is healthy food really more expensive? (wonkish)

Posted on May 16, 2012 by admin

Whew. Another semester is just about over (only 20 more papers to read!). But I am back!

The Economic Research Service plans to release a report (later today, I think) on how to measure prices of healthy food, and I will have more on that in the coming days. But coincidentally, the April issue of Agricultural and Resource Economics Review arrived in my mailbox yesterday, containing a paper on a related topic:  “Does Healthy Food Cost More in Poor Neighborhoods?  The authors (Hatzenbuehler, Gillespie, and O’Neil) analyze the cost of two baskets of food: one based on the Dietary Guidelines and the other on USDA’s Thrifty Food Plan, which forms the basis of the food stamp program. The study area is Baton Rouge, LA.

This work contains several novel elements. One, the market basket based on the dietary guidelines incorporates foods that are culturally appropriate for the region. Two, spatial competition among food stores is explicitly considered. Lastly, different store formats are included in the study (chain supermarket, supercenter, and independent supermarket).

The authors pose two related research questions: (1) do low income households face high prices because low-cost food stores do not invest in their neighborhoods and (2) is there less retail competition in low income neighborhoods. Food cost and store location data were collected from 60 stores over three weeks, in January 2009.

The average market price for the thrifty food plan basket was $259.61 (standard deviation was not reported), while the average price for the dietary guideline basket was $270.11.

A two stage econometric model was estimated, where in the first stage, spatial competition is considered to be function of demand factors ( population density, income, household size, race). Spatial competition is approximated by a gravity index that measures how many competitors each store faces, and the proximity of the competition; thus, a higher competition index results when stores are close, and when there are more competitors.  In the second stage, the prices consumers face depend on results from the first stage re: competition, the store type (chain, independent, supercenter), store size and the services each store offers.

The model, as estimated, suggests that supermarkets located in low income areas do not charge more for food. However, the main factor determining food costs was whether the store was a supercenter or a chain (others have found this result as well; see Leibtag, 2005).

Perhaps the most interesting finding is that competition among food stores is related to neighborhood income: the higher the income in a census tract, the more competition a store faces (consequently the lower the price to consumers).  This finding brings us full circle to the food desert literature, which finds that low income households (when compared to higher income consumers) tend to have low access to supermarkets.

The research is another piece of evidence that supports policies that increase the likelihood of a store locating in a low-income neighborhood. Of course, store location is based on a profit maximization decision, so the policy needs to tip the scale of profits in favor of the low-income neighborhood (topic for another day!) Policymakers are thinking about this, and the Healthy Food Financing Initiative is a policy that is designed to encourage stores to locate in underserved communities.

Posted in food availability, food choices, food deserts | Leave a comment

keeping local dollars in communities – does it matter?

Posted on May 1, 2012 by admin

“Buy local” is the mantra of many, who state that spending money locally provides significant economic benefits. I’ve been thinking about this concept for some time now. To be honest, I struggle with the notion, because I think in terms of tradeoffs. It is true that money spent in on local products made in my community is received by local entrepreneurs. But that also means the money is not going towards something created by someone else.

At first blush, buying local seems to benefit communities more than buying international does. But to really try to understand the value of buying local vs international, the full effect of spending needs to be factored into the discussion. The concept of the “multiplier”  – a core piece of macroeconomics -  helps guide our thinking. The multiplier effect is dependent on the assumption that consumers, when receiving money, will spend a portion and save the remainder; the amount spent depends on the consumer’s marginal propensity to consume, which is the share of the additional funds he/she uses for consumption (less than 1).  For example, if a person receives $100, and her marginal propensity to consume is 0.7, then she will spend $70 and save $30. The next person will receive the $70, and of this amount, $49 is spent and $21 is saved.  Of the $49 spent, the next consumer will spend $34 and save $15. The money will flow through the economy in this way, and the cumulative effect on the economy will be $330, which is significantly larger than the original  $100.

So back to the decision to buy local: To be extreme, suppose I am facing a choice to buy a basket made by a local artist, sold in my local farmers market, or one made in China, sold in a big box store. The basket made by the artist is probably more expensive, but also of higher quality.  If I choose to buy the artist’s basket, the artist receives money, which he or she will choose to spend/save. If the artist and everyone buys a locally made product, local economic activity increases. In other words, the full economic impact is a multiple of the original amount spent on the basket.

Now suppose I decide, instead, to buy the made in China basket at the big box store, located in my community. Workers in the store (maybe they live in my community, but maybe not) will receive a salary, which they in turn spend on goods and services. Taxes are paid to the local jurisdiction. The suppliers are paid for the basket (and other goods).  Some of these funds will stay in community, while some of the funds will leak out of my “local stream” but will benefit other communities. In addition, I have surplus cash (the difference in price between the two baskets), which I can use to buy something else.

Thus – the money I spend benefits someone, somewhere.  Then the question boils down to how to quantify the benefits, so that we can compare and assess: does the higher quality basket provide the same amount of benefits as the less expensive basket plus the other products I can buy? And how do the benefits compare when I think of financially supporting a local artisan vs a low income worker in China? Note that the benefits do not have to be in terms of money, but it is easier to compare benefits if we measure them in terms of money.

My main point is that the issue is more complex than the mantra “buy local” suggests. There are winners and losers in both cases.

 

Posted in buy local, multiplier | Leave a comment

jobs, jobs, jobs

Posted on April 27, 2012 by admin

Does anything surpass “jobs” in terms of importance in the current environment?  For those following economic policy, there is an odd sense of irony about the current attention. After all, the debate about how much money to inject into the economy post-financial meltdown (see discussions about the American Recovery and Reinvestment Act of 2009) was really about how many jobs to create, short term and long term.  At the time, most economists (at least saltwater economists) argued that the increase in government spending was insufficient to sustain higher levels of employment.

Along the same lines, the recent press release of the Organic Trade Association states that a research firm calculated that over 500,000 jobs were “created” by the organic industry, and this number of jobs exceeds the amount that would be created by the same level of sales of conventional food. The larger number of positions is related to several factors: (1) organic farms hire more labor to work on the farm, (2) the certification system creates positions, (3) the smaller firm sizes makes it harder to capture economies of scale, thus more labor is used, and (4) the need to keep food separated along the supply chain creates additional jobs.

Yesterday, I spoke with a consultant who was trying to estimate how many positions would be created by a new aquaponic farm to be opened in Maryland.

And yesterday, the Senate Committee on Agriculture passed the Farm Bill: Agriculture Reform, Food and Jobs Act of 2012.  Note the word “jobs” in the title.

What mechanism links jobs with agriculture, or any other economic activity? While this is a basic question addressed in introductory macroeconomics, I have learned from my students that not everyone has taken that course (gasp!). So here are the basic mechanics:

  1. Economic activity, typically measured as gross domestic product (GDP), consists of the sum of government spending, consumer spending, investment spending, and net exports (exports – imports).
  2. Note that GDP is related to employment – generally speaking, when unemployment is high, employment is low. People work, create products and services, and are paid for doing so. The same people use their income earned from working (abstracting from wealth effects) to consume products and services. When people are not buying, there is  need for fewer numbers of workers. And when fewer people work, there is less money for buying goods and services.
  3. When a consumer receives new money, she will spend a portion and save a portion. This concept – marginal propensity to consume – forms the crux of the link between spending/economic activity and jobs. This consumer spending ends up in the pocket of another person, who saves some and spends some.
  4. A multiplier effect is created, as money moves through the economy, some being spent and some being saved. Thus the cumulative effect on the economy is the sum of each person’s consumption, and is greater than the original amount of money spent.
  5. As as result of the spending, new jobs are created (or not lost), and the employment will spill into other sectors. After all, I am paid by an educational institution, but I buy food, clothes, travel, and so on, and I do this not only in NYC, but in Washington (where I summer) and in the other places I travel.
  6. This crudely described process shows how $31 billion of organic food sales can create 500,000 jobs, or how agriculture in the US can support 16 million jobs (Stabenow).

 

 

Posted in farm bill, food policy, food system, organic food | Leave a comment

sustainable seafood??

Posted on April 24, 2012 by admin

One of the hottest topics in the food world right now is the implementation of Whole Foods Market’s recent decision, nicely timed with Earth Day, to sell only sustainably harvested seafood. Numerous news sources have covered the story: see, for example, the Huffington Post,  The New York Times, USA Today. Not surprisingly, some groups support Whole Foods Market’s decision while others are opposed.

The economics behind fishing can be summarized in the following way:

  • Resource economists have examined the optimal fish harvest, which is based on the natural growth of fish. A pond or lake starts with an initial stock of fish, which grows until the population reaches the maximum level the water body can support.  This is the biological “S” curve, and the shape is determined by the amount of food relative to the number of fish. When fish population is small, food is abundant, so fish can eat, grow, and reproduce; as the population increases, and food becomes relatively scarce, competition for food eventually slows fish population growth.
  • There is a point on the S curve that is called the “maximum sustainable yield.” At this point, the stock of fish is constant over time. In other words, the annual catch is at the highest possible level, and the stock replenishes itself so that the population remains constant over time.
  • When deciding how much fish to harvest, the fishery considers (1) the biological growth rate, (2) the costs of harvest, typically modeled as effort in harvesting, and (3) the market price of the fish. Profit maximization implies that the optimal level of harvest will be less than the maximum sustainable yield (this follows because fishing is a costly activity). This result follows when a fishery is controlled and limits can be placed on who fishes, and how many fish are caught.
  • Once fishing becomes “open access”, the optimal choice changes.  A similar concept to the “tragedy of the commons,”  open access means that anyone can fish. Another way of viewing this is that the stream of future profits that result from the stock of fish do not accrue to a single person or firm. Thus, open access results in “over fishing,” meaning that the equilibrium level of fish harvested is so high that the stock of fish declines over time.  This means that the fish population decreases over time. Sound familiar?

Other important factors to think about include:

  • Animal welfare issues, in that the harvesting technology used frequently has unintended consequences. These include capture of other species (think of dolphins and tuna, although this is not the only case);
  • Fishing and fishing vehicles cause damage to reefs and other forms of aquatic ecosystems;
  • People who earn their livelihoods from fishing are struggling, particularly those in New England.  Additional restrictions on fish sales, particularly from a large buyer, will make this group worse off. It appears the group of fisherpeople from New England are going to suffer from WFM decision, as Atlantic Cod was just added to the “no sell” list.

The salient aspects of the fishing industry mentioned above do not include the human health effects of eating fish with heavy metals or other toxins.

The evidence points to continued troubles in the fishing sector (which has been experiencing difficulties for a long time). The long term prospects are bleak, given the problems of overfishing, open access, and animal welfare, and all reinforce the movement towards low stocks of fish in the future. The current path seems to lead to high prices and a very small supply of fish.

Thus, if we want to continue eating fish, what are the options? One is fish farming, but I am not a supporter of factory farmed fish (topic for another day!). Thus, a reasonable scenario is placing controls on what is caught (and sold commercially) and how it is caught. One obvious problem is how to define “sustainably caught” in a way that does not grant one party (or firm, or food chain) the ability to extract additional rents from the supply chain.

I would argue that policy would have been a better solution to the problem of defining  sustainability in terms of fishing standards.  However, I suspect that policy would have made “farmed fish” equivalent to “wild caught fish,” despite the science indicating that wild caught fish has greater health benefits.  And from a quick glance at the WFM website, it seems the company has created its own definition of sustainably farmed seafood, so perhaps fish farming is here to stay.

But given the lack of policy addressing fish sustainability, I support WFM’s decision. I am not saying that their standards are socially optimal, or that they represent what I would like to see, but they represent a big step forward.

 

 

Posted in animal welfare, sustainable agriculture, sustainable fishing, whole foods market | 1 Comment

the plants at Snug Harbor are growing!

Posted on April 22, 2012 by admin

Saturday was our last hands-on class at Snug Harbor.  Gus’s demeanor was bordering on frantic, as he was trying to get many small plants and seeds into the ground before the rain fell (which was expected to start during the day on Sunday).  We were racing the clock for another reason – 2 weddings were on the books for yesterday afternoon at Snug Harbor, and we needed to have our farm dirt well hidden before the weddings began. We are eager workers, but are a little slower than more experienced farmhands, which might have contributed to Gus’s stress. In the end, we managed to meet all of the deadlines.

During each farm visit over the course of the semester, we observed signs of growth and change. This is Gus’s first season farming at Snug Harbor, and he has been breaking fresh ground, turning dormant land into productive farmland. He is grappling with an ecosystem that is new to farming, and has to work with the soil, landscape, compost, and the weather, in order to get his crops in the field. And this work is taking place in an environment that is new to him, as well, since he recently moved to NYC from the Midwest. We watched land that was covercropped, but surrounded by rubble, be transformed into true farmland, planted with orderly rows of food (he has about 50 percent of the land currently planted). We saw the emergence of thousands of small plants – once seeds in packets – which are now seedlings or plants in the ground. And I even saw the boulder from last month – partially unearthed by me and Mark – completely free from all soil, standing above ground (Gus removed it from the ground with chains and a tractor).

Yesterday, we planted flowers near the house (new sources of biodiversity – cosmos, zinnias, marigolds); raked rows; direct seeded; and transplanted hot peppers into the ground.

I am not sure if we were actually helpful to Gus, but as a class, we appreciated the opportunity to gain some hands on experience. Thank you, Gus! As for our future as farmers, two students from the class are headed to intensive eco-farming programs (Laurel to UC Santa Cruz and Raina to U of Vermont). And I have committed to a Thursday morning internship at the farm throughout the summer (if Gus doesn’t fire me :) ).

PS sorry for the two photos that are duplicated – my low level tech skills are standing in the way of removing them.

Posted in Snug Harbor Farm, Uncategorized | Leave a comment

teaching children to eat

Posted on April 16, 2012 by admin

The NY Times Motherlode blog has a fascinating posting about French parents and childhood obesity (or more aptly speaking, lack of obesity). The author (a professor at UBC) spends time with her family in both Vancouver and France, and thus has an unusual perspective on the cultural differences regarding food and children in Canada and France.

France – a country known for love of food and wine – has a remarkably low childhood obesity rate, in comparison to the rest of the world. According to the OECD, less than 10 percent of French children are obese (2005). About 20 percent of French children are overweight.  As a point of comparison, in the US, about 40 percent of children are obese (did you know that the US is the fattest country??)

The NY Times blog author (Karen Le Billion) suggests that several factors contribute to the healthy body weight of French children.  First, parents teach children to love food – doing so is part of their culture, and so children eat foods of different textures and flavors, right from the start.  Forget Gerber’s rice cereal – a French baby’s first food is likely to be leek soup, beets or spinach. School lunches are cooked from scratch every day – and are not funded by the national government, but by local municipalities. So, for about the same cost as a National School lunch meal in the US ($3), French children receive a 3 or 4 course hot lunch, with no food repeated appearing on the menu more often than monthly.

Perhaps the most important factor contributing to healthy eating habits is that food is an integral part of the fabric of French society. Eating is a social activity, where good food and good conversation go hand in hand. The experience of a French meal is memorable: in fact, one of the most lively, engaging meals I have experienced was at the Industrial Organization of Food Processing conference in Toulouse, where we shared wonderful food, wine, and talked for hours (and not just about economics).

Posted in food choices, food culture, Food studies | Leave a comment

antibiotics in livestock

Posted on April 12, 2012 by admin

The use of antibiotics in raising livestock has a long history (for a partial description, see ps.fass.org/content/84/4/634.full.pdf).  Antibiotics have multiple uses – treating illness, preventing diseases in crowded animal operations, or as growth promoters. The use of antibiotics in feed does accelerate animal growth, by making feed “more efficient” (in other words, animals can convert food into body mass more efficiently). Since about 1950, when Jukes and Stokstad’s discovery was commercialized, many animals in the United States have received antibiotics in their food.

However, there are significant public health consequences of using antibiotics on such a large scale. Since 1955 (yes, 1955) scientists have been studying the risks of this type of widespread use of antibiotics. The recent NPR segment discusses how the addition of antibiotics to animal feed contributes to the creation of “superbugs,” which are antibiotic resistant bacteria.   The EU  banned the use of antibiotics as growth promoters in 2006, and there is some evidence that China is in the process of doing so as well.

Interestingly, unlike antibiotics for human use, those intended for animal use can be purchased over the counter.

Yesterday, the FDA took a step forward by requiring a prescription from a veterinarian before antibiotics can be administered.  The press release, written in government speak, reveals that use of antibiotics as a growth promoter is not being banned. Instead, the drug companies are encouraged to remove “..production uses of antibiotics from their FDA-approved product labels.”  A draft document “…that outlines ways that veterinarians can authorize the use of certain animal drugs in feed” is currently open for public comment.  It seems to me that the FDA is shifting the burden of establishing/enforcing appropriate practices regarding antibiotic use to veterinarians.

I am not opposed to the use of antibiotics when medically  necessary, but like many of you, I don’t see the need to rush the production process by enhancing animal growth through feed additives (not that I eat meat).

One interesting aspect of the draft proposed rule is the FDA’s interest in the impact of the rule on small scale livestock producers. I don’t possess deep knowledge of meat production, but I wonder whether this is a legitimate concern or whether this is political posturing.

The proposed rule (Veterinary Feed Directive) will be published in the Federal Register tomorrow (April 13). I suggest you add your public comment, urging the FDA to take a stronger position.

Posted in animal welfare | Leave a comment

do food miles matter?

Posted on April 11, 2012 by admin

Today’s topic is a response to a comment by Aron, a reader who asked me to explain why I remarked that lower food miles do not necessarily imply that local food has a small environmental impact.

One of the standard arguments for consuming local foods is that, by reducing food miles, we are lowering the carbon footprint of our food consumption. In other words, local food has a smaller impact on climate change.

There is a body of literature that examines the relationship between food production (including local food) and emission of greenhouse gases (GHG). A list of a few articles on the topic is articles is below; note this is not a comprehensive list. The basic premise of most of the research is that most GHG emissions occur when food is being produced. In fact, Weber and Mathews (2008) estimate that 83% of a US household’s annual GHG emissions (related to food consumption) are due to production, and 11% due to transportation of food.  Across all types of food, livestock production emits the most GHG  (specifically methane and nitrous oxide). They suggest a more effective way to reduce your carbon footprint: eat less red meat.

The literature on organic food and climate change finds that organic livestock production is less degrading to climate change, because it is pasture based (captures carbon) and has small herds. The closed loop system means that the pasture is fertilized by the manure excreted by the grazing animals: the manure is recycled, plants grow, and the animals feed on the plants.  And then the loop continues, as the animals excrete manure, and so on. In contrast, the waste excreted by animals in the non-pasture systems must be discarded.

I do wonder, though, if you are a vegetarian, does the balance re: food miles change?

References:

  1. “Food-Miles and the Relative Climate Impacts of Food Choices in the United States” Christopher L. Weber and H. Scott Matthews, Environmental Science & Technology 2008 42 (10), 3508-3513
  2. “Food, livestock production, energy, climate change, and health.” AJ McMichael, JW Powles, CD Butler… – The Lancet, 2007 – Elsevier
  3.  ”Agricultural sustainability and farm production practices.” David Tilman, Kenneth G. Cassman, Pamela A. Matson, Rosamond Naylor & Stephen Polasky. Nature. Aug. 2002. Vol. 418.
Posted in ecosystems, food miles, organic food, regional food systems, sustainable agriculture | 1 Comment

gardens, greenspace, and rooftop ventures in NYC

Posted on April 8, 2012 by admin

The lack of fresh food in low income neighborhoods, especially in NYC, is well known. Also lacking is green open space, and places to garden (for residents of all income levels). This week’s NY Times mentions community garden endeavors that seek to fill this need. Several apartment buildings in NYC are discussed, all of which include garden space for the tenants. The gardens are on rooftops, or in planters on the ground.

Also discussed in the Times is a new rooftop hydroponic farm in development by Bright Farms, which should be operational spring 2013. This farm will be located in Brooklyn, and is going to be large (100,000 square feet.)  The farm will be large enough (meaning that it will have a sufficient amount of output) to sell to large supermarkets in the area.  The article mentions that the chief executive is hoping to have a long term contract with one buyer who sells to local supermarkets. I am not wild about hydroponic farming in general. That aside, it will be interesting to see whether a long term contract materializes, which food stores will sell the production of the farm, and how the business fares over the long run.

There is a lot of activity in the agricultural sector of NYC at the moment.

 

Posted in NYC, urban agriculture | Leave a comment

new report from Commission on Sustainable Agriculture and Climate Change

Posted on April 7, 2012 by admin

For years, the debate about organic vs conventional agriculture has centered on the “feed the world” debate. The typical argument is that organic farming systems are impractical because there are too many people to feed, and population growth is expected to continue. Obviously, proponents of organic farming systems are not aligned with this argument, since organic farming supports intertemporal sustainability of farm land (ie, we want to be able to feed people in the future.)

A new report (sponsored by CGIAR) stresses the importance of food security and sustainable agriculture, in the context of how climate change is expected to alter patterns of food production. In other words, this report states that policies addressing both food security and environmental protection are essential, especially given the fact that climate change will add stresses to the international food system.

Some facts included are:

  • Of the 7 billion people in the world, 0.9 billion are undernourished, and 1.5 billion (over 20 years old) are overweight
  • 1.5 billion people are currently dependent on degrading land
  • 1.3 billion tons of food produced for human consumption are wasted in a year
  • The spike in food prices in 2007/2008 increased the number of hungry people (worldwide) from 800 million to 1 billion

The authors of the report directly address the food gaps (ie differences between supply and demand). They state that, in order to eliminate the gap, three approaches to are essential. In fact, adopting just one will not help reduce food insecurity. (1) Reduce food demand by encouraging consumers to make healthier and more sustainable food choices; eliminate the food waste along the supply chain. (2) Avoid loss of current productive capacity by reducing land and water degradation and by taking action to mitigate the impact of climate change on agriculture. (3) Increase productivity of land through adoption of better farming practices and technology, and expand agricultural production onto lands where environmental degradation is minimized.

One key recommendation is for increased global investment in sustainable agriculture and food systems. The investments need to take place locally, nationally, regionally and internationally. This leaves room for both grassroots action and policy at the different levels.

Of course, much of the success of the recommendations the Commission puts forth depends on the ability of countries to agree upon the best strategy to adopt (globally), commit to the strategies, and to not engage in domestic policies that undermine the overall welfare of society (internationally). Let’s hope everyone is on board.

Posted in food policy, organic food, sustainable agriculture | Leave a comment