Monday, January 24, 2011

Is more information better?

Local food advocates aren't the only ones calling for more information about where their food comes from: with the many food recalls we've heard about over the past few years, the regulations calling for increased food traceability seem like a no-brainer. As a customer (and as a former Californian recently moved to the East Coast), I'm somewhat interested to know where my food comes from. Smart phone apps are increasingly able to tell me, and more information is a good thing, right?

Well, yes and no. As this article in today's Washington Post makes clear, more information should shine a light on all parts of the (often ignored) food distribution system. If that light helps clear up problems with food quality that sicken 48 million Americans per year, killing 3000 and costing $152 billion per year in damages (including almost $3 billion per year in Maryland alone!), that has to be a good thing.

Another potential benefit is avoiding lost income from recalls. The 2009 peanut recall adversely affected an industry worth over $1.2 billion per year. When that goes down, producers, harvesters, processors, distributors, and retailers all lose, costing jobs.

However, shining that light is expensive, and consumers will foot the bill. I worked with some agricultural economists at UC Davis who wrote a few papers arguing against labeling foods with origin information. This short paper argues that compliance will cost the industry over $1.3 billion / year. In addition, the food safety bill that finally passed Congress late last year had governmental costs pegged at about $300 million per year, according to detractors.

It's tough to pay for policies that don't have immediate, obvious beneficiaries, but I have to say that this seems like money well spent. In fact, some are calling for funding to be further expanded. If you have any other information, I'm interested to hear it....

Thursday, January 20, 2011

Food and Energy

Two big resource economics topics are in the NYT over the past few days. First, Michelle Obama has apparently talked Walmart into subsidizing the consumption of fruits and vegetables, getting them to lower prices in hopes of increasing consumption. They hope that decreased prices will increase the quantity consumed, which seems likely, and that increased quantities consumed will lead to increased health, which seems less likely. This study by Dong and Lin disseminated two years ago shows that vegetable consumption is quite inelastic, responding little to changes in price. (Likewise the consumption of snacks is relatively unresponsive to changes in price, as discussed here.) I like the First Lady's economic thinking, but I'm guessing she'll need to be a bit more creative if she wants to make much of a difference here. The more interesting story is that Walmart is to some extent acknowledging its role as an influence on public health rather than as just a money-making corporation.

The second topic that has come up a few times lately is solar power. Although our food consumption patterns won't change much in the short term due to prices, there is more hope for changing energy consumption patterns, particularly when a longer term horizon is being considered. That's why concerns about barriers to the adoption of solar power here and China's increasing competitive advantage in the field are of some concern. On the one hand, China's production of cheap solar panels benefits those who want to see solar power increasingly adopted, but on the other, decreasing access in the US may dry up this country's investment in the area. Inexpensive loans and guaranteed demand boost businesses operating in China and hurt US investors, as solar power industry stocks lost an average of 26% last year. Here's to hoping the industry thrives somewhere, and that the newly available production capacity in the US is put to good use and soon.