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?

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