An agricultural economist weighs in on power (with Jayson Lusk)
I have some strong views on different topics. But even in those cases, I try to ask myself, what evidence would cause me to change my mind? If I can't answer that, then I am essentially an ideologue.
Welcome to Feed, food systems podcast presented by table, I’m Matthew Kessler
And I’m Samara Brock, and today we speak to Jayson Lusk.
I'm a distinguished professor and head of the Agricultural Economics Department at Purdue University, which is in West Lafayette, Indiana.
In this episode, Agricultural economist Jayson Lusk puts forward a vision of how science, technology and innovation are what we need for a sustainable food future, and what aspects of power he feels are getting in the way of this future.
We talk about his research that investigates whether having more information actually changes people’s food choices, how important is the role of consumers in shaping the future of food, and why Jayson is excited about venture capital flowing into the food system.
He also pushes back on some of the narratives and policy proposals of the “food movement.”
In our wide ranging chat, we also touch on some hotly debated topics like agricultural subsidies, GMOs, and true cost accounting. As always, let us know what you think of this episode by sending us an email to firstname.lastname@example.org or leaving a comment on our website.
We wanted to start just getting a little bit of your background, how did you go from studying food technology to agricultural economics?
That's a long meandering story. I grew up in a very rural area of West Texas, very small high school, I had 15 People in my graduating class. So everybody that I grew up around, either their parents worked for the school that was my parents, or we worked for farms, that was basically the two occupations. So I always worked on farms, neighboring farms, mainly cotton and cattle in that part of the country. We raised animals for youth livestock show organizations, four H and FFA. So I always enjoyed agriculture wanted to be a part of it. I had some teachers who push me towards food science, I enjoyed that degree. But the couple of summers I spent working internship were enjoyable, I learned a lot. But I also thought I don't want to be wearing a hairnet when I'm 45. And I really thought I enjoyed working with people more so than the chemistry and the microbiology. And I also just enjoyed the business side of things. How do you make money in food and ag? How do you create new products that people want. And so I had an opportunity come up, started applying to, to graduate schools actually had a great advice for one of my advisors, I said, I'm going to go get an MBA and he said, “Don't do that you can, you can get paid to go to grad school if you do a research based degree.” And so I started looking at Ag Econ programs, and I was fortunate to get some good offers and went to K State to get a PhD in agricultural economics. That combination of fit, the technical knowledge and background in food science coupled with economics, I think, for me has been a great mix of skill sets to bring to a lot of the food questions. That being said, please don’t ask me any questions about microbiology or chemistry because that was a long time ago and I don’t remember much of it.
There are lots of different definitions of economics out there - some focus on supply and demand, others see it as a study of scarcity, others see is at as the field of study to explain human decision making. We asked Jayson where, if at all, power enters the field of economics?
Power is not a word that is not a framing that often comes up in economics, and in often a lot of economics is one way I define economics is how do you get what you want when your wallet is only so big, so when you can't have all the things you want. And so we tend to focus often on mutually beneficial exchanges. So I have a product I've produced for a cost, somebody wants that product. And if we can get together, and if the seller can sell it for more than it costs them produce, to produce it for me as a buyer, if I can get it for less than my maximum willingness to pay, that's a mutually beneficial exchange. And so both parties are better off engaging in that activity than they would be otherwise. We're discussions of power do come in are often in conversations around concentration, and what we call industrial organization. So does somebody have the ability to influence the market price of a good if somebody has the ability to influence price, those are when words like Monopoly come into play, in essentially, the extent to which you can influence price is a signal of your market power. That's the traditional way we've thought about it. There are, of course, other forms of quote unquote “power” that we might study that relate to information and who has it, and who can use it, you know, we tend to think about, it's the big bad firms that have all the information. That's often not true. Often one of the big problems, say, in some parts of agriculture is like insurance, like it's the individual farmer or consumer producer that has the information that they might use to their advantage and might create what we call market failures. So that those are probably the typical ways economists think about power issues.
We've been talking about the field of economics, what separates agricultural economics from that field?
The most obvious answer is the focus of our application. A focus on the issues around food production and consumption. And then all the ancillary parts of that climate, environment, development have historically been a part of Ag Economics.
And you study what we eat and why we eat it. What is it that shapes consumer behavior around food?
It’s everything, I suppose. I think the three pillars of the economic way of thinking about consumer food choice is there are preferences, what you want, there's your income, which constrains what's available to you. So I may want to drive a Porsche or eat organic food, but my income may not allow that. So that income constrains choices, and then prices. So those prices coupled with income, and preferences are really what - that's the trifecta that defines consumer choices. As a one weakness in a lot of economic approaches, we take preferences as given that you're born with them, or they come from you on high, we, we traditionally haven't had a lot to say about where they come from. And that's where I think in more recent years, issues related to psychology, or other things that come in, that help us a little understand a little bit more about how people form their preferences, and how they can change over time and their response to either information or culture, or areas that are emerging, I would say in the area of economics.
And are there groups that have more power to change consumer behavior?
Sure, I think a common argument when people aren't eating the way people like is we just need to educate and inform consumers. So on the one hand, you might think whoever has the money and the ability to create good marketing and information has the ability to influence choice. And I think that's true to some extent. But I've done lots of studies and experiments over time, exposing people to information. And information can matter, of course, but often has fairly small-ish influences relative to, you know, things like income or prices, in my experience. But we certainly point to examples where aggressive lobbying by one group did influence people to say vote in one way on an issue versus another. So that's one way.
Advertising, of course, is a big and controversial issue and food. Some people think we should ban advertising for, quote, unquote “unhealthy” ingredients. Again, it's an area where there's a lot of debate, does advertising cause you to buy more of a product or just a switch from one brand to another? So just to give it a concrete example, does advertising make you buy more sugary sodas or is it just cause you to switch from Pepsi to Coca Cola? And I think there's arguments and data that suggests that both of those factors are at play. But one prima facia sort of line of reasoning is companies wouldn't be advertising if they weren't influencing people's choices, at least on some margin.
TABLE recently hosted a discussion on the role that advertising plays in increasing consumption. We’ll put that link in the show notes if you’d like to take a deeper dive.
Can you share an example of a study that you possibly conducted where sharing more information has had a limited effect on changing consumer behavior?
Genetically modified organisms, GMOs in the foods that supply chain has been something that's been heavily studied. Just to give you one example there we many years ago gave consumers just statements from leading scientific authorities, such as the National Academies of Science or American Medical Association about their statements about the safety of GMOs. Essentially, their statements say that foods produced to GMOs that have been approved are no more risky than foods that are bred through using other traditional crop breeding methods. And when we follow that up with questions about perceptions about the safety of GMOs, willingness to eat and consume GMOs, you actually get some set of people that respond opposite of the way that information suggests. So they think after reading that statement, they say, “actually, I now think the food is riskier than I said it was initially.” So there's a little bit of a backlash effect. And then there are some people that do say, “Okay, I see that that statement, now I move in the direction of the information is safer.” But one of the biggest determinants of how people respond to information is what their prior belief was. So were they already predisposed to thinking GMOs are safe, then that information cause you to think they're even safer? If you're predisposed to that, like GMOs, you easily dismissed that information. And so that's an example of one of the studies that I conducted with a former student, Brandon Mcfadden, as published in the journal food policy. So again, just simply providing scientific information often doesn't do a lot. You interpret it through the lens of your prior beliefs and prior commitments.
That's, that's interesting. As we reflect on - sorry, my dog, she was so quiet before. That's interesting as we reflect on the work that we're doing at the table, which is bringing people who have these preconceptions, or these very strongly informed beliefs into the same conversation, if there is the ability to change with a greater understanding of another side.
Yeah, I think that's important. And I think even for me, I have some strong views on different topics. But even in those cases, I try to ask myself, what evidence would cause me to change my mind? If I can't answer that, then I am essentially an ideologue. I think I always have to keep in mind that I should be open minded enough to consider alternative lines of evidence and ask myself what it would take to actually change my mind.
I really like that. I feel like we should have a poster of this in our virtual office.
Let me admit that it's an ideal, you know.
So we’re going to move on to, Who do you see as the gatekeepers or the more powerful actors that shape narratives and discussions around food systems?
There are many, and I think they come from a lot of different angles. I would think historically, the production ag industries and the commodity organizations that have farms support, and sometimes farm dollars are there, at least in the US are checkoff programs. So essentially, farmers pay a tax to an organization to support whether it's beef, pork, chicken, cotton, wheat. All those organizations exist, and farmers support those mainly to promote consumption of those products. And partly because of that, but for other mechanisms to some farm organizations often are pretty effective in lobbying for policies that, since the really the Great Depression era, there's been pretty, at least in the US pretty heavy support intervention of the federal government in agricultural markets. And part of that is because of the concept of concentrated benefits and diffuse costs. So there's a small number of producers who see those benefits, they have an incentive to lobby hard for them and the cost to the consumer, or to each one of us individually, is pretty small and spread out. So it does provide an environment in which farm lobbying can be effective. So I think those farm lobby organizations or ones that I think people often think about, and they do, they are real, they certainly have an influence. I engage with them a lot. I've done, in terms of full disclosure, I have consulted for some of those groups that that I've just mentioned, their power over time has waned as other groups have come to the forefront.
So who does Jayson see as the new groups influencing how food debates are framed?
So environmental groups have become effective at lobbying for against certain say, pesticides, or water quality or air quality or now climate issues. There are consumer advocacy organizations that focus on consumer cost and affordability. So there are many more seats at the food policy and foreign policy table than there used to be. And while I think there is power there, it's hard for any one group to really get all they want. One story about US farm policy that I think is still relevant is if you look at the signature piece of legislation in the United States, it’s the Farm Bill.
For our audience less familiar with the farm bill, it is a massive piece of legislation that gets passed around every 5 years. The last Farm Bill budget covered 2019-23 and totaled 428 Billion US dollars which included funds for agricultural production, farm income support, food assistance, trade, and more. Jayson reflects on how the funds are allocated and what does that say about who has power.
And 80% of the budget of the farm bill is food assistance programs. And the other roughly 30% are farm programs just in terms of dollars, in at least a traditional story that we tell about why that exists that way is it's a way for urban legislators to compromise and work with rural legislators to get a policy passed. And without either one of those two, neither group could really get what they want. So I think when I think about sort of those power dynamics, and power issues, some of the farm policies and food policies, we have a result of the compromise of those different power groups sort of waiting together.
Jayson mentions one more group in particular that he sees as gaining influence over how the public talks and thinks about the future of food.
One last piece of I mentioned that I think the emergence of what you might call the food movement, really, over the last 20 years, has become particularly I think, influential in influencing how the public thinks about food. think about the documentaries that you'll find on Netflix, or some of the best selling books on food or agriculture, or the editorial pages of our leading newspapers. Really shaping how people think about food, whether it's local, environmentally friendly, non GMO, these sorts of topics. Really being influenced by this often, this sort of celebrity chefs, sometimes bestselling book authors, and I think this really have captured the public imagination. And I have written critically of many of the policy proposals there.
But I will say they haven't been terribly effective in the policy front. They've been very effective, I think, influencing popular culture and thinking around food, less so about really influencing policies. And I think when I think about some of the challenges that relate to, again, communicating about food consumers and food policies is that the preferences I think of a lot of the folks in the food movement that they are advocating for, you might call it higher quality food. Food that at least arguably is better for the environment, but often more expensive. And I think one of my pushbacks against some of that is that those voices are from a particular subset of people who can sometimes afford to go shop at their local farmers market. Can afford to pay a little more for food. And so it's relatively easy to advocate for taxes and certain production practices that make food more expensive. But at least in food, I think one thing economists pay a lot of attention to are is this regressive nature of food price increases. And what I mean by that is that low income consumers spend a higher share of their income on food than high income consumers. That relationship also holds true across the world. So low income countries spend a higher share of their income on food than high income countries. So when we think about policies or activities that increase the price of the food, that burden is disproportionately felt by lower income consumers. So when I think about food policies that have the potential to influence price, that's one of the first things I think about is what's the impact on lower income consumers who are spending more of their budget on food products?
Interesting. In your article, evaluating the policy proposals of the food movement, but you really outline your arguments. You were critical of Mark Bittman, Michael Pollan, Ricardo Salvador and Olivier De Schutter's food and farm policies. And you've outlined some of the reasons for that mainly around prices. Are there other ways that you think this sort of food movement as represented by this policy proposal have it wrong?
So let me be clear. Let me give some nuance, which is, I don't typically argue with some of their advice about eating and like what you know how maybe consumers might have a more enjoyable diet or a healthier diet, I think some of the advice they have there is probably pretty sound and pretty good. But what I do take some disagreement with are those policy proposals, and some of them are related to these issues around price impacts, and how those price impacts are disproportionately felt by different income groups. But I also think it's a different vision, probably about the future of food. It took me a long time to understand why I was a bit uneasy with some of the food movement proposals. And I think if I had to put a pin in it, I think it really relates to the role of science and technology in the future of food. And my vision for what a prosperous food future is relates to a lot of innovation, the use of science and technology, new crop breeding techniques, new sensors on farms, to try to figure out how to produce more food on less land. Or if we even if we don't want more food, I think there are some that would argue we have too much food, too many calories. Well, even if we don't want to do that, how can we use fewer of our natural resources to produce them - so fewer animals, less water, less fertilizer? And I think to do that, we need science, we need technology. You know, my vision sort of for the future of food is one that's some people might call it a bit of techno optimism, I suppose, but it's an innovative future. Where we solve a lot of these problems through innovative, innovative new science, learning. Whereas a lot of what I read about their writing is, if I had to be pejorative, I'd say it's a bit. It's a little regressive version in some ways of the form of agriculture. Often there's a view, I think that we need to revert back to the 1940s or 50s way of agriculture, the old red barn and straw hat kind of view, when we had many more smaller farms that were more diversified. That that's a vision that we got away from that somehow we should get our selves back to that. And I think fundamentally, partly in response to the fact that I, you know, my families grew up in those backgrounds. And I think those romantic ideals of the past do not match with my own experiences, or the experiences of my families who came from those backgrounds. It was often dirt poor poverty, they strove to find a job in town, so they could have a lifestyle, like the people in town. And there were probably some good things about it. But I don't see us as a society making significant progress on the big challenges of our day, whether it's climate change, or obesity, or diabetes, water runoff by just reverting back to a historic version of agriculture. If I had to diagnose my criticisms, I think some of it just relates to alternative visions about what the future of food should look like.
It's really interesting to think of like, where does that come from - these beliefs that we hold, and you just articulated how your past might have played a role in that.
Yeah, let me give a specific example there. When I was a freshman in college, I worked for a county extension agent. So this was probably 1993. And one of the things this agricultural extension agent was doing was planting demonstration plots for farmers in that county to look at how different seed varieties performed. And they had these new GMO cotton seeds they were planting. They were herbicide resistant. So you could go spray a herbicide, it wouldn't kill the cotton, but it would kill everything else. Now, I had spent the previous, roughly decade, spending every summer walking miles with a hoe in my hand chopping cotton weeds and making a minimum wage. That was my job. And so when that county extension agent gave me a sprayer and he said, Go spray this herbicide on top of the cotton, I thought, are you crazy, like it's going to kill it. He's like, “No, it’s supposed to live.” So we did that came back about two weeks later. And sure enough, all the weeds were dead, the cotton was alive, looked healthy. And I was so overjoyed by the realization this technology existed because it meant the end to this job that I had grown to hate. And despise. And so when I think about my own personal reaction to GMOs, it's very different than the general public because of that really tangible experience I had with what the GMO did for the farmer, or in my case, the hired hand, in terms of making lives a little different.
I was going to link to your book here, “Unnaturally Delicious”, which tells the story of how science and technology are serving up super foods to save the world. And I think if people are interested in reading more about your vision, you share a lot in that book, which you wrote in 2016. And I was just wondering if your views have been reinforced, or if they've changed in any way since then?
Yeah, well, like most of us, we double down on our views. So I don't think anything fundamentally. I will maybe digress for a second, and it is related to the book, you've been asking some questions about power, one thing I think is important - realize consumers as a group, really hold a lot of power in the food system. And I think people often point towards what they might call big food, this kind of pejorative notion that the food industry is shaping our food environment, and controlling what we want and what we have available to us. I have a very different view that food companies are an extraordinarily competitive industries, that leader low margin industries, they are scrambling all over themselves to get on top of the next consumer trend, or they're paying marketing research companies that sometimes academics like me to try to understand where's the consumer going? What are they wanting this month? Is it non GMO? Is it gluten free? Is it low? Sodium is a low fat, you know, what is it plant based? What's the next thing? And you know, I don't view that as, as a system where the so called Big Food is in power, I view it as a system where it's the consumer that that all these companies are scrambling over themselves to try to get in front of and respond to you now obviously, there's some gray area there. But I think that consumers often have a lot of power in shaping what the food system looks like, at least and when I say the consumer, I mean, not what they always say on surveys but what they actually buy and do in a grocery store. Their revealed preferences so to speak.
So you may remember from the first episode in our power series, Phil Howard has a very different understanding of the role of consumers and corporations. He sees the food industry as a much more powerful actor – that they aren’t only giving the consumers what they want, but that they are actively shaping their behavior and influencing a friendlier regulatory environment. You can revisit his episode to learn more.
So you asked about the book. And so I think one of the things I tried to think about in that book and as I think about the future is what are those next innovations that are shaping our food system, and what could be the next disruptive thing and I think, you know, they're things that are going to deliver attributes to consumers that they want and are willing to pay for. So, improved food quality at a lower cost with a lower environmental footprint. So whether it's the plant based meat alternatives, a lab grown meat alternatives. Some of these, I talked about some synthetic biology in that book, like a way of producing many of the food ingredients or products we want through new means. I'm not naive enough to think all those are going to be successful. But I think it's this sort of process of experimentation and trying new things that we end up with improvements. And we get to a point where we have new alternatives, new varieties, that, both are good for human health, but hopefully good, good for the environment.
So thinking to what people that might be labeled as part of the food movement might think of technologies, you know, some common critiques are worries that these kinds of technologies will further concentrate wealth and power, and corporations who will have patents and ability to control what people plant and how they harvest them, etc. etc. and take power further away from farmers? How do you respond to those kinds of criticisms?
Lower the barriers to entry, is my response. So that's easier said than done. But I think one of the ironies here for a lot of these is, when those concerns exist, often that effort is to say, we need to regulate more, we need to make sure these products are super safe, because we don't want these big companies poisoning us all or what have you. So we enact all this regulatory bureaucratic system. And the unfortunate part of that is, it makes it such that you have to be big, if you want to get into some of these technological spaces, because it's only the big players that can really afford to invest in all the lawyers, and the managers to manage that bureaucratic process to get things through. And so I think, if it's a topic like GMOs, let's say, I know lots of scientists that have new crop varieties, and new attributes that have been introduced in seeds, but it's sitting on their shelf, because just the cost of commercialization is so high. And a big chunk of that are the regulatory burdens around them. So I think we got to think carefully about the barriers we create to entry. Sometimes when we are, know, good motives, we're trying to make sure things are safe, and that we're protecting the public and the environment. But we got to be careful that sometimes we are facilitating concentration, rather than making it easier for folks to enter.
The other thing I would say they're a little bit, too is, I think one of the cool things in the food space right now is how much venture capital money is flowing into food and ag. Just remarkable increases over the last decade or so, a lot of this is Silicon Valley type money, but it's not from within traditional agriculture companies. It's from outside the sector. And I think a lot of the traditional players are a little worried about it, they're a little unsure how to respond to it. But think it's interesting, I think it's exciting. And in there are a lot of players that are new and startup today that may become the big players in the future. But I think I get, in my role to see a lot of those things firsthand. And so I see a lot more diversity in the innovation space than perhaps people see just by reading the front pages of the paper.
So when you're thinking through how you would like to see the food system progress, what aspects of power need to be shifted? You talked about regulatory power. So what should the relative role of government versus private sector be? Where is it now and where would you like to see it?
I mean, that's a very difficult question. I'm not going to claim to have the answer in a short soundbite. I guess, at the end of the day, I think that, you want the consumer to have the power. Companies can produce what consumers want at a price they're willing to pay. There are these opportunities for a mutually beneficial exchange. And so I tend to be a bit more libertarian in my thinking about the food system, and that I want consumers to have more options available to them, doesn't mean companies can't get big. Sometimes you get big because they're successful, because they're successful. I've given consumers what they want at a price they're willing to pay. What we want to make sure is that bigness is a result of success, not a result of the fact that they've somehow used regulatory practices or other means to keep out, new entrants and competitio. I tend to be somewhat negative towards policies or actions that limit choice for consumers. Or you know, and I think that works both ways. Both for constraining the companies exist, but also those that are trying to enter the market to provide consumers new things.
One role I think that people forget about when they think about sort of power in the food system, potential damages that could be caused by new entrants is we have a whole legal system in place. And yes, it's expensive. And it doesn't always work perfectly. But if a company enters in causes harm to the environment or the consumer, there is recourse that can happen there. And sometimes companies in knowing that will self-regulate, somewhat, because they don't, they don't want to be exposed to that bad press or those negative repercussions that could come through the legal process.
While Jayson acknowledges the imperfections of the different frameworks that regulate the market, other guests emphasize the uneven nature of these imperfections, where low-income communities and the environment have less resources, power and agency to take legal action to defend themselves.
So I guess what I'm trying to say there's even an absence of explicit regulation. It's not as if even in a, quote unquote “laissez faire” type of world that companies do whatever they want. They're constrained both by consumers, but they're also constrained by the potential of legal action if something goes wrong, or reputational harm.
I'd like to ask you a few questions about potential misconceptions when they use economic terms. And I think one of the ones that comes up a lot is the use of subsidies. It's often called on as, “we just need to get the subsidies right… subsidies are the problem… we have too much subsidies.. just get rid of subsidies entirely.” Curious now speaking to an expert in this field, an agriculture economist, how you think about subsidies and also the discussions around them in the food system?
When there's no doubt that many aspects of our agricultural system are subsidized. There are billions of dollars that flow from taxpayers to farmers. It's also maybe counterintuitive, but interesting, perhaps for people to know that those subsidies and the interference in sort of market outcomes is much smaller in the US than in many other parts of the world. So often, much more distortionary outcomes and more developing countries. But it does exist. And I think the question is, how much distortion does it cause?
How much of the current food landscape does it explain? And the research I've done that I've seen others do suggests that if you removed all the farm subsidies that existed today, it have small impacts, but it wouldn't cause a fundamental shift in say, the fact that we mainly grow corn and soybeans and wheat and these main commodity crops.
It’s important to note that Jayson here is talking about the smaller impacts that US subsidies have on its own markets and not on global markets. We’ll link in the show notes to some of Jayson’s studies that examine who benefiting more from farm subsidies - consumers or producers? Jayson shares some different explanations for why commodity crops like corn, soybeans and wheat are widely grown and favored across the US.
And part of the reason for that is just biology. It's not the economic forces from the subsidies are there. But the main force there is that there are a handful of plants that we've developed over time that much Mother Nature has endowed us with. And we've continued to improve, that are incredibly efficient at converting sunlight, energy and nutrients in the soil into seeds, which are a storehouse for energy that are easily stored and transported. And it's that basic fact of biology that explains a big chunk of why we grow a lot of corn and soybeans here in the Midwest, for example.
While Jayson argues that these crops’ popularity is owed to their biology, others point out that their biological advantage is partly a result of the disproportionate investments and resources that went into breeding these crops into more productive varieties. To which Jayson may reply, the investment is because of their desired traits.
It's not some big corporate conspiracy that causes that outcome. And if we got rid of all the subsidies, we would still have majority acres planted in corn and soybeans here in the Midwest.
So there are a couple of answers, reasons for that. One is a lot of what the farm subsidies do, we're just transferring dollars. They were like literally in the past direct payments, it's just we're giving you money because you're a farmer. The other one is, I think that sometimes maybe not obvious to people is that sometimes people blame these farm subsidies on that it makes food too cheap. But I try to remind people why would farm lobbying organizations lobby for policies that would make their agricultural commodities cheaper? No, rather, they're often fighting for policies to increase the price of commodity.
So in general, I think at an intuitive level, people should see that farm policies are typically not designed to make food less expensive, but more so that's what the farmers want. They don't want expensive food, but they want higher commodity prices.
So when you look, for example, to say corn, there are certain policies or crop insurance subsidies and in other policies that probably do promote more corn production. But there are other policies like you know, Conservation Reserve Program that take land out of production, that result in fewer acres being planted that would be otherwise which increases the price of corn. One of the biggest impacts on agricultural markets are our ethanol policy, which doesn't even come from the US Department of Agriculture comes from the Environmental Protection Agency. So basically diverts 40% of corn production to ethanol. And that makes corn a lot more expensive than it would be otherwise. So policies push prices up in some cases and down and others and it's not always clear, depending on the exact commodity we're looking at what the net effect is, but often that net effect is one policies make food more not less expensive than it would be otherwise.
So speaking about food prices, we wanted to ask your opinion - there's an increasing push in the food movement and other areas to talk about True Cost Accounting, so internalizing some of the externalities to deal with food, be that social or environmental impact. Can you tell us your thoughts on that?
As an economist, I like it when people want to use our language and talk about externalities. So that part is kind of nice. But you know, at the same time, I think the concept of externalities has a lot of nuance, and that people really need to think about when using that as motivation for public policy. I do think there are certain externalities in our food system that are more amenable to correction via taxation. And I think one example of that is probably greenhouse gas emissions. And the reason I say that is because it's just you and I making individual choices together, it's going to be hard for us to coordinate. It's really a global problem, it's really hard to find a way to internalize that and other mechanisms. But even still, I would say those policies aren't really very effective unless you treat all carbon the same. If you want to tax carbon equivalent emissions. It can't just be food, it needs to be fossil fuels, it needs to be the whole the whole works. And I think what we also want to think about is, if we're going to pursue those kinds of policies, implementing them in a way where it encourages producers to adopt practices that lower, let's say, carbon emission.
So some of the biggest carbon emission impacts in agriculture come from cattle production, because cattle emit methane, methane is a potent greenhouse gas. But if all you say is we're just going to tax cows, a dollar a cow tax, it's actually not a very effective policy. Cattle are grown all over the world and grown all over the United States in entirely different conditions, different genetics, different feed. We need the science to catch up a bit. But let's make sure we incentivize producers to adopt practices, that they want to breed new kinds of cattle, feed cattle different types of feed or feed additives that reduce those emissions so that they're incentivized for doing that. And if there's a mechanism for doing that, I think there's much to be said.
The other thing I'd say those people often think with regard to something like the climate emissions or externalities doesn't mean that people will eat none of the product that we think is causing the bad. So I mentioned cattle, if you could do a back of the envelope calculation for the social cost of carbon, that come from those methane emissions from cattle, if you impose that tax on cattle, we'd still eat a lot of beef, and a lot of meat. And I think that's one reason in some cases to be positive about a carbon tax is then you can say, “Look, I've already paid my taxes, I paid my sins. Now leave me alone, I'll have my burger.” Now, if you have other objections to eating meat, you know, animal welfare, what have you, that's another issue entirely. But just in terms of that particular externality, once it's accounted for, then you move on with your life and drive your consumption choices, given your preferences, income and prices.
In 2013, Jayson wrote the article “Lunch with Pigou: Externalities and the ‘Hidden’ Cost of Food” where he quote “seeks to clarify the definition and nature of externalities and discuss situations in which public policy is most and least effective in efficiently making ‘hidden’ costs of food visible.”
There are many other issues that are less straightforward when you start talking about externalities. And in some ways, people use the word externality almost tantamount, with, I don't like this aspect of our food system. It's an externality and therefore it should be accounted for in a true cost.
There are external effects. So some things I do affect you. And then there are externalities. And I think most economists think about externalities as something that have these external effects, and also lower overall wellbeing for consumers. But even in the case of these externalities, it doesn't always mean that we have a low cost way of coordinating or fixing it. And you could cause more good than harm sometimes by trying to correct it.
Jayson talk about how farm and food labor wages are one way that the market helps to internalize externalities.
One example of that might be I was in a conference once and somebody pointed out that well in meat packing plants, it's riskier to workers, they have more injuries. In other industries, so that's an X, you know, so you eating meat causes an externality on the worker. Well, if you actually look at wages and meatpacking, they are higher than in other industries that aren't as risky. So yeah, we don't like to buy things where workers get hurt, but those workers are being compensated for their risk. Otherwise, they wouldn't take those jobs, they would they would choose other jobs.
There is a lot more to unpack here, such as whether there are other jobs available to the typically vulnerable labor force that take these positions, but what does Jayson have to say about those that transport our food?
Or what about the - there are lots of trucks on the highway transporting produce to us? Sometimes those trucks, you know, have accidentally run into other cars? Isn't that an externality in the food system? Well, those truckers pay insurance, right? If they have a lot of accidents, their insurance rates go up, or they might not be able to have their driver's license anymore if they're particularly risky. And those costs get factored into the system.
The last thing I'd say, even for those efforts that, you know, aim to use a true cost accounting to food. They almost never consider positive, external effects and externalities. And I think that's sort of a telling thing, from my perspective, is if you really want to do a true accounting or cost, it's not just negative, it's the positive effects. I know I said, that was my last thing, but I've got more.
But one thing a lot of agricultural economists do is study commodity markets. At the moment, for example, wheat prices are going through the roof because of some of the disruptions that we're seeing in Ukraine. Ukraine is a major wheat, producer and exporter. So prices fluctuate a lot throughout the year, because there's news that comes in we have weather events, and we have wars, we have all kinds of factors that drive prices of commodities, up and down, sometimes doubling within a year. Why would we expect externalities to be a stable number, we shouldn't. Likewise, there's an enormous amount of uncertainty about when you talk about true costs, there is no true cost. There are costs that fluctuate over time in response to weather and, and what technologies available and what consumers are demanding. So I think even in those cases, where we want to think about trying to account for those external costs, we need to do it in a way that we recognize that those aren't static numbers. They're numbers that fluctuate, sometimes wildly over time in response to emerging market conditions.
Jayson lays out how externalities are often treated too simply by non-economists. Here are some takeaways:
- Externalities are complex and the concepts of true costs is hard to capture since they vary so much across time and space,
- positive externalities are under accounted for in these discussions, and
- it can be more costly to fix some externalities than to let them be.
We will link to Jayson’s article in the show notes if you’d like to learn more. We’ll also link to TEEB agrifood a true cost accounting approach whose proponents would argue they do look at positive externalities and use a systems approach to analyze the dynamic nature of shifting costs in the food system.
The goals that some of these externalities are trying to address social and environmental ills. It sounds from what you're saying you don't disagree with? So what is the alternative? What would better capture our ability to reduce those harms?
So I'm going to argue with my own self-interest as somebody that works at a research intensive university, and that is spend more money on research and development. So the issue is that cattle are emitting methane, let's invest in research and technology to understand ways that we can produce the things consumers want, in a way that lowers those methane emissions. So feed additives. Research on things like seaweed, for example. What are different grazing and management practices? Can cattle sequester more carbon in the soil if raised in certain kinds of grassland environments? What are the breeds of cattle that might produce fewer greenhouse gas emissions? We don't know the answers to those questions, we have maybe some hands here and there, the only way we're going to know them is to invest in that science, invest in that research. And so that that would be my preferred alternative to addressing some of those problems. They're real, I think we do need to think about them. So let's think about ways we can help consumers and the environment have their cake and eat it too. I want to have my hamburger, but I don't want it to have the environmental impacts that it normally has. And one of the ways we can do about that is through science and innovation. Economists are fond of saying there's no such thing as a free lunch. But science and innovation are the closest thing to a free lunch we can have.
But who's paying for that lunch and who is benefiting?
You’re right. It’s not free. So the research grants, the salaries of the scientists, those research studies, they're not free, they do cost something but when you look at returns on those investments, they’re quite high. And there has been a lot of work on this topic over the years about the return to investments in agricultural R&D. And I think one of the most conservative estimates is that for every one dollar, that's invested in agriculture R&D, you get $22 In return, and that's a well done study, that's probably among the most conservative estimates that I've seen. So not free, but a good return, a good investment.
A lot of people would critique R&D money coming from corporations into Ag schools. And I know that is an increasing source of income for research. Do you see those dollars as potentially tainted? Or is there a way to ensure that they're doing good?
Well one solution to that is to fund more public investments in agricultural research, and one of the reasons they're there is more corporate funding of agri-research is because at least in real terms, public investments in ag R&D have fallen over time. So as we try to find ways to support our research programs, we cast a wider net. So certainly, ag businesses, corporations do fund research at university, I think, if universities, if we lose our integrity, and our pursuit of objective knowledge on these things, we won't be around much longer. And I think we have to be able to hold firm that, that even when we take private dollars, to study certain issues, that we can be forthcoming with the data, and forthcoming with the results. I think, for example, those kinds of agreements should be accompanied by full disclosure of the results, I generally won't engage in those activities to the university unless the funding entity is willing to make public all the findings in the publication so that those things don't get held back. Because I think those are the kinds of situations where we lose integrity. And I think that's not good for the public, it's certainly not good for the university. But let's be clear, it's a double edged sword, because who else is going to pay for the research and in many cases, if you want new, let's say, a new herbicide that's less toxic, that's more environmentally friendly, who's going to pay for that? It's often the companies who can make money doing that. And so there are reasons why these entities fund this sort of research. But again, I think we have to be careful about that sort of funding and be transparent with the public when we do take it.
Jayson Lusk, head of agriculture economics at Purdue University. Thank you very much for your time.
Thank you both. This was a great conversation. I really appreciate it.
And we'll catch you down the line when we do a farm bill episode.
Well, good. Now happy to come on again. So just let me know.
That wraps another episode of the Feed podcast. A big thank you to Jayson Lusk for joining us and to you for listening. Please check out the show notes for additional resources referenced in this episode.
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This episode was edited and mixed by Matthew Kessler. Music in this episode by Blue dot Sessions. Stay tuned for a new episode on power in two weeks.