Wednesday, July 19, 2017

Food Costs, Satellite Data, and Diversity within Species

Russ Roberts talks with Tomar Haspel about food costs, animal welfare, and modern agriculure on EconTalk.

A couple great discussions regarding the future ag macro environment and satellite based crop data in finance.

More on the myth of monoculture - biodiversity within species in Nature.

See also:

Big Data + Genomics  Not Your Grandparent's Monoculture
Crop Diversity

Why AgEcon?

Another reason to study agricultural and applied economics:

"Foster says because we're entering an era of data-driven decision making, "the students who can position themselves to be strong from an analytical and problem-solving perspective are going to have an edge in the market."

See also:

Why Study Agricultural/Applied Economics
Value of Graduate Education

Thursday, July 13, 2017

Market Commentary July 13, 2017

On June 8 we saw a high of 4.09 in the dec17 corn contract with some heavy trading volume and open interest behind it. From there we saw a gradual decline until late June when prices picked up through the July 4th holiday (following USDA acreage reports) with a 12 month and year to date high on July 11th at 4.17. Much of this was reaction to weather vs fundamentals in those reports.

However, interest and volume were not at the elevated levels we saw back during the June high of 4.09. Also, the RSI was near 70 on the 10th and 11th approaching levels giving a potential technical indication of being overbought. This of course may just be the kind of volatility we expect in a weather market while  there is probably somewhat firm fundamental support based on the late plantings, replants, and current crop conditions and lack of uniformity in the crop progress across the corn belt compounding the uncertainty about weather.

***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. *****  

Sunday, July 2, 2017

Simulating Impacts of Food Taxes and Subsidies

 Just last week I posted about food subsidies. I asked:

"Could you make the argument that simply shifting money toward programs related to fruits and vegetables would have a large enough impact on price to influence consumption? How much money would that take and what would the effect size be?"

This video discusses a PLOS medicine study that finds positive health benefits related to subsidies for fruits and vegetables and the referenced study (from a 'headline' reading) indicates a 10% subsidy could have a meaningful impact on health:

The video makes no direct reference to a study. However based on this reading I think the following are the studies mentioned in the video, the first being the primary reference:

Reducing US cardiovascular disease burden and disparities through national and targeted dietary policies: A modelling study. PLOS Medicine. June 6, 2017

Taxes and Subsidies for Improving Diet and Population Health in Australia: A Cost-Effectiveness Modelling Study. PLOS Medicine. February 14, 2017

Both papers are simulations based on assumptions related to elasticities and projected health outcomes (vs. empirical findings). One thing advocated is to create a revenue neutral policy that taxes soda and subsidizes fruits and vegetables. I'm skeptical, but if I want to give any credit I could say cynically that in this way maybe a soda tax could be useful even if it fails to have any meaningful impact on consumption or health.

See also: 

Are Soda Taxes Effective?
Four Big Questions about Farm Subsidies

Saturday, July 1, 2017

Democracy in Chains...? Was that not the vision of the founders?

There has been a lot of buzz and controversy surrounding Nancy MacLean's book  "Democracy in Chains" in relation to how James Buchanan (a founder of the public choice school of economics) and others especially connected to George Mason University have been mischaracterized in the book (see these two pieces from the WaPo here and here).

I want to zero in on one aspect of the book, pointed out by economist Russ Roberts, that also confuses me:

Russ Roberts quotes Nancy MacLean:

NM: "American democratic system of majority rule." 

RR: That phrase confuses me. The American system is a constitutional republic with very little majority rule. "


Note, I have not read the book but it makes me the book assuming that in fact the American system is actually a democratic system of majority rule vs. a constitutional republic that greatly restricts majority rule? Is it arguing that the latter is just a fabrication of Koch funded propaganda? And all of those taking Koch money are antidemocratic shills conspiring to covertly establish a libertarian utopian America? Is Nancy (a historian) ignorant of American History, or is she blatantly distorting it....being intellectually dishonest? Or does she (and by she I really should all along say those that think like her)  have some rather complicated and nuanced view of our history and constitution that you've got to read the book to understand because simply reading our founding documents and standard history textbooks leave something out???

I'm not sure....but the notion of an American system as a constitutional republic certainly predates James Buchanan and the Koch brothers. If we are going to be critical of the historical misinterpretations  and mischaracterizations found in "Democracy in Chains" at least we can give some credit. Noone has yet accused the author of claiming that the Federalist Papers or the Constitution were tantamount to Koch funded studies. But I have not yet read the book.

Our founders were well aware (without Koch money by the way) that a democratic system of majority rule was dangerous and they proposed a constitutional solution to check the kinds of abuses and powers that came with majority rule:

As stated in Federalist #10:

"From the protection of different and unequal faculties of acquiring property, the possession of different degrees and kinds of property immediately results; and from the influence of these on the sentiments and views of the respective proprietors, ensues a division of the society into different interests and parties."

In Federalist #10 they also warned us about the populist appeals and uprisings that may result from the above, but proposed a solution:

“A rage for paper money, for an abolition of debts, for an equal division of property, or for any other improper or wicked project…we behold a republican remedy for the diseases most incident to republican government.”

The purpose of the constitution was to ensure that the government did very little without the consent of the governed, but consent was not tantamount to majority rule.  For the most part, this was achieved through legislation held in the strict bounds of enumerated powers, with expanded powers of government coming through the amendment process.  This strict adherence to constitutional principles was the foundation for a workable democratic constitutional republic, as stated by economist Thomas Sowell in  Judicial Activism Reconsidered,

“The federal Constitution is "the supreme law of the land," not because it is more moral than state constitutions or state or federal legislative enactments, but because it represents a larger and more enduring majority. Minorities receive their constitutional rights from that enduring majority to which transient majorities bow, not from whatever abstract moral rights are imagined to exist as a brooding omnipresence in the sky.”

Democracy, limited by strict adherence to constitutional principles meant that government would have few powers and resources to spend on corporate interests or other special interests that can distort our democratic processes through campaign finance, lobbying etc.

Thomas Jefferson (who by the way had no connections to the Koch brothers) had the idea:

“in questions of power then, let no more be heard of confidence in man, but bind him down from mischief by the chains of the constitution” - Kentucky Resolutions, 1798

I think the title "Democracy in Chains" is a good title for a book, and perhaps a better description of the American System than "democractic system of majority rule." But I think reading the book will reveal something quite different in the mind of the author and others that think like her.

Wednesday, June 28, 2017

Wednesday Post: Subsidies and Food Prices


One big reason some foods cost so much more than others

“Hint: It’s (mostly) not subsidies. Although they’ve certainly played a role in shaping our food supply such that we have huge quantities of just a few crops — a recipe for low prices — the discrepancy that seems to be at issue is the one between commodity crops such as corn and soy, and the fruits and vegetables that everyone’s trying to get us to eat more of. There’s a factor there that plays a much larger role than subsidies, and it doesn’t get much airtime…Its machines.”

An older article from 2014 in WaPo:

Farm bill: Why don’t taxpayers subsidize the foods that are better for us?

“But we also need to move away from a system that requires taxpayers to spend billions underwriting a system detrimental to public health.”

That last statement needs some qualification. We've seen something similar before from the NYT (see Are Farm Subsidies Making us Fat).  Not sure the causal link between subsidies and public health is much to talk about.

Economist Jayson Lusk knocks it out the the park. He addresses the science behind these specious connections  (and links to a number of related research articles) and includes some of his work in the area:

"There are actual lots of people who know how much farm subsidies contribute to food consumption, and they're called agricultural economists (in fact, McMillian goes on to then cite two prominent food and agricultural economists on the issue: Parke Wilde and David Just)…..In the model I used for the forthcoming paper I wrote on the distributional impacts of crop insurance subsidies, I find that the complete removal of crop insurance subsidies to farmers would only increase the price of cereal and bakery products by 0.09% and increase the price of meat by 0.5%, and would also increase the price of fruits ad vegetables by 0.7%.  So, while these policies may be inefficient, regressive, and promote regulatory over-reach, their effects on food prices are tiny, and depending on which policy we're talking about, could push prices and consumption up or down."

Could you make the argument that simply shifting money toward programs related to fruits and vegetables would have a large enough impact on price to influence consumption? How much money would that take and what would the effect size be?