Saturday, August 20, 2011

Rent Seeking and Biotechnology

"Yet today we have only a handful of genetically modified crops, primarily soybeans, corn, canola and cotton. All are commodity crops mainly used for feed or fiber and all were developed by big biotech companies. Only big companies can muster the money necessary to navigate the regulatory thicket woven by the government's three oversight agencies: the E.P.A., the Department of Agriculture and the Food and Drug Administration."

Monday, August 15, 2011

AgBiotech combating climate change « The Berkeley Blog

Some teasers:

"GMOs in the US and in other countries, reduce significantly the use of rather toxic pesticide chemicals and there is evidence that they actually save significant amount of lives in India and China. "

"It is easy to show that if restrictions on the adoption of GMOs would have been removed and adoption rates of GM varieties in Europe would have been similar to the observed patterns of adoption, then much of the recent increase in commodity food prices would have been diminished. Introduction of GM varieties to wheat and rice would have further reduced commodity prices whereby helping the poor and would have released resources for other uses."

"The land use saving effect of GM varieties is estimated to have the equivalent effect of taking between 800,000-9 million passenger cars off of the road....The use of herbicide-tolerant varieties enable large scale adoption of low-tillage practices that sequester carbon and greenhouse gas sequestering effect is estimated to be equal to that of taking 6.4 million cars off the road."

"The heavy regulation of GMOs are unsound not only because of the loss of benefits from existing varieties, but because of the loss of potential benefits from newer applications of GMOs"

Sunday, August 14, 2011

Greg Mankiw's Blog: What nation has the most progressive tax system?

Based on these numbers, the U.S. has the most progressive tax system in the world by far.

The top 10% of earners earn about 33.5% of all income on the U.S. but pay 45.1% of taxes. They in essence pay 35% more in taxes than what they earn as a share of income.

There is also an interesting discussion on how these numbers are used and interpreted.

Saturday, August 13, 2011

The Economics of the S&P Downgrade

“the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011”

One of the main reasons that the ‘multiplier’ effects of the stimulus have not taken hold, and the reason that the economy is recovering so sluggishly is the uncertainty in the regulatory environment. Last fall, NCBA president Steve Fogelsong put this quite well in an interview on Agritalk where he discusses the regulatory zeal including cap and trade, the takeover of the financial and auto industry, the student loan industry, dust regulation, inheritance taxes, failure of pending free trade agreements, as well as livestock marketing regulations to name a few (at 9:23 on the clip you can find here

A very similar argument  is also well put in a post on the economics blog CafĂ© Hayek:

"But if the decline in GDP growth and in the rate of employment are caused, not by a taste-driven increase in the demand for money but, instead, by a large enough disruption in what Arnold Kling calls "patterns of sustainable specialization and trade," then kicking up aggregate demand won't solve the problem.  Neither kicking it up, or trying to, through monetary policy or through fiscal policy will work.  The problem is not originally one of widespread inadequate demand…. it is clearly the result of distorting government policies, regulatory and monetary, leading up to 2008 as well as of the symptom-treating policies since then that only worsen matters.  (And not to mention yet other actual and threatened policies)”

The issue of regulatory uncertainty is not unique to our current economic challenges, we had a very similar situation following the Great Depression, which lasted for over a decade. According to Robert Higgs, this was largely the result of New Deal Policies that created regulatory uncertainty prolonging the depression. You can find his paper here. You can also find a good discussion of this work  on the EconTalk podcast here.

I’ve shared a lot of the following research in the past discussing the prediction that the stimulus probably would not work, but given the recent downgrade in the U.S. credit rating, it seems like it is worth a review:

"The Keynesians had it all wrong. In the Great Depression, employment was not low because investment was low. Employment and investment were low because labor market institutions and industrial policies changed in a way that lowered normal employment." --Edward C. Prescott Federal Reserve Bank of Minneapolis Quarterly Review Winter 1999, vol. 23, no. 1, pp. 25–31

"We find that New Deal cartelization policies are an important factor in accounting for the failure of the economy to recover back to trend." -Journal of Political Economy, 2004, vol. 112, no. 4 New Deal Policies and the Persistance of the Great Depression : A General Equilibrium Analysis. Harold L. Cole and Lee E. Ohanion.

"We conclude that a new shock is needed to account for the Depression’s weak recovery. A likely culprit is New Deal policies toward monopoly and the distribution of income." ---The Great Depression in the United States From A Neoclassical Perspective Federal Reserve Bank of Minneapolis Quarterly Review Winter 1999, vol. 23, no. 1, pp. 2–24

"Businessmen came to ask themseleves 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 Enterprising Americans: A Business History of the United States BY JOHN CHAMBERLAIN INSTITUTE FOR CHRISTIAN ECONOMICS TYLER, TEXAS 

Until we can start thinking outside the box of Keynesian economic policies as well as get a handle on the uncertain regulatory environment, we won’t likely see a strong recovery. That means higher budget deficits and downward pressure on future credit ratings.

For a more entertaining look at policy alternatives, I highly recommend the following youtube videos:

Fear the Boom and Bust

New Research On Fair Trade Coffee

 The Problem with Fair Trade Coffee
By Colleen Haight.  Stanford Social Innovation Review Summer 2011 link

My field and analytical research has found that there are distinct limitations to the Fair Trade model.7 Perhaps the most serious challenge is the extraordinarily high price of coffee. “The market today is five times higher than when FLO entered the United States. The market’s at $2.50 (per pound for commodity coffee) today vs. the 40 cents or 50 cents (per pound) it was at in 2001,” says Dennis Macray, former director of global sustainability at Starbucks Coffee Co. This price shift dampens farmers’ desire to sell their high-quality coffee at the Fair Trade price. Many co-ops, according to Macray, are choosing to default on the Fair Trade contracts, so that they can do better for their members by selling on the open market. 

(HT to Knowledge Problem )

Monday, August 08, 2011

ScienceDirect - Ecological Economics : Impact of Bt cotton on pesticide poisoning in

A case of the internalization of negative externalities via technological change and market forces w/o taxes or  new regulations. 


While substantial research on the productivity and profit effects of Bt cotton has been carried out recently, the economic evaluation of positive and negative externalities has received much less attention. Here, we focus on farmer health impacts resulting from Bt-related changes in chemical pesticide use. Previous studies have documented that Bt cotton has reduced the problem of pesticide poisoning in developing countries, but they have failed to account for unobserved heterogeneity between technology adopters and non-adopters. We use unique panel survey data from India to estimate unbiased effects and their developments over time. Bt cotton has reduced pesticide applications by 50%, with the largest reductions of 70% occurring in the most toxic types of chemicals. Results of fixed-effects Poisson models confirm that Bt has notably reduced the incidence of acute pesticide poisoning among cotton growers. These effects have become more pronounced with increasing technology adoption rates. Bt cotton now helps to avoid several million cases of pesticide poisoning in India every year, which also entails sizeable health cost savings.