What's the good of advertisers?

Much of what I read and hear in debates about obesity, nutrition, and public health seems to assume that all corporate food marketing is "bad".  Food marketers are nudging us away from healthful choices toward the more profitable (for them) unhealthful ones (never mind that some companies sell healthy products).  Many people argue that the government needs to make its own commercials to counter-nudge us back toward health eating.

With that backdrop, I was interested to read the back-and-forth letters between Rory Sutherland and George Loewenstein at the beginning of this paper, The Behavioral Economics Guide 2014. (HT: Andreas Drichoutis)

Here's an interesting point by Sutherland:

“Interestingly the late, mostly great, Gary Becker (in a paper with Kevin Murphy) seems to agree with me on this. Their model of advertising seems to suggest that advertising should be viewed not as persuasion (something which distorts preferences, as you suggest) but as a complementary good, the consumption of which, alongside the main product, increases the value of that main advertised product and which therefore allows sellers to capture more of the consumer surplus. He sees advertising as potentially a value-add, not as manipulation.

Nonetheless, I agree that we are right to be suspicious of manipulation. After all, the most successful advertisers over the past 150 years have been totalitarian regimes. ”

Sutherland also responds to Loewenstein's story about a recent joy-ride to the country ending in a meal of burgers and beer which was ruined when Loewenstein learned he was simply playing out a scene he'd seen in a credit card commercial.  Sutherland writes: 

“But what is strange is that we are already affected by frames, without being remotely aware of them. When you described your cycling experience, it was clear that you saw the cycle ride as virtuous and the food and beer as sinful. Yet people have been enjoying the consumption of beef products and fermented beverages since the time of the pharaohs.

Indeed, perhaps 900m people in China would have read your story and said, “The beer and the burger I understand. What I don’t understand at all is why a presumably wealthy Yankee professor would get to the restaurant by bicycle, when I have been dreaming of owning a car for the last ten years. Travelling by bicycle is the lowest form of drudgery.” You have clearly been manipulated here. But it’s not the credit card company I blame, it’s Nike.”

Loewenstien responds with some interesting observations of his own.  Do read the whole exchange. 

New Dietary Guidelines

The USDA and DHHS are in the process of revising the federal dietary guidelines.  It is unclear how similar or dissimilar the new recommendations will be relative to the current MyPlate recommendations. 

The committee drawing up the new recommendations has come under fire for what appears to be an attempt to work in environmental considerations when making the new dietary recommendations.

A recent appointment to the USDA has added further fuel to the fire.  Here's Jeff Stier writing in the Des Moines register:

“The appointment of Iowa’s Angela Tagtow, a controversial “environmental nutritionist” and local food activist, to head the U.S. Department of Agriculture’s Center for Nutrition Policy and Promotion is causing more headaches for the agency, already facing criticism about politicization of federal nutrition advice and its consequences for public health.”

It isn't necessarily a bad idea for the government to convey the scientific evidence on the environmental impacts of producing different foods.  The trouble comes when a single set of omnibus recommendations attempt to integrate disparate issues like environment, nutrition, and other factors.  

The trade-off between health outcomes, environmental outcomes, taste, and the price we pay (among other factors) is subjective and individual-specific.  Science might be able to tell us that eating food X is associated with environmental outcome Y and health outcome Z.  But, there is nothing in science that can tell us whether Y or Z is more important.  Nor should we expect every person to be willing to pay the same amount for Y or Z or to make the same trade-offs between taste and price to get these outcomes.  

Tell us which foods are more nutritious.  Tell us which foods are more environmentally friendly.  But, don't presume to know how much one values taste vs. nutrition, or environment vs. nutrition, or price vs. environment.  And, recognize that we can't have it all.  Life is full of trade-offs.  

A food producing machine

Imagine a biologist on an excursion in the Amazon looking for new plant species.  He comes across a new grass he's never seen, and brings it back home to his lab in the U.S.  He finds that the grass grows exceedingly well in greenhouses with the right fertilizer and soil, and he immediately moves to field trials.  He also notices that the grass produces a seed that durable, storable, and extraordinarily calorie dense.  The scientist immediately recognizes the potential for the newly discovered plant to solve global hunger problems and to meet the dietary demands of a growing world population.

But, there is a problem.  Lab analysis reveals that the seeds are toxic to humans.  Despite the set-back, the scientist doesn't give up.  He toils away year after year until he creates a machine that can convert the seeds into a food that is not only safe for humans to eat but that is incredibly delicious to eat.  There are a few downsides.  For every five calories that go into the machine, only one comes out.  Plus, the machine uses water, runs on electricity, burns fossil fuels, and creates CO2 emissions.  

Should the scientist be condemned for his work?  Or, hailed as an ingenious hero for finding a plant that can inexpensively produce calories, and then creating a machine that can turn those calories into something people really want to eat?  

Maybe another way to think about it is to ask whether the scientist's new product can pass the market test; can his new food - despite it's inefficiencies (which will make the price higher than it otherwise would be) - compete against other foods in the marketplace?  Recall, that the new food must be priced in a way that covers the cost of all the resources it uses - from the fertilizer to grow the new seeds to the gasoline required to run the new machine.

Now, let's call the new grass "corn" and the new machine "cow".  The analogy isn't perfect (e.g., the cow is a living-feeling being and not a lifeless machine), but the thought experiment is useful nonetheless.

It's particularly useful in thinking about the argument that corn is "wasted" in the process of feeding animals.  It is one that appears - in one form - in a recent paper in Science.  West et al. write:

“Although crops used for animal feed ultimately produce human food in the form of meat and dairy products, they do so with a substantial loss of caloric efficiency. If current crop production used for animal feed and other nonfood uses (including biofuels) were targeted for direct consumption, ~70% more calories would become available, potentially providing enough calories to meet the basic needs of an additional 4 billion people (28). The human-edible crop calories that do not end up in the food system are referred to as the “diet gap.””

I'm not sure the logic of this sort of argument adds up.  

Unlike my hypothetical example, corn is not toxic to humans (although some of the grasses cows eat really are inedible to humans).  Nevertheless, few people really want to eat the calories that directly come from corn or other common animal feeds like soybeans.  

So, why do we grow so much corn and soy?  They are incredibly efficient producers of calories and protein.  Stated differently, these crops (or "grasses" if you will) allow us to produce an inexpensive, bountiful supply of calories in a form that is storeable and easily transported.  

The assumption in the quote of the Science article seems to either be that the "diet gap" will be solved by: 1) convincing people to eat the calories in corn and soy directly, or 2) that there are other tasty-edible crops that can be widely grown instead of corn and soy which can produce calories as efficiently as corn and soy.  Aside from maybe rice or wheat (which also require some processing to become edible), the second assumption is almost certainly false.  I'm also skeptical about the first assumption - that large swaths of people will voluntarily consume substantial calories directly from corn or soy.

What we typically do is take our relatively un-tasty corn and soy, and plug them into our machine (the cow or pig or chicken) to get a form of food we want to eat.  Yes, it seems inefficient on the surface of it, but the key is to realize the that the original calories from corn and soy were not in a form most humans find desirable.  As far as the human pallet is concerned, not all calories are created equal; we care a great deal about the form in which the calories are delivered to us.

The grass-machine analogy also helps make clear that it is probably a mistake to compare the calorie and CO2 footprint of the corn directly with the cow.  I suspect only a very tiny fraction of the world's caloric consumption comes from directly consuming the raw corn or soy seeds.  It takes energy to convert these seeds into an edible form – either through food processing or through animal feeding. So, what we want to compare is beef with other processed foods.  Otherwise we're comparing apples and oranges (or in this case, corn and beef).

Competition for supplying local foods

This is from a new paper in the American Journal of Agricultural Economics looking at Community Supported Agriculture (CSA)"

“For farms considering entry into a CSA market and policymakers exploring policy scenarios to encourage local foods growth, this may serve as a cautionary note about the ability of the existing demand for local foods to sustain a substantial number of new entrants.”

A related footnote:

“We should note that several CSAs were excluded from our hedonic sample as a result of having ceased operations, suggesting that profitability could be a concern.”

The authors also find the interesting result that organic CSAs do receive a price premium over non-organic CSAs, answering the question which serves as the title of their paper, "Does Organic Command a Premium When the Food is Already Local?"  However, they only estimate about a 7% premium, which is much lower than that found in many other studies. I would interpret this to mean that local and organic are demand substitutes, but not perfect substitutes.

Hormones in Soybeans and Beef

About 90% feedlot cattle in the US are administered some type of growth hormone to promote growth.  Use of the hormones convey economic benefits to consumers (lower prices) and a host of environmental benefits (more meat using less land, less water, less C02).  The biggest drawback, from my perspective, is the evidence that use of such hormones reduces the eating quality of steaks, particularly by reducing tenderness.  

While reduced tenderness might be a reason to eschew hormones, food safety isn't.  Some people are worried about the health effects of these hormones, but such concerns do not mesh well with the scientific literature, and the concerns tend to ignore relative risk.  Specifically, there are much higher levels of naturally occurring hormone-like substances in many foods we eat.

As a result, there have been many attempts to communicate this information to the public.  Examples of such discussions appear at BeefMyths.org, US Meat Export Federation, the NCBA, and extension facts sheets from Michigan State University, University of Nebraska,University of Georgia, and many others.  

A common approach is to compare the extra amount of estrogen in a serving of beef from an animal that has received a hormone implant to one that hasn't, and then compare that to estrogen-like substances in other foods like soybean oil (it is a comparison I've made myself in a study on the effectiveness of such communication), cabbage, peas, and potatoes.

After making this comparison in a talk a couple weeks ago, an audience member gently questioned my numbers on soybean oil.  While it is true that soybeans have high levels of isoflavones, which acts like estrogen in humans, it turns out that these compounds are not in soybean oil.  

Here is a publication from the USDA Ag Research Service showing the isoflavone content of a long list of foods.  As you can see, soybeans have quite a bit, but if you'll look down on page 38, you'll find soybean oil listed in a table titled "List of Foods Containing Zero Values for Isoflavones."  This website neatly summarizes the USDA data.

So, where does that leave us.  First, those that have used this comparison should try to correct the record (as I'm doing here).  If we are arguing that the public should make decisions on "the facts," we darn well better get our facts straight.  Second, the relative hormone comparison remains useful (though only marginally persuasive with most consumers), but one needs to drop soybean oil and use other soy products instead.  An Iowa State University Fact's Sheet by Dan Loy helps make the proper comparisons.

Here is a key screenshot