blog

Distinguishing beliefs from preferences in food choice

That's the title of a paper I co-authored with Glynn Tonsor and Ted Schroeder, which is forthcoming in the European Review of Agricultural Economics.  The abstract:

In the past two decades, there has been an explosion of studies eliciting consumer willingness-to-pay for food attributes; however, this work has largely refrained from drawing a distinction between preferences for health, safety and quality on the one hand and consumers' subjective beliefs that the products studied possess these attributes, on the other. Using data from three experimental studies, along with structural economic models, we show that controlling for subjective beliefs can substantively alter the interpretation of results and the ultimate implications derived from a study. The results suggest the need to measure subjective beliefs in studies of consumer choice and to utilise the measures when making policy and marketing recommendations.

We show applications related to tenderness, added growth hormones in beef, and country of origin labeling.  Here are a couple excerpts:

The reason why the conventional ‘reduced form’ model yields a potentially misleading result is that it does not take into account the fact that most people believe that the generic steak is safe. The reason the premium for natural over generic was so low in the ‘reduced form’ model was not because people did not care about safety but rather because they, on average, believed the health risks from growth hormones and antibiotics in the generic steak were low.

and

the results reveal that, at the mean beliefs, consumers are WTP a premium of only about USD 1.68 . . . for a US origin steak relative to the ‘weighted average origin’ steak. The reason why the value is so low is that most people believe the unlabelled steak is highly likely to come from US origin.

The estimates allow us to make interesting calculations like:

of the total WTP premium for guaranteed tender steak, 46 per cent is due to perceived value of added tenderness; the remaining 54 per cent is due to other factors. A similar computation reveals that of the total WTP premium for natural steak over the generic steak, only 38 per cent is due to perceived added healthiness or no hormone use; the remaining 62 per cent is due to other factors.

and

The implication is that when a product has a mixed-origin label, people are
apparently pessimistic, believing the joint-labelled product to have a much
higher likelihood of coming from the less-preferred origin.

For the Starving, 'Eat Local' Isn't an Option

That is the title of an opinion piece at the WSJ in which Adrienne Johnson warns that the local food movement isn't all it's promoted to be.  A few snippets:

More important, local foods do nothing to help the world's poor, who have long relied on export markets for their livelihood. American farmers likewise rely on foreign markets: About 25% of total crop production is exported, according to the Agriculture Department, representing a near $100 billion market that helps offset trade deficits in other sectors.

The "return" to local foods and yeoman farmsteads isn't just impossible. It misdirects political attention away from the problem of world hunger. Local foods simply cannot feed the world.

and

In this global sense, the often-heard eat-local slogan of "vote with a fork" is well-intentioned but naïve. It doesn't satisfy our moral obligations as global citizens. If you want to cast a food-related vote, find a candidate talking about global hunger and do it at the ballot box.

We shouldn't deny ourselves the privilege (if we have it) of a good meal, but let's not do so under the banner of political action. If you're eating free-range chicken from an organic farm down the road, with side orders of locally sourced arugula and kale, just remember you're not acting politically. You're just having dinner.

I'm glad to see these ideas in the WSJ.  They are many of the the same arguments I've made with Bailey Norwood at the Library of Economics and Liberty and in Chapter 9 of the Food Police.  If you want a whole book on the subject see The Locavore's Dilemma: In Praise of the 10,000-mile Diet.

People Are Willing to Listen in the Fight Over GMOs

Polls consistently reveal overwhelming support for the mandatory labeling of genetically engineered foods.  But, in two test states, California and most recently Washington, initiatives to require such labels have gone down in defeat when put to the voters.  

Supporters of the failed initiatives in Washington and California have vowed to fight on, and they are not alone.  Indeed, it appears the fight has just begun.  There are organizations in at least 37 states pushing for state-level ballot initiatives, and Connecticut and Maine have already passed mandatory labeling laws for genetically engineered foods, which will go into effect once other states nearby states pass similar laws.

The question is how the future labeling battles will play out

In states that allow initiatives, the California and Washington examples suggest that voters can be swayed away from supporting mandated labels.  For example, in what was pitted as a David versus Goliath battle, opponent of the Washington initiative raised a state record $22 million from the likes of the Grocery Manufacturers Association and Monsanto.  Yet, the carpetbagger label could equally apply to supporters of the initiative, who raised $7.7 million, 70 percent of which came from out-of-state mostly from natural and organic associations and retailers.       

A cynical view is that massive advertising turned consumers into pawns of Big Food at the ballot box.  A more charitable interpretation is that reasonable people, when confronted with the evidence of the safety of genetically engineered food and the potential benefits, changed their minds about an unfamiliar technology.

Biotech companies and food manufacturers have shown that the public can be persuaded about the merits of labels at the polls.  The question is whether food companies are willing to continue to spend such sums state-after-state.  Indeed, General Mills which donated millions in the fight against mandatory labeling initiatives in California and Washington has come out in favor of a national labeling standard for products produced without genetically modified ingredients (but not necessarily mandatory labeling).  Such a call is an effort to head-off future, costly state initiative battles, but it is far from clear that such a standard will alleviate the concerns expressed by mandatory labeling advocates.

One of the key issues in the debate about mandatory labeling surrounds the potential cost that would arise should mandatory labeling become law.  The ultimate impact hinges critically on how food manufacturers and retailers choose to respond to a mandatory label.  There is some chance manufactures will simply add the label indicating the presence of genetically engineered ingredients, most consumers will ignore it, and life will go on as usual.  Ironically, this is the outcome that label supporters suggest will happen.  There is also a chance manufacturers will avoid the label for fear of losing customers, the entire production system eschews biotechnology, food prices go up, and farmers are less profitable.  This is the outcome feared by opponents of mandatory labels, yet the choice of how to respond is, at least partially, in the manufacturers’ and retailers’ hands. 

The focus thus far has been on government mandated labels.  But as the actions of General Mills suggests, more attention is been devoted to the impacts that food and biotech companies might have on attitudes toward biotechnology more generally.   

The willingness of food and biotechnology companies to donate millions to change minds about mandatory labels could also be spent changing minds about the technology.  Spending by food and biotech companies in the ballot fights, while creating temporary victories, might ultimately be counterproductive.  Fighting the label feeds conspiracy theories and suggests that there is something to hide. 

Why not spend money educating consumers?

To be clear, the food companies were right to oppose the initiatives.  One should be careful about when the government can compel company speech.  A case could be made that mandated labels are appropriate when there are legitimate safety or health risks, for example transfats or nut content.  But, the best science shows no such worries for biotechnology. Moreover, by requiring a label, the government might well send a false signal that biotechnology is something to fear.  

It has become no longer acceptable for reputable journalists to repeat the scare tactics of GMO fear mongers.  More nuanced critics point to issues associated with market power, resistance, and gene flow.  These are reasonable conversations worth having.  So too are the conversations about the benefits already accruing from the adoption of biotechnology, such as lower food prices and reduced insecticide use, not to mention promising developments on the horizon such as engineered citrus varieties resident to a disease that is destroying the industry in Florida, drought tolerant crops, and developing-country staple foods engineered to contain micronutrients.

Biotechnology is not a panacea, but all tools should be on the table to sustainably meet the demands of a fast growing, hungry world.         

For now, food companies are not required to add labels indicating the presence of genetically engineered ingredients.  But, it might ultimately be in their best interest to do it voluntarily, and in a way that avoids the negative connotations implied by the labels that would have been mandated in state ballot initiatives.

Some day in the near future, after concerted efforts to educate the public and create consumer-oriented biotechnologies, we may see food companies clamoring to voluntarily add a label that proclaims: proudly made with biotechnology.

Don Boudreaux on GMO Labeling

I am sometimes surprised at the stances some libertarian-leaning folk take on food issues, particularly GMO labeling.  But, over at Cafe Hayek, Don Boudreaux responds to a question on the issue precisely as I'd anticipate. 

No.  I believe that there is no justification for such a requirement [mandatory labeling of GMOs].  An important reason why I oppose such a requirement is that there are no non-arbitrary criteria to guide even the best-intentioned government in determining which sorts of information-disclosure to mandate and which not to mandate.  The best practical rule is to allow competition among firms to determine which bits of information to disclose and how to disclose it.

Suppose (not unreasonably) that there are some consumers who would prefer not to buy foods harvested by ‘undocumented’ workers.  Should government then require suppliers of fruits and vegetables to disclose whether or not they take steps to ensure that all of their workers have official U.S. Government permission to work as farm laborers in America?  Suppose (not unreasonably) that some other consumers care about ‘gender equity’ in the workplace?  Should government then require that each supplier of fruits or vegetables disclose information about what proportion of its workforce is women?

Suppose (not unreasonably) that yet some other consumers care about ‘sexual-preference equity’ in the workplace?  Should government then require that each supplier of fruits or vegetables disclose information about what proportion of its workforce is gay, lesbian, bisexual, or transgendered?  Suppose (not unreasonably) that some consumers care about the employment prospects of U.S. military veterans.  Should government then require that each supplier of fruits or vegetables disclose information about what proportion of its workforce is made up of people who once served in the U.S. military?  Suppose (not unreasonably) that some other consumers care deeply about ‘made in America.’  Should government then require that each supplier of fruits or vegetables disclose information about what proportion of its inputs were bought from American, as opposed to non-American, suppliers?