Thinking like an economist ... about grocery stores

In a recent blog post, my Friedman School colleague Will Masters considers the differences in the economic incentives that manufacturers, restaurants, and supermarkets face when it comes to selling healthier food:

Today’s New York Times has a terrific news story about this frontier of research by their reporter Michael Moss. Moss just released a lively new book about how food manufacturers raise the levels of salt, sugar, fat and other ingredients in processed foods far beyond what you’d add in your own kitchen, while research at Tufts and elsewhere has shown similar problems in restaurant food. In contrast, grocery stores sell a lot of fruits, vegetables and other relatively healthy stuff, generally around the perimeter of the store. So, in the choice between processed foods, restaurant foods, and plain old groceries, what determines how consumers’ spend their hard-earned money?

Part of the answer is advertising.  I imagine other key factors are consumer tastes, demand for convenience, prices, and overall health orientation. The comments to Will's post are interesting.

Will, incidentally, this year won the prestigious Bruce Gardner Memorial Prize for Applied Policy Analysis from the Agricultural and Applied Economics Association (AAEA).

Food Tank recommends books for fall 2013

Danielle Nierenberg and Anna Glasser at Food Tank this week listed Food Policy in the United States: An Introduction as a "must read" book for fall 2013.

Food Tank: The Food Think Tank was founded by Nierenberg (a graduate of the Friedman School at Tufts) and Ellen Gustafson. This video lays out the initiative's objectives.
 

Better wages for fast food restaurant workers

Let's honor the picket lines today. Fast food workers are striking for higher wages across the country. It will be a good thing all around if they succeed.

Inadequate private-sector wages at the low end of the wage distribution are a key source of our country's hard economic times and basic feeling of distress. As individual consumers, we cannot be proud to save a couple bucks ourselves by supporting companies who pay people so little. The coalition of groups that has organized today's walk-out has been circulating this video, mocking McDonald's own website that purports to educate its workers about how to survive on a low budget. A technical detail: the McDonald's website actually allowed for a miscellaneous category for some expenses, so some have quibbled with the video's list of all the basic needs that are excluded, but this is a very minor correction. I found the video completely persuasive on its main point: somebody in the McDonald's hierarchy was tasked with trying to demonstrate that the company's wages were adquate, and discovered exactly the opposite.



Restaurant industry defenders have claimed that higher wages would cost jobs, but I see things differently. First, labor economists are divided on this question. Some leading labor economists believe there would be no job loss and might even be employment gains (see, for example, Jeremy Stahl at Slate). Second, even if there were a small loss of employment in particular quick service restaurant outlets, here is how that loss would play out: a substantial percentage increase in wages would lead to a small percentage increase in actual restaurant product prices, which would then cause a small decrease in fast food consumption, which would finally lead to an even smaller decrease in employment. The fast food consumers who reduce their restaurant consumption will not go hungry; they will buy other things from other businesses instead, and those other businesses hire workers too. The upshot is economically healthy and nutritionally healthy all around.

Some people think of striking for higher wages as anti-market or anti-capitalist, but again I see things differently.  Our great market economy will only work if it provides prosperity that reaches even down to the lower end of the wage distribution.  It would be an unpatriotic and anti-market sentiment to say that the American economy is somehow incapable of this modest accomplishment.  I expect decent wages at the restaurants I patronize precisely because that's what makes this whole fine system work.  That's what makes a market system better than the alternatives.

See Time and AP for more news reports.  The AFL-CIO has links to labor movement sites.  In Boston, there is a rally on the Boston Common at 4 pm today.  I'll be there. 

What is your general view about the safety of genetically modified organisms (GMOs)?

The public debate over genetically modified organisms (GMOs) is shrill.

GMO opponents are very tough on occasional environmentalists who express a public view that GMOs might be safe or useful.  GMO supporters belittle the serious concerns that critics have about corporate control of the food supply and shortcomings in the U.S. approach to safety testing.

For rhetorical purposes, most writers on this topic spend all their ink criticizing the errors their opponents make, while carefully avoiding committing themselves to the sometimes untenable implications of their own side's position.

I think it would help if people paused the rock-throwing and reflected on what broad general statements they could support and defend under scrutiny.  I suspect that this reflection would make people more aware of the weaknesses on their own side and more willing to listen to multiple points of view on this divisive issue.

Create your free online surveys with SurveyMonkey , the world's leading questionnaire tool.

Rodney Leonard: "No food stamps, no farm program."

The Republican-led House of Representatives recently passed a Farm Bill with no food stamp provisions.  Fiscal conservatives in the House hope this will allow them to make deep cuts to the Supplemental Nutrition Assistance Program (SNAP) without jeopardizing their political support from farmers.

It is unlikely to work out that way.

In a note this week on the Institute for Agriculture and Trade Policy (IATP) site, Rodney Leonard, who had been a special assistant to Agriculture Secretary Orville Freeman in the early 1960s, described the early politics that led Congress to combine nutrition assistance and farm programs into a single Farm Bill.

The union began when Secretary of Agriculture Orville Freeman finally pushed the Democratic majority of House of Representatives to approve by a narrow 30-vote margin legislation to adopt the statute creating a permanent food stamp program originally proposed in 1961 by President John F. Kennedy. That program is a far cry from the program that today ensures the right of every American adult to choose to protect themselves and their children from hunger. Freeman was intent on linking the capacity to feed a growing nation to a policy insuring that every person, regardless of income, is entitled to share in an abundantly productive agriculture. Within two weeks of the passage of the food stamp legislation, Freeman was able to convince an urban dominated Congress to adopt a Farm Bill establishing supply management as the new post-war policy for American agriculture. Agriculture could maintain remunerative prices for farmers despite a structural tendency to overproduce year after year.

To some extent, this policy logic remains intact. Leonard argues that -- far from allowing farm programs to thrive without SNAP -- the divorce between the two parts of the Farm Bill will allow the nutrition assistance program to survive.  It is the farm programs that will lose support.

The effort of the House GOP to perform political surgery to remove food stamps can have only one predictably disastrous outcome:  Food stamps will survive. An urban nation will not compel millions of its residents to accept a life dominated by hunger. But, if divorced from food stamps, farm programs, whose benefits largely are delivered to the largest 200,000 farm operations, likely will perish in the ideological bonfire that is the GOP Farm Bill. The political conflagration will inevitably include rural America as well.

Simply put, no food stamps, no farm program.

I am not sure.  With separate bills, SNAP also faces political hazards.  We will see what happens next.

In addition to being a former special assistant at USDA, Rod Leonard is a past board member for IATP, and he is author of a history about Orville Freeman's time as governor.  Rod was the long-time executive director of the Community Nutrition Institute (where he hired me as an editor in 1990, my first-ever job in U.S. food policy).

30% price incentive has positive impact on fruit and vegetable intake for SNAP participants

USDA's Food and Nutrition Service today released the Interim Report from the Healthy Incentives Pilot (HIP), a major study of price incentives for fruit and vegetable intake for Supplemental Nutrition Assistance Program (SNAP) participants.

This study may help to inform the national discussion about the economic environment and its influence on food choices.  Agriculture Secretary Tom Vilsack today said, "The results of the Healthy Incentives Pilot demonstrate the clear impact that promoting nutritious food choices can have on improving the healthfulness of SNAP purchases."

Here is the punchline:

Our interim results indicate that HIP participants (adults aged 16 and older) consumed one-fifth of a cup-equivalent more fruits and vegetables per day than did non-participants (ES.1). This represents a difference of 25 percent in consumption over control group members. Approximately 60 percent of the observed difference was due to a difference in consumption of vegetables and 40 percent due to a difference in consumption of fruit.

These impact estimates are statistically significant, and they are big in percentage terms, but the baseline intake for the control group is quite low, so the impact seems fairly small in terms of cup-equivalents.  There is evidence that some retailers and participants in the pilot were still in the process of learning how the incentive worked.

The pilot was implemented in Hampden County, MA.  The study used a random assignment research design.  The Interim Report is based on a pre-implementation survey and an early post-implementation survey.  A Final Report in several months will use an additional later second post-implementation survey.

The authors of the Interim Report are Susan Bartlett, Jacob Klerman, Parke Wilde, Lauren Olsho, Michelle Blocklin, Christopher Logan, and Ayesha Enver.  As one of the co-authors, I worked on this study as part of a team led by Abt Associates, with funding from USDA's Food and Nutrition Service.  I will be presenting some results from this report on August 5 in Washington, DC, at the annual meeting of the Agricultural and Applied Economics Association (AAEA).  For me, personally, the project is the most terrifically ambitious research effort to which I have ever contributed.

This pilot initiative is related to other efforts to enhance incentives for purchasing fruits and vegetables, in farmers' markets and other outlets.  Some municipalities, including Boston, have Bounty Bucks programs, and Wholesome Wave has a series of related efforts.  One cool thing about the HIP study is that it worked through the SNAP participants' Electronic Benefit Transfer (EBT) card in all sorts of participating retailers.

With declines in Ogallala Aquifer, a reflection on the politics of agricultural environmentalism

Here is an excellent, sober, persuasive, and worrisome report at Science 360 about the accelerated decline of the Ogallala Aquifer from 2011 to 2013, because of drought on the Great Plains.

 

In the summer of 2010, I drove across the country visiting farms, markets, agricultural research stations, and other food policy sites.  One of the most interesting stops was a visit with a large-scale corn farmer in southern Nebraska, who showed me the modern irrigation equipment and careful monitoring system he used in an effort to waste as little water as possible from the Ogallala Aquifer.  He argued that aquifer declines were really only a problem further south, in Kansas and Oklahoma, not in his part of Nebraska.  He said farmers have a strong economic incentive to conserve water, because of the electricity costs and other variable costs from pumping water.  I think many farmers in his situation don't want government regulation or too much attention from worried environmentalists.

At the time, I wondered if these internalized costs really provided a strong enough incentive.  The big cost of irrigation is the value of the aquifer water itself.  Without coordination among farmers, each farmer has an incentive to use too much water.  I thought at the time that environmentally aware corn farmers in Kansas and Nebraska should go a little softer in their ferocious criticism of government environmental regulations, because without these regulations their own livelihoods are in jeopardy.

Climate science includes big uncertainties, but it seems likely that global climate change is causing more frequent droughts in the Great Plains.  I hope scientifically savvy and pragmatic corn farmers who rely on the Ogallala Aquifer have the political courage to resist the temptation to ally with anti-government conservatives who flirt with climate denialism.  Even though it takes some work and some compromise, and even some tolerance for cultural differences between heartland folks and city dwellers, I think farmers have a more promising long-term future allied with the pragmatic wing of the environmental movement.