Choices Magazine Theme on Herbicide Resistance

There was a really nice collection of articles recently featured in Choices:

http://www.choicesmagazine.org/choices-magazine/theme-articles/herbicide/theme-overview-herbicide-resistance-management

From the theme overview:

"When resistant weeds are mobile, managing resistance can suffer from the classic “tragedy of the commons”—no one controls the resource—in this case, the effectiveness of herbicides—so no one manages it sustainably. For guidance on how to proceed, Ervin and Frisvold look to the research of Nobel laureate Elinor Ostrom and her colleagues on the management of common property resources (CPRs). "

This is the kind of work I was interested in in graduate school and this convergence of social science, economics, and genomics is very exciting. I veiwed the problem as an externality or commons problem that could be described by an Nash Equilibrium. In a later white paper I also discussed some of Elinor Ostrom's work in a similar context. If ever there was a middle ground for policy approaches to environmental challenges her work provides a nice foundation.

See also:

Game Theory, A Foundation for Agricultural Economics

Externalities, Coase, Ostrom & Demsetz

Why corn is king when it comes to sustainably feeding a growing population

A few weeks ago there was a nice article in the Washington Post about a misguided vision emphasizing vegetables vs row crops as the focus for a sustainable food system:

We need to feed a growing planet. Vegetables aren't the answer. https://www.washingtonpost.com/lifestyle/food/we-need-to-feed-a-growing-planet-vegetables-arent-the-answer/2016/12/15/f0ffeb3e-c177-11e6-8422-eac61c0ef74d_story.html

I recently re-watched Food, Inc. One of the most egregious and misleading themes I get from that movie is that farm subsidies and our 'industrial' food system leads to a monoculture of mostly corn and soybeans that threatens both our health and environment. The WaPo article clearly explains why a shift away from row crops or commodity based cropping systems toward more vegetables is both non-pragmatic and more threatening to sustainably feeding the world.

There are a number of myths about commodity agriculture, monoculture, farm subsidies, and large scale agriculture, unfortunately many retailers and food products companies know how to exploit them.

See also:

 What's the big deal about farm subsidies? Four big questions about big ag, subsidies, food, and GMOs

Big Data + Genomics ≠ Your Grandparent's Monoculture

Whole Foods Facing Turf War With Mainstream Grocers

Via AgWeb:

http://www.agweb.com/article/whole-foods-shareholder-said-planning-push-for-changes-sale-blmg/

"Whole Foods’ poor inventory and vendor management, high costs and failure to make the most of its unique appeal to millennial shoppers among the key issues…Larger mainstream grocers, including Kroger Co. and Wal-Mart Stores Inc., continue to advance on Whole Foods’ organic turf, weighing on sales. Kroger has a market value of about $29 billion and Wal-Mart is valued at about $214 billion. Whole Foods is trying to fight back by offering more discounts and starting a new chain aimed at younger shoppers. Organic products have become widely available at U.S. stores, often at lower prices than Whole Foods offers. Analysts have since questioned whether there’s capacity for more high-end organic grocers in the U.S."

MarketWatch did an interesting comparison of products and prices here.

I wonder what really motivates Whole Foods customers?....is this a true preference for taste and quality, or how much of this is actually driven by misperception and fear?

As the article says..."Larger mainstream grocers, including Kroger Co. and Wal-Mart Stores Inc., continue to advance on Whole Foods’ organic turf, weighing on sales." The kind of snake oil  marketing that firms like Dannon and Chipotle engage in has probably been a major driver of this fear and Kroger and Wal-Mart are exploiting the fact that now consumers are economizing on the fear and misconceptions that may have previously driven them to stores like Whole Foods.

Perhaps if Whole Foods can trim margins via better supply chain or inventory management (as suggested in the article) that will help with pricing more competitively. It seems like they may also need to capitalize on some other source of differentiation in products or services. I don't see food fads and fears going away anytime soon unfortunately.

See also:

Modern Sustainable Agriculture 

Monsantophobia

The Twisted Economics of Local Food

Monsanto Expanding CRISPR Technology Rights

From:

http://mobile.the-scientist.com/article/47123/monsanto-buys-rights-to-crispr

"Two other companies, DuPont Pioneer and Calyxt, are currently using CRISPR gene-editing techniques for agricultural applications, GenomeWeb reported. In addition, the Life Science Center at Bayer—the European pharma giant that recently made an offer to buy Monsanto—has licensed CRISPR for biomedical uses, but the company’s Crop Science division has not obtained a license for CRISPR/Cas9."

In a previous post (CRISPR Technology and Agriculture) I speculated that companies like Monsanto would leverage this technology heavily with less emphasis on traditional recombinant DNA based techniques (aka GMOs). The article above indicates some synergy between Monsanto and Bayer in this regard in terms of licensing and applications related to crop science. 


Related: 

How Big Data and Genomics are Crushing the Myth of Monoculture

GIPSA , Lemons, and Cattle Markets

I was recently reading about how proposed GIPSA rules will impact cattle marketing in Beef magazine:

http://www.beefmagazine.com/ranching/gipsa-rule-threatens-more-cattle-beef-prices

Here is one slice from the article:

"USDA’s decision to move forward with publishing final rulemaking on the 2010 Grain Inspection, Packers and Stockyards Act (GIPSA) could force packers to pay the same price for all cattle. That would narrow or remove any spread in prices offered by cattle feeders. So, every cow-calf producer would receive the same price for calves, regardless of value."

Other places in the article talk about alternative marketing arrangements (AMAs) and thinning cash markets as well. But one thing I always thought, was that AMAs were one way that the market worked to solve the lemons problem. Conventionally, people might support regulation in cases where there are in fact lemons, and they want government intervention to fix the so called market failure.

You can read about lemons markets here, but generally in the case of cattle marketing, if you are a buyer and not sure about the quality of cattle you are buying, you would at best assume average quality and pay an average price in order to avoid overpaying for bad cattle. Unfortunately producers with good cattle would not receive a price that reflected superior genetics or management that they have invested in.  AMAs help identify better cattle with specific traits of interest and allow producers to get more for their value and allow buyers to get the quality they want without overpaying.

This looks like a case where the market solved a major problem, and the new GIPSA rule may in effect create a lemons problem all over again. The article does a good job describing the ramifications to producers, buyers, and consumers.

Trade, Jobs, and Political and Economic Disruption

Two podcasts I listen to often include EconTalk with Russ Roberts, and Masters in Business, with Barry Ritholtz. No one could have called the election based on these episodes, and none of the guests  made any projections about it specifically, but each of the these guests below discuss issues that could have been informative about what's been going on in the minds of the electorate. And why non-conventional candidates like Bernie Sanders and Donald Trump had so much appeal. They also question conventional wisdom about the distributional effects of comparative advantage and free trade.

In a past podcast, just over a year ago, Gary Shilling offers some interesting thoughts on trade:(paraphrasing not quoting).

Basically globalization has led to income polarization, with 8 years of zero to no real income growth for a segment of the population and this frustration has been expressed politically through Bernie Sanders and Donald Trump. With regard to Trump, when you strip away the blustering, he may actually be more like an old school centrist politician. When you take the impacts of globalization, the recession, and the slow recovery, conventional politicians don't know how to react. 

I think this is the kind of environment in which it was possible for the 'blue wall' on the electoral map to crumble.

More recently, Aswath Damodaran touches on this: (again paraphrasing)

Brexit should be a warning sign that we've lost perspective. In the aggregate, trade and globalization can be good for the country, but the 55 year old steel worker in Pennsylvania gets little consolation out of the fact that free trade is going to create more world wealth when he says where the heck am I going to get my paycheck next month. 

"We are paying a price for almost deliberate blindness in the financial capitals of the world to the kind of costs that are being created sometimes."

Again this echoes Shilling above. In his paper, "The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade", David Autor takes a very detailed look at these issues and investigates them empirically. David was guest this past year on EconTalk with Russ Roberts. Some highlights:

• one of the standard arguments for free trade and globalization is that it makes the pie bigger, and sometimes the story sounds like some people get larger slices than others, but everyone gets a bigger slice, so on the net everyone is better off. 
• Another way of thinking about this is that trade increases aggregate wealth, and this increase more than offsets the losses for those that are displaced in the labor force.
• Autor points out that yes, gains can offset losses, but the gains are going to different people
• Example: sure consumers gain by saving 5 cents on the broom they buy at Wal-Mart, and if you add up all of those nickels its more than the total losses for people whose lives are ruined.
• But this is little consolation to those whose lives are ruined, it takes years to find alternative opportunities and often at a fraction of the salary they earned before
• In the past, maybe these distributional effects were of less concern because trade largely reflected differences in comparative advantage across different types of manufacturing- for example maybe we would lose jobs manufacturing electronics but make up for it with other jobs building tractors-And balanced trade resulted
• In the past, skillsets were much more congruent across different industries with changing comparative advantages- i.e. it was not extremely difficult to move from manufacturing one good to another if your former job was displaced by trade
• More recently, with globalization, things changed. Instead of reallocating across sectors of manufacturing, countries like China just supplanted manufacturing on a much larger scale. And instead of paying for imports with different exports for which we had a comparative advantage we ran trade deficits (of course with surpluses in capital accounts)
• However, the kinds of investments being made with the new wealth created by global trade are in areas and sectors where skills are not congruent for many workers supplanted by the trade outcomes
• Ultimately we have experienced a sharp decline in demand for labor that has been contractionary

Hence this is the 'stagnation' in real wage growth that so many have been talking about. Could it also be why conventional stimulus and monetary policy has not really moved the needle in terms of economic growth? Is this because our comparative advantage is in services, technology, marketing, research, and engineering and these sectors are not soaking up the excess labor freed up when manufacturers shut down or relocate overseas?

The conventional wisdom has always been with trade, labor and resources that were once tied up in lower valued uses are reallocated to higher valued uses creating more wealth making everyone better off. But Autor is arguing that this just isn't happening or is taking too long. Maybe its the next generation or two that reaps the rewards. But not necessarily. If you've got a good gig and lose it, you may end up living in an area with bad schools, or may not have the resources to provide your children or the next generation with the education and training required to take advantage of the new economy jobs where the gains more than offset the losses from globalization. 

This also makes me wonder...supply side policies designed to promote economic growth and  aggregate wealth (under the terrible misnomer 'trickle down economics' ) might not work quite as well as they used to either given the structural environment depicted by Autor in his paper. But that probably goes the same for fiscal stimulus related to infrastructure. It might boost those sectors related to construction, but the traditional multiplier working its way through manufacturing and labor demand just likely won't work the way the Keynesians believed it would 30 years ago. 

So what is the answer? Surely a world with trade is in aggregate better than one without. Does this mean renegotiating NAFTA? Should we put the brakes on future globalization and phase in tariffs and trade restrictions and slowly fade them out so that sectors can readjust over a few generations? (things Donald Trump may seem in favor of) Or more aggressive and progressive policies called for  to provide a soft landing for those future displaced?  Some combination?  This gets to more spending on a number of programs, healthcare, and education. (things Hillary Clinton would have supported)

I'm not sure what the answer is after considering the incentive effects and the impacts for long term economic growth and development. Not to mention government spending. However, it was the lack of policy response to these questions that made this past election what it was. 

References:

"The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade," by David H. Autor, David Dorn, and Gordon H. Hanson. National Bureau of Economic Research Working Paper, January 2016.

Dannon Yogurt Called Out for Misleading Consumers

Recently on Agritalk (Nov 3), Michael Neuwirth, senior director of public relations with Dannon discussed their new campaign to ramp up offerings of non-gmo yogurt products.

From: Dannon's Contrasting GMO Message Fails to Convince USFRA

"In October, leaders from the American Farm Bureau Federation, American Soybean Association, American Sugarbeet Growers Association, National Corn Growers Association, National Milk Producers Federation, and U.S. Farmers and Ranchers Alliance signed a letter to Dannon, saying the company can’t claim it’s improving sustainability practices by turning to non-GMO ingredients."

With this decision, Dannon joins other snake oil marketers, including Cliff Bar and Chipotle, in their efforts to create market share misleading consumers and demeaning farmers.