How much do millennials like to eat out?

A recent article in Forbes discussed millennial's eating habits utilizing, it seems, a report from the Food Institute and USDA Economic Research Service Data.

The Forbes article writes:

“Millennials spend 44 percent of their food dollars – or $2,921 annually – on eating out, according to the Food Institute’s analysis of the United States Department of Agriculture’s food expenditure data from 2014. That represents a 10.7 percent increase from prior data points in 2010.

In contrast, baby boomers in 2014 spent 40 percent of their food dollars on eating out or $2,629 annually.”

It's a little hard from this article to really get a nice comparison of millennials food spending without controlling for differences in income and total spending on food at home and away from home.  Thus, I turned to the data from my Food Demand Survey (FooDS) where we've been asking, for more than three years, how much people spent on food at home and away from home.

Here is a breakdown on spending on food away from home (expressed as a share of total household income) by age and by income.  The black and red dashed lines are the two age groups that could be considered millennials.  The results show that for incomes less than about $80,000/year, millennials do indeed spend a larger share of their income on food away from home than do other generations; however, the same isn't necessarily true for higher income households.  People in the two oldest age categories spend a lower share of their income on food away from home at virtually every income level.  For each age group, the curves are downward sloping as suggested by Engle's Law: the share of income spend on food falls as income rises.   

The next graph below shows the same but for spending on food at home.  For the lowest income categories, the youngest individuals spend more of their income on food at home than do older consumers; however, at higher income levels, all age groups are fairly similar.  Coupling the insights from the two graphs suggests that, at incomes less than about $60,000, younger folks are spending more of their income on food (combined at home and away from home) than older folks.   

Finally, here is the share of total food spending that goes toward food away from home by age group and income level.  In general, as incomes rise, people spend more of their food budget away from home.  That is, richer people eat out more.  No surprise there. 

Generally speaking, consumers younger than 44 years of age spend more of their food budget away from home than do older consumers.  The 24-34 year old age group that is firmly in the millennial generation consistently spends more of their food budget away from home than other age groups at almost every income level.   

Social Isolation and the Food Police

Last week on the Econ Talk podcast, Russ Roberts had Chris Arnade on as a guest.  Arnade is a former Wall Street trader who became disillusioned with his work and began (first as a way to just relieve stress) going on long walks to poorer neighborhoods in New York where he would meet people and take pictures.  He's since expanded the enterprise and has visited disadvantaged areas all across the U.S.  

There was a bit near the end of the discussion that hit home for me and helps explain a bit of the motivation that led me to write the Food Police several years ago.  

From the transcript, here is Chris:

“They do see themselves as victims of policy decisions. They may not be actually informed about those policy decisions as people would like them to be. You know, I think what sticks out to me is the anger. The anger is kind of 3-pronged. One of it’s very much social. It’s a sense of feeling kind of diminished in terms of people caring about them, being made fun of: everything they do is laughed at. If they like NASCAR (National Association for Stock Car Auto Racing.), that’s made fun of. If they vape, then that’s considered wrong. They eat at McDonald’s, that’s cheap. So that’s kind of just—if they go to church, they are considered silly. So there’s a sense of just feeling like very much they are being mocked in terms of their lifestyle.”

After a bit more discussion, Russ Roberts the asks:

“I want to talk about the first one, because it interests me. I am constantly trying to remind economists that money isn’t everything. And that, although work is nice when it brings money, one of the things it also brings is meaning. And I think the problem of the lack of employment in the United States as we’ve recovered from this recession, especially among less educated Americans, is a huge problem, not because they are poor and unemployed—which is unpleasant, no doubt about it—but because their life is not as meaningful and worthwhile. So, I totally understand that. What I wonder about is this idea of respect. Certainly respect is hugely important to our sense of wellbeing. But when you say things like, ‘People don’t respect NASCAR,’ or church, they being—McDonald’s. And among my friends, that’s true. Among the people I hang out with generally, higher educated people, those are all the attitudes they hold. But are the people who are enjoying those things—McDonald’s, etc.—why do they—how do they perceive that they are not respected? I don’t hang out much with people on the Coast, say, who are telling them that—is this something they are perceiving on television? Is it something they are reading about?”

And Chris responds:

“I don’t want to get overly simplified but I guess I really do think there’s two Americas. And I think the America that’s doing well dominates the media, dominates the culture in terms of—you know, Sociologists always talk about there’s an in-culture and there’s an out-culture. And we signal [?] ways of being in the in-culture, in terms of the television shows, in terms of what’s on, movies, and what’s kind of made fun of. And I think there’s a fair amount of people who make fun of the culture of poverty, in terms of how people get by. If people go to church. If people, you know, go to NASCAR. Or those sort of things. I think it does filter across through the media. And I think some of it also is, comes from a place of being frustrated already and then taking any perceived slights, you know, magnifying them. So, you know, we may not be as—they may be more overly sensitive than they should be, but that comes from a place of also being just frustrated, economically—feeling very much like they are left behind.”

There are not doubt many good people in the so-called "food movement" who care about the downtrodden and are motivated by the belief that the food system they envision will help poorer people.  But, I think this exchange also reveals that we need to also respect and look at things through the eyes of the people we're trying to help.  

Trade Matters

Trade has been taking it on the chin as of late.  Leading politicians are decrying trade partnerships like TPP and NAFTA.  In addition, the Environmental Working Group (EWG) released a report a few weeks ago challenging the argument that US agriculture needs to "feed the world".  While I happen to agree that "we need to feed the world" is not perhaps the best way to frame the future challenges, I'm not so sure about the arguments they make either.   Basically they argue something along the lines of the following: well, we don't really export that much anyway, and the people we export to are pretty rich, so we're not really feeding the world.  More on that in a minute, but first on the statistics.  

Trade is a big deal for U.S. agriculture.  The data from the USDA shows that we export about 20% of all the agricultural output (both in terms of volume and in terms of dollars).     

And, the share of agricultural output that is exported is much higher for particular commodities.  As the below graphs shows, for example, more than 80% of the U.S. cotton crop and over half the U.S. wheat crop was exported to other countries in 2013.  

While trade has no doubt has some deleterious effects on certain kinds of manufacturing jobs, these data make it quite clear that if you're a wheat or cotton farmer, trade is a very big deal.  Most of their customers reside outside the United States.  

Let's take a look at wheat since it is mainly used as human food.  Where does that wheat go?  Here's some USDA data.

Yes, some of these countries, like Japan, are relatively wealthy.  It shouldn't be surprising that relatively wealthy countries are relatively big importers of U.S. products: they have the money to buy things that poorer countries can't afford (this shows up particularly when one looks at meat exports because meat is a relatively expensive food).

Back to the Environmental Working Group's argument.  Many, if not most, of the countries in the above list have hunger and food insecurity rates far above that in the US Moreover, their per-capita GDP is far below that of the U.S.  What would be interesting to see, but I don't have the time to compile, is how these trade statistics look compared to domestic production in say, Japan, Mexico, Nigeria, etc.  That is, of all the food eaten in these countries, how much comes from the US?

A couple other points about trade are worth noting.  First, there are other large producers of wheat, corn, soybeans, etc.  And we all compete for international customers (and sometimes we trade with each other).  That is a very good thing because if we have a drought in the U.S. or in China, trade allows us to smooth out the impacts.  So, even if one looks just at a snapshot in time and says, "see trade isn't that big a deal", look again when we have a major crop failure in a particular part of the world.  Prices and food consumption in the U.S. would be more volatile if we didn't have world trade buffering the shocks.  

Second,  many developing countries have really restrictive trade policies and trade barriers.  Thus, in some cases we don't send food to hungry people in other countries because their governments don’t allow it (here's a great paper comparing agricultural policies across the world).  

Finally, I'm not sure whether and to what extent food donations and assistance to developing countries are counted in trade trade statistics.  To the extent they're not, people in the developing world are eating more U.S. food than the trade statistics would suggest.   

So, the next time the issue of trade comes up, don't forget about the diverse foods we enjoy at lower prices than we otherwise would because we buy from farmers in other countries, and don't forget the extra income that U.S. farmers enjoy from being able to sell to customers in other parts of the world.  

P.S.  After some Twitter feedback, I should clarify that not ALL farmers benefit from trade.  Here is data on U.S. food and agricultural imports (the biggest are seafood and fruit).  U.S. farmers who, for example, grow catfish are indeed in competition with foreign fishermen and fish farmers.  However, for most agricultural goods, the U.S. is a net exporter.  But, even if we weren't, it wouldn't mean trade is bad.  Even in this case, U.S. consumers would benefit by having access to less expensive food (and different types of food) from other parts of the world.  It isn't helpful to think of trade as a zero-sum game (or in the old mercantilist mindset), but rather trade expands the size of the pie making more food available for consumers everywhere (though of course there are some winners an losers along the way).  It isn't just the volume of trade that matters either.  For example, we export beef to Mexico and we import beef from Mexico.  How does this make sense?  Because it isn't the same type of beef: we're importing high value steaks and we're exporting different cuts that Mexicans prefer in their cuisine.      

Philosophical Soylent Haters

David Sax has a recent article in the New Yorker where he decries everything wrong with the new food, Soylent and other tech-derived foods.  He comes to his conclusions despite admitting he's never tried Soylent.  Rather, it seems he's philosophically opposed to the idea.  Sax writes:   

“The problem with all this food-2.0 stuff isn’t that it sometimes tastes horrible but that it misses the mark on how our eating is evolving. The tech world approaches food from the perspective of engineering: a defined problem to be solved, with the right equations, formulas, compounds, and brainpower. Soylent was developed by its creator, Rob Rhinehart, to compress all the nutrition the human body needs to live into one single, easily digestible formula, like the twenty-first-century version of manna. But that is fundamentally the opposite of the way we increasingly want to eat in America and in much of the developed world.”

But, what is it that people "really want" when they eat?  My research consistently shows it's, healthy, affordable, safe, tasty food; whether it is natural or "fair" or from a particular origin matters far less.  I believe Sax is also mistaking what people say they want which what they actually choose.  As I previously discussed via USDA statistics, the amount of farmland in organic, for example, represents a very small share of all agricultural acreage.  

I don't deny that there is increasing demand for organic, "clean", etc., but I think Sax is mistaking what people want for the method of how it's provided.  The theme of my book Unnaturally Delicious is that if we really want to tackle many of our most pressing problems in agriculture it will require exactly the sort of stuff (like math, science, engineering) that Sax says he wants to keep away from food.  

Sax concludes:

“Most humans are happy to eat real food, and crave it in its most natural form. A strawberry picked at the height of summer. Fish pulled from a river and grilled over wood coals. Sourdough bread made from a twenty-year-old starter, and kneaded by hand. Wine grown on knobby vines, and aged in a dark cellar. Why would you disrupt that?”

I can think of a lot of reasons why you'd want to "disrupt that."  Because, for examples, his vision is too expensive, unavailable but for the most wealthy, too time consuming, and would use too many of our natural resources if everyone ate this way.  No one I know is trying to keep these "natural" alternatives from consumers, and it is a testament to our vibrant food economy that the market provides these "natural" foods for consumers who are willing to pay for them.  But, that doesn't mean we can't have Solyent too.   

Let me state things differently.  Modern food and agricultural technologies are providing us more affordable food than at any time in our history, reducing hunger all over the world, while at the same time reducing the amount of land we need to bring into production.  We're adopting new technological approaches to keep food safe, quite literally saving lives, and using science to understand how to make a more nutritious, affordable food supply even for people in some of the most impoverished places on the planet.  Scientists are using math, chemistry, engineering and the like to reduce the number of animal we need to produce meat and milk, thereby reducing our carbon impacts. Why would you want to stop all of that?

What's going on in your brain?

Ever wonder why you choose one food over another?  Sure, you might have the reasons you tell yourself for why you picked, say, cage vs. cage free eggs. But, are these the real reasons?

I've been interested in these sorts of questions for a while, and along with several colleagues, have turned to a new tool - functional magnetic resonance imaging (fMRI) - to peak people inside people's brains as they're choosing between different foods.  You might be able to fool yourself (or survey administrators) about why you do something, but you're brain activity doesn't lie (at lest we don't think it does).  

In a new study that was just released by the Journal of Economic Behavior and Organization,  my co-authors and I sought to explore some issues related to food choice.  The main questions we wanted to know were: 1) does one of the core theories for how consumers choose between goods of different qualities (think cage vs cage free eggs) have any support in neural activity?, and 2) after only seeing how your brain responses to seeing images of eggs with different labels, can we actually predict which eggs you will ultimately choose in a subsequent choice task?   

Our study suggests the answers to these two questions are "maybe" and "yes".  

First, we asked people to just look at eggs with different labels while they were laying in the scanner.  The labels were either a high price, a low price, a "closed" production method (caged or confined), or an "open" production method (cage free or free range), as the below image suggests.  As participants were looking at different labels we observed whether blood flow increased or decreased to different parts of the brain when seeing, say, higher prices vs. lower prices.  

We focused on a specific areas of the brain, the ventromedial prefrontal cortex (vmPFC), which previous research had identified as a brain region associated with forming value.  

What did his stage of the research study find?  Not much.  There were no significant differences in brain activation in the vmPFC when looking at high vs. low prices or when looking at open vs. closed production methods.  However, there was a lot of variability across people.  And, we conjectured that this variability across people might predict which eggs people might choose in a subsequent task.  

So, in the second stage of the study, we gave people a non-hypothetical choice like the following, which pitted a more expensive carton of eggs produced in a cage free system against a lower priced carton of eggs from a cage system.  People answered 28 such questions where we varied the prices, the words (e.g., free range instead of cage free), and the order of the options.  One of the choices was randomly selected as binding and people had to buy the option they chose in the binding task.  

Our main question was this: can the brain activation we observed in the first step, where people were just looking at eggs with different labels predict which eggs they would choose in the second step?

The answer is "yes".  In particular, if we look at the difference in the brain activation in the vmPFC when looking at eggs with a "open" label vs. an "closed" label, this is significantly related to the propensity to choose the higher-priced open eggs over the lower-priced closed eggs (it should be noted that we did not any predictive power from the difference in vmPFC when looking at high vs. low priced egg labels).  

Based on a statistical model, we can even translate these differences in brain activation into willingness-to-pay (WTP) premiums:

Here's what we say in the text:

“Moving from the mean value of approximately zero for vmPFCmethodi to twice the standard deviation (0.2) in the sample while holding the price effect at its mean value (also approximately zero), increases the willingness-to-pay premium for cage-free eggs from $2.02 to $3.67. Likewise, moving two standard deviations in the other direction (-0.2) results in a discount of about 38 cents per carton. The variation in activations across our participants fluctuates more than 80 percent, a sizable effect that could be missed by simply looking at vmPFCmethod value alone and misinterpreting its zero mean as the lack of an effect. ”