Saturday, January 30, 2010

Animal Activism and Statistical Fallacies

In a recent article, animal rights activists (Mercy for Animals-MFA) went undercover and made some observations about animal abuse on dairy farms. See-
Governor Paterson, Shut This Dairy Down

The author of the above article states:

"But the grisly footage that every farm randomly chosen for investigation--MFA has investigated 11--seems to yield, indicates the violence is not isolated, not coincidental, but agribusiness-as-usual."

This is exactly why economists and scientists employ statistical methods. Anyone can make outrageous claims about a number of policies, but are these claims really consistent with evidence? How do we determine if some claims are more valid than others?

Statistical inference is the process by which we take a sample and then try to make statements about the population based on what we observe from the sample. If we take a sample (like a sample of dairy farms) and make observations, the fact that our sample was 'random' doesn't necessarily make our conclusions about the population it came from valid.

Before we can say anything about the population, we need to know 'how rare is this sample?' We need to know something about our 'sampling distribution' to make these claims.

According to the USDA, in 2006 there were 75,000 dairy operations in the U.S. According to the activists claims, they 'randomly' sampled 11 dairies and found abuse on all of them. That represents just .0146% of all dairies. If we wanted to investigate the proportion of dairy farms that were abusing animals, if we wanted to be 90% confident in our estimate ( that is construct a 90% confidence interval) and we wanted the estimate (within the confidence interval)to be within a margin of error of .05, then the sample size required to estimate this proportion can be given by the following formula:

n = (z/2E)^2 where

z = value from the standard normal distribution associated with a 90% confidence interval

E = the margin of error

The sample size we would need is: (1.645/2*.05)^2 = (16.45)^2 = 270.65 ~271 farms!

To do this we have to make some assumptions:

Since we don't know the actual proportion of dairy farms that abuse animals, the most objective estimate may be 50%. The formula above is derived based on that assumption. (if we assumed 90% then it turns out based on the math (not shown) that the sample size would have to be the same as if we assumed that only 10% of farms abused their animals, which gives a sample size of about 98 or way more than 11). This also assumes normally distributed data. But to calculate anything, we would have to depend still on someone's subjective opinion of whether a farm was engaging in abuse or not.

I'm sure the article that I'm referring to above was never intended to be scientific, but the author should have chosen their words more carefully. What they have is allegedly a 'random' observation and nothing more. They have no 'empirical' evidence to infer from their 'random' samples that these abuses are 'agribusiness-as-usual' for the whole population of dairy farmers. While MFA may have evidence sufficient for taking action against these individual dairies, the standard should be set much higher in order to support a larger role for government in animal agriculture, which seems to be the goal of many activist organizations.

Note: The University of Iowa has a great number of statistical calculators for doing these sorts of calculations. The sample size option can be found here. In the box, just select 'CI for one proportion' Deselect finite population ( since the population of dairies is quite large at 75,000)then select your level of confidence and margin of error.


Profits, Costs, and the Changing Structure of Dairy Farming / ERR-47
Economic Research Service/USDA Link

"Governor Patterson Shut Down This Dairy", Jan 27,2010.

Thursday, January 28, 2010

The Gausian Copula:

Nice demo on the copula. I'm not in full agreement with the conclusion.

"That does not mean it was useless. The Gaussian copula provided a
convienent way to describe a relationship that held under particular
conditions. But it was fed data that reflected a period when housing
prices were not correlated to the extent that they turned out to be when the housing bubble popped."

From:In defense of the Gaussian copula, The Economist

You have to ask, if you were basing risk correlation on the copula, how can you incorporate the uncertainty and instability created by the fed maintaining artificially low interest rates for so long. Bubbles/Booms usually result from an accumulation of mistakes. Markets typically by their very nature consist decentralized decisions. What would lead so many decentralized decision makers to all make the same mistakes when it came to the financial crisis? This kind of coordination and the accumulation of mistakes is very likely explained by the fed's interventions. Decisions about risk, leverage, and asset prices would very likely become more correlated in an environment of centrally planned interest rates than under 'normal' conditions.

Wednesday, January 13, 2010

Class: The Politics of Food

Chew On It: New J-Term Class Delves Into 'The Politics of Food'

After just a few days in the class, several students had already altered their eating habits. Third-year Rashawnda James gave up eating chicken after watching "Food, Inc." and seeing how factory farms cram chickens into cages so tiny that they can never spread their wings. One line from the film, "We're not breeding chicken; we're breeding food," conveyed the objectification and inhumane treatment of animals endemic to factory farming, James said.

Pape noted that he personally buys organic milk. When a student asked why, he noted that he didn't want to serve any additional hormones to his 12-year-old daughter.Freedman noted that he also purchased organic milk for his family, and had a hard time explaining, even to himself, exactly why he made that choice. "I think it's a little superstitious. I think a lot of my food choices are tied not to reason, and not necessarily even to preference or taste, but to practice and tradition and habit."

From the description in this story, it appears that the entire class is focused on politically motivated films and books, with an agenda critical of modern agriculture and most family farms. Perhaps there should be a co-requisite or a companion course that also looks at the science and environmental impacts of food choices. Perhaps it could convince Mr. Freedman to give up on his superstitious practices.

Just presenting some basic facts might help Mr. Freedman deal with his superstitions. Somatotropin receptors in human cells cannot recognize bST. (the hormone he probably doesn't even realize he's concerned with). Residue levels of hormones in food have been demonstrated to be safe,and are well below any level that would have a known effect in humans. Given no conclusive scientific link between the use of antibiotics in livestock and clinically important antibiotic-resistant infections in humans, more effort should be placed on judicious use in humans.

Facts relating to the environmental impacts of these lagely personal and political choices wouldn't hurt either. For example, energy use and greenhouse gas emissions per pound of beef are increased three-fold in grass-fed beef cattle vs. conventional, excluding the positive benefits of growth enhancing pharmaceuticals.

More information:


rBST -Cornell University Dept of Animal Science

Antimicrobial Resistance: Implications for the Food System
Comprehensive Reviews in Food Science and Food Safety
Volume 5 Issue 3, Pages 71 - 137

Monday, January 11, 2010

Forbes: Big Fat America

It looks like Forbes is emulating TIME magazine with more point of view journalism targeting agriculture and family farms.

Big Fat America - link

Here are some of the outlandish statements I found in the piece:

Archer Daniels Midland ( ADM - news - people ), the self-professed "super market to the world" is the behemoth buyer of farm products that's been influential in the development of factory farms.

It is true that Archer Daniels Midland has played a huge role in modernizing the agriculture supply chain. But the results of this have been mainly positive if you consider that modern agriculture is more sustainable and has a lower carbon footprint than ever in history! It appears the attempt here is imagery. The author is unable to cite anything negative negative about ADM that is substantiated other than using the adjective 'Factory Farm.' The term factory farm is not defined, and I guess is assumed to be understood by the readers as just a bad thing associated with big agribusiness like ADM. I often find that when one evokes the term 'Factory Farm', it is just like profanity- strong words used in place of better reasoning. Other cases I've seen this sort of shibboleth is in the attempt to appear to be pro family farm while stealthily advocating polices that would be detrimental to all producers.

The documentary Food Inc. makes the compelling case that factory farming spreads disease among cattle, hogs and birds and that diseases are spreading to crops like peanuts and spinach.

It is true that Food Inc. makes these outrageous claims, but it is a novelty film, not a scientific report. No evidence is given to grant that the case made by Food Inc is compelling in the sense of being convincing. Emotionally appealing? Yes. Again with the use of the term 'Factory Farm.'

Is organic beef healthier than beef from a factory farm? There's no doubt. Cows aren't supposed to eat corn, but factory farmers feed it to them to fatten them up fast, so by definition a corn-fed cow is going to produce fattier meat than a grass-fed one. The corn causes bacteria to grow in the cow's digestive equipment, which is why the cows need all the darned antibiotics. Cows get fed corn because corn is cheap, and corn is cheap because it's subsidized. Dropping those subsidies might raise the price of corn feed, so that letting cattle wander and graze could become an appealing choice again.

Again, the author again applies the label 'Factory Farm' to what are mainly family farms that either finish their own cattle corn or sell calves to feedlots where corn is fed. As I mentioned when criticizing similar junk science last summer in TIME magazine, what matters is of the antimicrobials given to animals, what % actually target pathogens that affect humans. Resistance requires selection pressure, and if the majority of antimicrobials used in livestock production are not selecting against deadly pathogens, then the risks are overblown. What we have observed is that in countries where food grade antimicrobials used in livestock production have been more heavily regulated or banned, the resulting increase in livestock illness has lead to an increased use of antibiotics actually used in human medicine. And just like the case with the TIME article, the environmental benefits of growth enhancing pharmaceuticals are never mentioned. Pound-for-pound, beef produced with grains and growth hormones produces 40% less greenhouse gas emissions and saves two-thirds more land for nature compared to organic grass-fed beef.

Also, high-fructose corn syrup isn't sugar, so there's no way that the two are nutritionally identical unless the phrase "nutritionally" is meaningless. If the government subsidies are pulled, food makers might turn back to sugar land, since it's more expensive, they might even use less of it.'

It is true, high fructose corn syrup is not the same as table sugar. The author makes this distinction and leaves us with the conclusion that this is bad, again without evidence. High Fructose corn syrup, in the highest formulation used in most foods and beverages is 55% fructose. The author doesn't bother to mention that the alternative that they propose, table sugar is 50% fructose! Most recent research indicates that the effects of sugar sweetened beverages ( mostly sweetened with HFCS) have no statistical link to obesity.

The idea that eliminating subsidies would be a good way to combat obesity is purley speculative and again is contradicted by evidence, as I've cited before from UC Davis:

'The culprit here is not corn subsidies; rather,it is sugar policy that has restricted imports, driven up the U.S. price of sugar, and encouraged the replacement of sugar with alternative caloric sweeteners...Given that consumers generally show limited responses to retail food price changes, eliminating the corn subsidy would reduce corn-based food consumption by at most 0.2 percent."

Finally, the author concludes by proposing that we need more labeling. For what? The purpose of labeling is to warn consumers of potential dangers. There is no evidence indicating any potential dangers from GM foods, and the organic market clearly establishes their brands as being GMO free ( losing out on the environmental benefits of biotech). But, no need for labels.


Capper, J. L., Cady, R. A., Bauman, D. E. The environmental impact of dairy production: 1944 compared with 2007. Journal of Animal Science, 2009; 87 (6): 2160 DOI: 10.2527/jas.2009-1781

International Journal of Food Microbiology
Volume 120, Issue 3, 15 December 2007, Pages 296-302

The Environmental Safety and Benefits of Growth Enhancing Pharmaceutical Technologies in Beef Production
By Alex Avery and Dennis Avery, Hudson Institute, Centre for Global Food Issues.

Am J Clin Nutr doi: 10.3945/ajcn.2009.27573
Adolescent beverage habits and changes in weight over time:
findings from Project EAT1–3
Michelle S Vanselow, Mark A Pereira, Dianne Neumark-Sztainer, and Susan K Raatz

Nutrition July-August 2007, Volume 23, Issues 7-8, Pages 557-563
"Is sugar-sweetened beverage consumption associated with increased fatness in children?"

Saturday, January 09, 2010

Economists Explain Political Aides Disappointment

Some of our political leaders are advocating for more regulation and are disappointed with the results:( from CNN Money )

"Not only do they come for a bailout, but in this short period of time where they have a level of normalcy because of what the government did to help them, they're now back trying to fight consumer offices and the type of protections that will prevent another type of situation where the economy is taken over the cliff by the actions taken on Wall Street and the financial market," Emanuel said on CNN's "State of the Union."

"The most offensive thing is, we haven't seen the kind of increase in lending that we should," Axelrod said in reference to tight credit for consumers and small businesses that need capital for growth."

However, economists Gary Becker and Steven Davis explain the disappointing results are expected given the current economic climate: (Wall-Street Journal)

"We believe two factors are behind this rather tepid rebound. An obvious one is the severe financial crisis that precipitated this recession, with many major financial institutions receiving large bailouts from the federal government...Faced with a highly uncertain policy environment, the prudent course is to set aside or delay costly commitments that are hard to reverse. The result is reluctance by banks to increase lending"

"These facts suggest that it was a serious economic mistake to press for a hasty, major transformation of the U.S. economy on the heels of the worst financial crisis in decades. A more effective approach would have been to concentrate first on fighting the recession and laying solid foundations for growth. They should have put plans to re-engineer the economy on the backburner, and kept them there until the economy emerged fully from the recession and returned to robust growth. By failing to adopt a measured approach to economic policy, Congress and the president may be slowing the economic recovery, and thereby prolonging the distress from the recession."

It bears repeating that this isn't the first time we've seen such a wide margin between policy and reality. Note Chamberlain made a similar observation concerning the efforts to combat the Great Depression:

"Businessmen came to ask themselves whether Roosevelt really understood a system where the hope of profit sparks expansion and investment. Or did he believe simply in centralizing decision and authority in boards and "planners" along the Patomac?"

The preponderance of evidence suggests a new direction that involves tax cuts and more pro-growth policies.



Uncertainty and the Slow Recovery
Wall Street Journal
Jan 4, 2010

Obama aides: Wall Street shouldn't fight reform
CNN Money
Oct 19, 2009

The Enterprising Americans:
A Business History of
the United States

Thursday, January 07, 2010

Poll: Most Oppose Tax on Junk Food

"Most Americans want to lose weight, a new CBS News poll finds – but they do not favor a tax on junk food and do not believe that such a tax would help lower obersity. "

Note: Recent research from George Mason University indicates that the tax rate required to have significant impact on obesity would be in the 1200 percent range, and even if taxes eliminated (in this case soda) consumption, the impact on obesity would be very small.

Saturday, January 02, 2010

Avatar, Property Rights, and the Environment

Some may claim that Avatar could not have had a libertarian or pro-market theme, because the Na'vi people in the movie didn't have a strong notion of property rights. Never was there mention of deeds, titles, or stock exchanges among the Na'vi. One might even go so far as to say that these people lived in harmony with their environment, and really had no conception property.

First, the movie was full of clues that the Na'vi people embraced property. First of all, what is property, other than a formal relationship between oneself, others, and resources. The Na'vi appeared to live in a society that embraced monogomous marriage, where two individuals take exclusive ownership in one another. They also appeared to take exclusive ownership in some of the animal life, and if they had no sense of ownership, why would they care to fight for their land and homes?

Now it certainly did appear that they lived in harmony with their environment, and there was little mention of extensive institutions of property like deeds and titles. If you review the literature on property and the environment (Coase, Demsetz, Hardin) you will find a common theme illustrating the role of property rights in internalizing negative externalities- in other words, mitigating conflicts of interests and leading to choices that put individuals in harmony with one another and their environment. Demsetz looks specifically at various groups of Native Americans and the relationship between resources, scarcity, enforcement costs, technology, and property. In cases where technology is insufficient or enforcement costs are too great, property rights may not evolve. In other cases, when resources become scarce, there are not technological barriers, ( or there are technological breakthroughs) and enforcement costs are low, more extensive systems of property rights may develop.

It appeared from the movie, that on Pandora, resources were relatively abundant. There appeared to be no need to develop intricate forms of property to internalize any negative externalities resulting from common ownership of some scarce resources. However, that does not imply that they were alien to the notion of property.

"Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place." — Frederic Bastiat

"The system of private property is the most important guaranty of freedom, not only for those who own property, but scarcely less for those who do not." -Hayek.

"[A] private property regime makes people responsible for their own actions in the realm of material goods. Such a system therefore ensures that people experience the consequences of their own acts. Property sets up fences, but it also surrounds us with mirrors, reflecting back upon us the consequences of our own behavior." –Tom Bethell


'Tragedy of the Commons.' Science, Vol 162 no 3859 Dec 13, 1968 p. 1243-1248 Garret Hardin

Towards a Theory of Property Rights.
Harold Demsetz
The American Economic Review. Volume 57, Issue 2. May, 1967

The Problem of Social Cost
R. H. Coase
Journal of Law and Economics, Vol. 3, Oct., 1960 (Oct., 1960), pp. 1-44

Friday, January 01, 2010

Avatar: Anticapitalist? Not Really

I've read a few reviews of the movie Avatar, and many of them make the claim that the movie has an 'anti-capitalist' message. Having seen the movie, I didn't see anything that made me think of capitalism. Anyone that has seen the new movie Avatar might agree that there are a lot of lessons that one could take away from the story. Among the many themes, one might suggest that the story is about corporate greed. Someone else might say that it is about environmental exploitation. While you might say that the people in Avatar are struggling with issues related to corporate greed and environmental exploitation, you could not say that capitalism is an issue. This movie offers a teachable moment and an important lesson in economics.

If a capitalist system had been adopted, there would have been no conflict between the two societies. Issues could have been resolved by peaceful,cooperative, mutually beneficial, voluntary exchange. ( a good description of capitalism) The absence of force, is by definition a necessary and sufficient condition for capitalism. There are two things that cannot be achieved at gun point- charity and capitalism.

Ask yourself, was this movie about peaceful cooperative solutions or using violent means to serve an end?
Was the private company that seemed to be central to the plot really a private company- or was it the result of some public private partnership? Was it a government sponsored enterprise? If not, was this the only company on the planet ? I saw no indication that it was in competition with rivals- so if it wasn't a government sponsored enterprise did it achieve monopoly status through some sort of regulatory advantage? The instituional arrangement that would allow for such unaccountable behavior as this company exhibited, and that made use of force, was something other than capitalism.

While some might like to characterize what they saw in the film as capitalism, and may think that it provides an anti-capitalist message, they are wrong. If anything it stands to show the dangers of posed in the absence of property rights, liberty, and voluntary exchange. I remember my geography teacher playing a song ( 'Beds are Burning'? By Midnight Oil) and proceeding to tell us how freedom and capitalism was destroying the planet. I hope such a great movie like Avatar is not misused in the same way.
Avatar was about a lot of things, but capitalism was not one of them.