Endangered fish vs. farms

The full story has been written up elsewhere, but there's a nice little piece in the LA Times today about a tiny, endangered fish that lives near Sacramento, California. To protect the two-inch long fish, 25 million people and 2 million acres of farmland have had their water supplies reduced. Fox News, as you can imagine, is apoplectic. And indeed, it seems like they might actually have reason to be. While species are important, aren't 25 million people and 2 million acres of farmland more important than a few dozen minnows?

Fish scientist Peter Moyle, expert on the delta smelt, looks at it differently. "If the delta smelt goes away, it's not going to solve the problem." Chinook salmon also need the delta, and protecting it for delta smelt also means protecting it for salmon as well. The bottom line is that the smelt have become the flashpoint for a larger issue: there are too many demands on California's water resources. We're going to have to deal with them sooner or later- why not address them before we lose the smelt? A lot of times tradeoffs are deeper and more complex, involving more issues than we initially suspect, particularly when it comes to ecosystems. Still, we need to try to figure out how to weigh the competing concerns- and that's why we need economists!

Food subsidies

Just finished writing about the energy subsidies when I found this article on food. An interesting counterpoint to the Tea Party: instead of fiscal austerity, this guy wants the government to provide free cooking classes to people. However, he too opposes subsidies (in this case, for food), saying they represent $3 billion down the tubes each year. Anti-subsidy sentiment has been around for years, but giving money to farmers has always been so politically convenient. Need cooperation on your legislation from the representative from Indiana? Increase the subsidies. Senator from Iowa in your way? Increase the subsidies.

Another interesting quote: "Food-related deaths are far more common than those resulting from terrorism, yet the F.D.A.’s budget is about one-fifteenth that of Homeland Security." He proposes disbanding the USDA and subsidizing "home cooking" and "healthful foods." (Could this be a contradiction?) He wants to ban concentrated animal feeding operations and encourage sustainable production of meat. That means more expensive meat- is he ok with that? Sort of, I guess, since he says he wants vegetables to be a larger part of our diet.

Overall he's got many proposals, and honestly I mostly agree with him, but the world is complicated. See if you can think of some of the unintended consequences of this guy's proposed policies and list them in the comments.

Dirty Drilling

The economic and environmental costs and benefits of natural gas have been widely debated though most contend that gas is less environmentally damaging than petroleum. Also, quite a large amount is available right here in the US. However, as with most extractive industries environmental damage results from access. Recently a Congressional investigation reported that part of the extraction process called "fracking" has entailed the injection of tens of millions of gallons of diesel fuel into the ground, a process that could be in violation of the Safe Drinking Water Act. The EPA is responding to the accusations with an investigation of its own.

If natural gas really is a step in the right direction, as it appears to be, then hopefully an appropriate set of regulations can be established to minimize its environmental impact. If we're going to use it because it's cleaner, let's be sure we keep it that way!

Energy subsidies

Solar and wind power are relatively new technologies, and the costs per kilowatt hour of power produced are still high. Since they are easier on the environment than fossil fuels like coal or oil, the government offers a variety of economic incentives to increase their use. While some groups wish the government would stop supporting them, it seems to me that there is at least a good case for this help.

However, it turns out that most types of energy actually get some kind of help from the government. Should government help the coal industry find ways to pipe its emissions underground? That way they shouldn't contribute to global warming; of course, then we end up making a "dirty" industry have an even stronger cost advantage than it already has. (It remains "dirty" in that it still produces CO2 and toxic ash, even if some of its outputs go underground.) Should we support nuclear power, since it too doesn't contribute to global warming, and since historical incidents prevent insurers from being willing to cover the development of nuclear facilities? How about corn-based ethanol? It's not economic, meaning the costs outweigh the benefits, and its impact on climate change is debatable, but it's not coal or oil.

So where should the government draw the line? Tough question, and a very real one for policymakers. These issues are taking shape as a battleground for the next budget: it'll be interesting to see which proposal wins out.

Class begins

If you're in Econ 376, articles posted earlier than this post aren't your responsibility- you won't be asked about them on the reading exams.

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....

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.