Relevant and even prescient commentary on news, politics and the economy.

Online Shopping

A big change that has occurred in my household this year is the amount of shopping we do online – it has gone up a lot. It extends to food – a significant part of my daily calories now get delivered to our house. It isn’t just price driving that change; some of what we order online is very difficult to obtain locally. In fact, it was looking for items I wanted to add to my diet for health reasons that catalyzed this shift to online shopping.

What have been your experiences shopping online? Any thoughts about how it all plays out going forward?

Give A Man A Fish

I once spent a couple of weeks asking myself, “How can a nation, or even just a city, cheaply deal with a scarcity of food for the poor, together with a plenitude of cheapbad food (whether fast or home-made) which harms ones health?” I came up with the Streetfood Initiative (still in planning, I am sorry to say.)

Up here in the great white north we have plenty of poorly fed, obese, and diabetic people. We’re good — but not perfect. Our local food bank alone fed about 36,000 people four years ago when I last looked up the data, and the numbers have risen since then.

I proposed that a network of carts and tiny kiosks be set up to give away Streetfood to anyone who asks.

It would not infringe on the fast food industry because it would not be the sort of addictive mix of fat-sugar-salt-starch that they specialize in. All offerings would be vegetarian, though spicy and nutritionally balanced. Rice, lentils, curry, stews, and stir-fry type recipes, each serving handed over in an edible container, like a hollowed breadroll or a unsweetened ice cream cone type cup, using a minimum of wrapping. Recipes would be public, on the net, and available at the cart for the asking.

The carts and kiosks would be funded through general revenue, with the understanding that savings and benefits would show up elsewhere: less diabetes, better performance in the schools, fewer malnourished drunks taking up hospital beds, fewer proud starving seniors, and so on.

How much rice, lentils and beans can you buy for what it costs to care for one blind, amputee diabetic? Lots and lots, I bet.

Another effect I hoped for (perhaps the core effect) would be to alter people’s ideas of what “food” is.

We generally consider the food we grew up with to be real food, and stuff encountered later as foreign, peculiar or even non-food. Diet is partly choice, true — but much of what we consider choice comes down to imprinting.

Jared Diamon, in his book “Collapse: How Societies Choose to Fail or Succeed”: wrote about why the Norse settlements on Greenland failed. He said

“Looking back on these settlements from our vantage point today, we can observe that the Norse were imperceptibly following practices which weren’t sustainable in their environment in Greenland. These practices were as follows:
•Chopped down forests to use wood for fuel, furniture and houses
•Used cleared land for grazing cows
•Built houses out of 6-foot slabs of turf which meant a home consumed about 10 acres of grassland
These practices weren’t sustainable… Looking back the Norse Greenlanders should have learned from the Inuit to hunt seals as the most reliable food source in winter. But they preferred beef and didn’t like seal. The Norse also should have eaten fish. If they had, they may have survived.”

I consider canned mushroom soup to be a staple, along with bananas, potato chips, and frozen pizza. My grandmother, born in the late 1800s, most likely would never have seen these when she was growing up.

But what if a generation of children grew up eating delicious street food? Presented correctly, it could become the circus and state-fair finger food for a whole population of youngsters, and help introduce people to a diet that doesn’t subvert their health.

As for the free rider problem — bring ’em on. In an inversion of the old saw, we could be a culture where “the wealthy, as well as the poor, are permitted to eat Streetfood all they wish.”

Up here, a person generally has to be below 37% of our poverty line before they will go to a food bank. People who need the food still won’t go until truly desperate. I think the potential for free riders is less than one might imagine, and meanwhile — they will learn different tastes.

What Policies Cause High Food Prices?

by Tom Bozzo

Over at his FT blog, Willem Buiter sensibly calls for an end to biofuel subsidies and mandated levels of biofuel use, and suggests that the money be spent on environmentally friendlier renewable energy research instead. He delivers a great bit of wonk snark after reciting various biofuel targets, then saying:

All this will have to go. It is part of a process called ‘learning’. More governments and official institutions should try it.

Buiter does deliver a “Paging Dr. Baker” moment in adding a more general call for agriculture liberalization in the rich world to the pitch:

End all policies to subsidise or protect agriculture as well as all policies to restrict agricultural production through set-asides (paying farmers not to grow stuff) and other idiocies.

Do subsidies and restrictions on production both affect price in the same direction? (Not all set-asides are “idiocies” either, notably those on the margins of waterways.)

Agriculture subsidies is one of those areas that tends to unite economists against politicians; the elimination of them seems to offer benefits across the political spectrum — a little expansion of the “free” market for the right, a little reduction in corporate welfare for the left, say. Much as I might be receptive to both under the right circumstances, this is not enough reason to pursue the near-total liberalization of ag markets.

It can be argued that there are goods where we should be willing to trade some efficiency of provision for reliability and/or affordability, which favors the intervention of the visible hand; I’d argue that food staples are among them. To the extent this is the policy aim, then economists should be more aware than most that there’s no theoretical reason to expect free markets to provide them reliably or affordably for all, or even all important, values of “reliable” and “affordable.” It’s part of a process called ‘learning,’ natch!

It’s necessary to actually make the case that subsidies aren’t warranted, or at least that the effects of existing as opposed to ideal subsidy programs in total are worse than whatever could be reasonably expected under liberalization, and that’s a tough one to make categorically. Even Buiter is willing to countenance subsidies for production of staple crops in poor and underdeveloped countries. The question is whether that should be the limit of them, and there isn’t a simple answer.

A Quick One on Externalities of Foreign Trade

I won’t pretend this is part of the Vladimir Masch discussion, or one of the traditional thorough-analysis Angry Bear posts. Just a data point on which we may need to work later, and a report that will be of interest to many who read here.

UPDATE: As rdan notes in comments, this “links to testing for mad [cow disease, or BSE] as well.” And since I’m a week or so behind in my blog-reading, I’ll just refer everyone to this U.S. Food Policy post, which used economic reasoning to come to a depressing but clear conclusion.***

One of the ways in which externalities are created is with differing regulations on what should be the same product. The quality of the Grade-A beef you buy that was raised in Texas should be the same as the Grade-A beef that was raised in Mexico and imported. If the inspection processes are not the same, though, the chance of contamination is raised.

I hasten to note that the probability of contamination in both cases is rather low, if you assume that the firm is an ongoing concern that plans to do business with you again.*

But what is the effect of contaminated meat slipping through?

I’m glad you asked, and so is the USDA.

Economic Impacts of Foreign Animal Disease
seeks to address the question. Though it deals specifically with foot-and-mouth disease, the report:

presents a quarterly livestock and crop modeling framework in which epidemiological model results are integrated with an economic model of the U.S. agricultural sector to estimate the economic impacts of outbreaks of foreign-source livestock diseases. The framework can be applied to many livestock diseases[.]

To what I trust is no one’s great surprise, the model predicts larger losses than just the animals slaughtered:

Model results show large trade-related losses for beef, beef cattle, hogs, and pork, even though relatively few animals are destroyed.

Even the bromide at the end (“The best control strategies prove to be those that reduce the duration of the outbreak.” Really??) doesn’t change the economic reality: the best way to ensure the highest return is to spend money on inspection.

Anyone who has ever used the financial markets for hedging purposes could tell you that. It’s good to see that the USDA has done the analysis to justify a uniform process of inspection of foreign meats; the only question is whether they realise that is what they have done.**

*It is, for instance, common knowledge in some parts of Eastern Europe that, if you are offered lumber at a lower-than-market price, it probably comes from the Chernobyl area.

**This appears to be noting new: here’s a 1906 NYTimes article (PDF) dealing with jurisdiction over testing meats. (That was, of course, the year after The Jungle was published. Even then, loopholes were the rule, not long-term sustainability.)

***”Instead, the officials’ actions seem to me most consistent with believing there are a handful of real cases of BSE out there in the beef cattle population, and that these cases will naturally die out without infecting new cattle over the next several years. Of course, if this were true, a handful of people would be subjected to risk of the deadly disease years after eating a cow whose infection was never discovered.”