Consumer World and Mouse Print

The headline sounds like a superhero and the ever-loyal sidekick: Consumer World and Mouse Print.

That's not far wrong.

Consumer World is veteran consumer protection expert Edgar Dworsky's original site (no RSS field, but easy email newsletter subscription). Mouse Print is the Massachusetts-based writer's entertaining blog covering the tiny print on consumer packaging and advertising.

The blog has been having fun lately with package downsizing for food and beverage products. Here is the recent coverage for orange juice.

Hooray for summer

Hooray for the Waltham Fields Community Farm, and for a sunny weekend afternoon at the farm's fundraiser with the marvelous inter-generational Family Folk Chorale. Hooray for Captain Vegetable, who brought a smile to my children's faces. Hooray for the community and traditions of local farms and local food.

The real food stamp challenge

At Half Changed World, Elizabeth is doing a real food stamp challenge -- genuinely reflecting on the cost of food instead of seeking confirmation for an expected outcome. It gives her a lot to think about.

So why are we finding it relatively easy to stay within the Thrifty Food Plan, when by all accounts, people on Food Stamps are struggling badly to cope with rising food prices? My guess is that there are several things going on:

• First, most people on Food Stamps are working, and thus receive less than the maximum monthly benefit. In theory, Food Stamps aren't supposed to pay for all their food -- they're supposed to use some of their cash income for food as well. But low-income families have many other demands on their income (if I remember correctly, about half are spending 50 percent or more of their income just on housing). Food is the easiest part of the budget to squeeze, particularly if you're willing to invest the time in going to food pantries.
• Second, we have a car, and so can travel to low-cost supermarkets and warehouse stores. And we can have enough cash to buy large quantities when they're on sale.
• Third, we're eating very little meat, and relatively little processed food. We often make a big batch of pancakes or waffles on the weekend, and reheat them for breakfast all week, which is a lot cheaper than breakfast cereal.

I think nobody would find the Thrifty Food Plan to be a permissive food budget. Some would find it adequate, and some not even adequate.

But here is the hard policy question -- hard even to ask without seeming heartless. If the Thrifty Food Plan is adequate for many, but not all, then should the maximum food stamp budget be raised?

The Thrifty Food Plan, and hence the program benefit, are already indexed for food price inflation (though the adjustment lags during a particularly inflationary year, such as the current one). What makes the question difficult is that the Food Stamp Program does two things: (a) it provides resources to low-income people, and (b) it insists that by law the program participant may not spend those resources on anything other than grocery food, even if the participant's own judgment is that she needs to spend only part of those resources on food.

How much would a change in ethanol policy affect corn prices?

Here is the story from one of the most authoritative sources in agricultural economics, the Center for Agricultural and Rural Development at Iowa State University.

In a working paper (.pdf) released this month, Lihong Lu McPhail and Bruce Babcock consider the impact of three policy changes: (1) removing the Renewable Fuel Standards, which mandate that a certain fraction of fuel comes from ethanol, (2) removing the blenders tax credit, a direct tax subsidy to blenders, and (3) removing the tariff on imported ethanol, which encourages the conversion of U.S. corn to ethanol by keeping domestic ethanol prices high.

They reach the following conclusion about short term effects:

Eliminating any one of the policies would reduce average corn prices by less than 4%. Removal of all three programs would decrease average corn prices by 14.5%. The reason why the changes are relatively modest is that existing U.S. ethanol plants will only shut down if their variable cost of production is not covered. Changes in ethanol policies would have large distributional impacts. Corn growers, ethanol producers, and fuel consumers have a large incentive to maintain high ethanol consumption. Gasoline producers have a large incentive to reduce ethanol production and imports. Livestock producers have a large short-run incentive to reduce domestic ethanol production.

The authors plan future work to consider the corn and soybean markets jointly, and to lengthen the time period focus.

I would add that 14.5% seems like too big a price reduction to dismiss lightly. Also, the authors explain that ethanol plants will keep operating even if they are failing to pay for themselves, so long as their sales cover at least their variable costs (such as purchases of inputs). But, the investments in the plants themselves were in many cases also subsidized by the federal government, so the impact of federal policies has almost certainly been to raise corn prices by more than 14.5%, and in the midst of an unusual price spike to boot.

For further reading, the Environmental Working Group has just released a blistering report on ethanol policies (see coverage at Mulch).

King Corn

In the engaging and insightful documentary King Corn (trailer from YouTube below), college friends Ian Cheney and Curt Ellis use their year of experience farming an acre of corn in Iowa as the frame on which to hang a wider exploration of the U.S. food system.

I finally watched King Corn last week after missing it in the theaters and waiting for it from Netflix. I should have seen it sooner. There's a lot to like.

• Cheney and Ellis are charming stand-ins for the film viewer, looking with astonishment on an industrial system few people understand.
• The film overcomes gimmickry in part through excellent interviews with Ken Cook, Michael Pollan, an agronomist, a corn syrup industry public relations person, and more. The interview with former Agriculture Secretary Earl Butz, prophet of the agriculture motto "get big or get out," is of considerable historical interest. This interview reminded me of Michael Moore's interview with Charlton Heston in Bowling for Columbine, but Cheney and Ellis are kinder to their host.
• A tour of urban neighborhoods, chaperoned by a fellow who grew up in the neighborhood and who lost a parent to diabetes, extends the film's scope beyond the heartland and increases its relevance to audiences anywhere in the country.
• The film is clever in its use of visuals to communicate complicated information, such as hand-drawn bar graphs that provide substantial quantitative detail without breaking the film's rustic tone, and funny animations using a toy farm to illustrate the agriculture system's interrelationships.

The Boston Globe's rave review points out that the film's gentle tone makes easier watching than Super Size Me or Michael Moore's work, but without subtracting from the film's motivational impact.

Flooding likely to contribute to high food prices

The Financial Times this morning described the impact of the flooding in Iowa and nearby states:

Agriculture officials and traders said the damage could push up worldwide corn and soyabean prices, which have spiralled in recent days as floods have swamped crops in parts of Iowa, the US's biggest cornproducing state. The warning comes at a time when high food prices are already sparking protests across the developing world.

Corn futures in Chicago this week rose to record highs of more than $8 a bushel on fears that up to 5m acres of the crop could be lost, while soyabean prices hit a record of $15.93 a bushel.

I spoke yesterday with Bob Burgdorfer at Reuters:

Torrential rains over the past week and the worst floods in 15 years have badly hit the U.S. Midwest, which directly or indirectly produces much of the nation's food.

The corn and soybeans grown there are used in processed foods and are fed in some form to the cattle, hogs, and chickens that produce the nation's meat.

"Given that grain supplies are already tight, this flood comes at a bad time and is going to push the major grain crop prices up rapidly. Over a longer time, that will have an effect on supermarket prices as well," said Parke Wilde, economist at Tufts University.

This week's weather news sent me back to last month's Farm Bill coverage, to remind myself whether the controversial "permanent disaster assistance provision" had made it into the final law. It appears to me it did, but I am not sure I understand the provision correctly. Perhaps its main impact is not so much to increase authorized eligibility or benefit amounts for disaster payments, but rather to establish a permanent funding source out of customs receipts, making supplemental appropriations less necessary? It is not clear to me whether it will have an impact already this year. Here is the Congressional Research Service's description (.pdf) of the crop insurance and disaster assistance provisions.

Marginal Revolution covers food safety

Alex Tabarrok at Marginal Revolution gives Paul Krugman a hard rap on the knuckles for criticizing federal food safety regulators without noting the relevant data. Krugman's recent column describes a crisis of foodborne illness outbreaks, while Tabarrok points out CDC statistics showing that at least some kinds of outbreaks haven't increased. Still, the CDC data aren't the whole story. Here is my comment:

Interesting post and thread, Alex.

On food safety issues, I try to ignore the ideologues.

On the one hand, Grover Norquist and Milton Friedman have hopes for market incentives that are not only unrealistic, they are very far from the current state of good contemporary economic thought on food safety.

On the other hand, I give little weight to critics who hold out unrealistic expectations for government prevention of all food safety risks, not so much because they care about food safety, but because they just have large ambitions for government interventions in the economy.

Current economic thought draws on a fairly specific diagnosis of different kinds of imperfect information, each of which calls for a different policy response, which can range from laissez faire to labeling to testing to regulation.

A standard mainstream -- or even somewhat conservative -- text on the economics of food safety is John Antle's book on food safety. It acknowledges market failures in food safety, and particularly recognizes the need for strong government regulation of food-borne pathogens, because in many cases consumers cannot recognize the safety of the food even after purchase, and hence cannot defend their own interests in the marketplace. In my reading, Antle is a strong critic of food safety activists on other topics, such as pesticides (where he believes there is over regulation disproportionate to risk), but on foodborne disease he seems to me closer to Krugman than Friedman.

There are some exciting private market innovations in food safety recently. For example, the buyers for major supermarket chains are getting more sophisticated in demanding safety from their suppliers, which allows the market to achieve good outcomes that individual consumers could not command on their own.

At the same time, it is fair to say USDA and FDA oversight of food safety have fallen far short of a balanced position. The CDC stats on outbreaks have a number of shortcomings, and don't suffice to make me think otherwise. Take something like the USDA's refusal to let Creekstone beef voluntarily test its own product for BSE. It is so outrageous that the J. Thomas in his comments even presumes it to be untrue (it's true). The so-called "regulators" are way out of step with the public interest position of economists, even market economists who appreciate the market's accomplishments on its good days.

[Update 6/15/2008: Lively continuing discussion of this topic at the Economist's View, including comments from Mark Thoma, Tyler Cowen, and Alex Tabarrok.]