Antarctic Melt And Calls For Action | On Point with Tom Ashbrook

http://onpoint.wbur.org/2014/05/20/antarctic-melt-carbon-tax

Ashbrook asks, if the market were the answer and not a carbon tax, then why aren't we seeing anything from the market? And that is the issue, we could have said the same thing about mail and parcel delivery before email and UPS, and who saw google, Wikipedia, and Netflix on the horizon? The hybrid cars, wind farms, and solar seem like obvious solutions that the government has poured lots of money into. But the market's solution will not be so blatant and obvious as a government tax or subsidy, and Ashbrook's question will never have an obvious answer. Modern hybrid corn with no subsidy or tax for instance has done more to combat climate change than hybrid cars in the US.

The Oregon GMO Ban: Who is really harming who?

“Was the government to prescribe to us our medicine and diet, our bodies would be in such keeping as our souls are now” - Thomas Jefferson Notes on the State of Virginia

This past May two counties in Oregon voted to ban the production of GMO crops. Was this good policy?

For a moment let’s sidestep the fact that modern molecular applications of crop improvement are just as safe if not safer than conventional and organic methods.  Let’s also forget that using a democratic process to override other people’s choices may not be the optimal strategy for making the most of imperfect information and limited resources.

Often, this law is discussed in the context of property rights, and rightly so:

“This local effort is important because it’s a way for local growers to protect their property rights from genetically engineered pollen contaminating their seed crops.”

-Ivan Maluski, Friends of Family Farmers

The assignment and protection of property rights is an important role of government, and definitely serves a key function in dealing with what economists refer to as negative externalities, and what most people would think of when they think of nuisances or environmental pollution.  However, the GMO bans represent a very narrow and restrictive assignment of property rights.

Property Rights and Externalities

Basically a negative externality occurs when  a second party is harmed from an activity without their consent or compensation. In the context of the Oregon law, we might view genetic contamination as a negative externality.  In these cases, the principle of polluter pays is often the basis used to require polluters to either stop their activity, pay a fine, or perhaps levy a tax related to the level of pollution.  However, in 1960 economist Ronald Coase brought new insight in his Journal of Law and Economics paper “The Problem of Social Cost.”  Coase stated that in many cases, the issue of pollution or negative externalities was in fact reciprocal.  This can easily be understood in the context of the Oregon case. While banning GMOs certainly protects organic and conventional producers from the harms of cross-pollination it reciprocally imposes significant harm on most family farmers by limiting their ability to grow food in a way that is both profitable and sustainable.  The question becomes, who may harm who?

Put another way, who should get the right to grow the kind of crops they want? The answer is that the right should be assigned to the party that values it the most. According to what has come to be known as the Coase Theorem, the initial assignment of rights does not matter. With clearly defined property rights, the optimal level of GMO vs. non-GMO crops planted as well as optimal levels of cross-pollination can be determined through cooperative processes.  Of course in this case, we may not be assigning physical rights to property so much as we are assigning liability.

 If liability goes to the organic producers, and they want to restrict the planting of GMO crops, then they have to find a way to compensate GMO growers to reduce planting . If liability falls on GMO growers and the economic and environmental benefits of growing GMO crops exceeds the value that organic producers place on uncontaminated crops, then GMO growers can pay for damages (or buy insurance for such purposes), or compensate organic producers for shifting their crops to another location. They may also alter their GMO planting decisions in highly susceptible areas.

The assignment of property rights and the potential for bargaining results in behavior that is changed or altered to account for the negative impact our choices have on others, regardless of who holds the rights. This is the essence of what is known as the ‘Coase Theorem and sets a standard of morality and efficiency that the Oregon law falls tragically short of meeting and in fact egregiously preempts.

Positive Externalities

Positive externalities occur when one or more parties engage in some activity and actually benefit another party without getting compensated for it.  An example of a positive externality is the concept of herd immunity that can occur when most people are vaccinated for things like measles.  Government funding of vaccination programs is often justified on the grounds of positive externalities. An unintended side effect of the Oregon law banning GMOs is the elimination of positive externalities associated with the planting of GMO crops. Research has shown that genetically modified crops have improved the genetic diversity of beneficial pest populations and have provided external pest protection benefits to non-gmo crops worth billions of dollars annually. In addition, biotechnology has contributed to significant reductions in greenhouse gas emissions and reduced the use of toxic chemicals and pesticides.  The Oregon laws eliminate all of these positive externalities associated with GMO crops in effect harming organic producers and all consumers.

Are these options practical or realistic? Nothing I could put in print likely would be. Policy makers and economists are not in a situation to know exactly all of the margins that individuals consider in their decision making and the options available, which is another flaw in the Oregon laws which make this assumption.  Some assignment of property rights or liability that accommodates a cooperative space for individuals to live their lives would be superior to both no law at all, or one as draconian as the two counties in Oregon have adopted.

References:

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

Areawide Suppression of European Corn Borer with Bt Maize Reaps Savings to Non-Bt Maize Growers. Science 8 October 2010:Vol. 330. no. 6001, pp. 222 - 225 DOI: 10.1126/science.1190242W. D. Hutchison,1,* E. C. Burkness,1 P. D. Mitchell,2 R. D. Moon,1 T. W. Leslie,3 S. J. Fleischer,4 M. Abrahamson,5 K. L. Hamilton,6 K. L. Steffey,7, M. E. Gray,7 R. L. Hellmich,8 L. V. Kaster,9 T. E. Hunt,10 R. J. Wright,11 K. Pecinovsky,12 T. L. Rabaey,13 B. R. Flood,14 E. S. Raun15

Communal Benefits of Transgenic Corn. Bruce E. Tabashnik  Science 8 October 2010:Vol. 330. no. 6001, pp. 189 - 190DOI: 10.1126/science.1196864

Genetically Engineered Crops: Has Adoption Reduced Pesticide Use? Agricultural Outlook ERS/USDA Aug 2000

GM crops: global socio-economic and environmental impacts 1996- 2007. Brookes & Barfoot PG Economics reportOctober 2010:Vol. 330. no. 6001, pp. 189 - 190DOI: 10.1126/science.1196864

Greenhouse gas mitigation by agricultural intensification Jennifer A. Burneya,Steven J. Davisc, and David B. Lobella.PNAS  June 29, 2010   vol. 107  no. 26  12052-12057

Comparison of Fumonisin Concentrations in Kernels of Transgenic Bt Maize Hybrids and Nontransgenic Hybrids. Munkvold, G.P. et al . Plant Disease 83, 130-138 1999.

Indirect Reduction of Ear Molds and Associated Mycotoxins in Bacillus thuringiensis Corn Under Controlled and Open Field Conditions: Utility and Limitations. Dowd, J. Economic Entomology. 93 1669-1679 2000.

A Meta-Analysis of Effects of Bt Cotton and Maize on Nontarget Invertebrates. Michelle Marvier, Chanel McCreedy, James Regetz, Peter Kareiva Science 8 June 2007: Vol. 316. no. 5830, pp. 1475 – 1477

"Why Spurning Biotech Food Has Become a Liability.'' Miller, Henry I, Conko, Gregory, & Drew L. Kershe. Nature Biotechnology Volume 24 Number 9 September 2006.

LETTERS: Farm Bureau speaks for farmers everywhere | Opinion | The Free Lance-Star | December 23rd, 2013

This farmer may not have ever read "The Use of Knowledge in Society" but they get it: 

"I know my farm much better than a bureaucrat trying to apply blanket solutions to thousands of farms that vary greatly in size, type, soil capacity and a hundred other ways. Voluntary practices, encouraged by some cost share and technical assistance have proved effective in reducing runoff from farms. Now much of that effort will be wasted in forms, paperwork, deciphering regulations and similar nonsense that fulfills some bureaucratic goal but doesn't help the bay at all."

http://www.freelancestar.com/2013-12-23/articles/25459/letters-farm-bureau-speaks-for-farmers-everywhere/#.UsW8yrwAkLw.twitter

Agritalk Discussion of the Impact of Biotechnology, Big Data, and Genomics on Seed Choice

On December 17th I was invited on AgriTalk with Mike Adams to discuss the impact of biotechnology on farmers' choices in seed options. Agricultural markets in the seed industry (as imperfect as they may be when we compare them to unrealistic and idealistic standards) function as they should by solving the knowledge problem related to seed choices and technology. This will only be enhanced with the convergence of big data, genomics, and biotechnology. That is truly the social function of markets and prices.  Even if a single corporation controlled all of the IP related to existing biotech traits, the disruptions of new technology, big data and genomics (applications like FieldScripts, ACRES, MyJohnDeere or the new concept Kinze planters that switch hybrids on the go etc.) will require the market to continue to offer a range of choices in seeds and genetics to tailor to each producer's circumstances of time and place. There are numerous margins that growers look at when optimizing their seed choices and it will require a number of firms and seed choices to meet these needs as the industry's focus moves from the farm and field level to the data gathered by the row foot with each pass over the field. The concerns related to monoculture and monopoly in the seed industry are largely overrated when these factors and trade offs are considered.

The audio is available in the archives (Dec 17) below via Farm Journal Media or iTunes (@33:00) (play in browser): https://itunes.apple.com/us/podcast/agritalk-december-17-2013/id619537283?i=215613895&mt=2  

See also: What does the Farmer Say About Seed Choices- Channeling Hayek.
Big Ag Meets Big Data: Part 1 & Part 2

What does the farmer say...about seed choices? (Channeling Hayek)

I recently came across the following article in the Huffington post: Do Farmers Have Choices? by Jenny Dewey Rohrich who also has a very nice blog replete with some very good ag photography. The article discusses seed and hybrid selection issues based on actual responses from real producers. The responses are what I expected, of course they have a choice and its a tough one!

I've seen the concern out there that many people think big agribusiness and biotech companies have a gun (figuratively) to growers heads when it comes to seed choices and that justifies government interventions like labeling, more regulation, or bans on GMOs . As this article states, seed choice is a very complicated decision that involves many variables and traits. From the article, one producer describes their decision process that involves comparisons of hundreds of varieties from hundreds of corporations and mom and pop seed companies:

"First we go through the list of potential seed candidates every year comparing conventional, GM, and hybrids. Then we compare yields, cost per acre to keep plants alive, and then we throw in the variables: drought, flood, extreme heat or cold, early frosts, and untimely rains during harvest."

 The choice of what crops we should grow, how they should be produced in terms of management practices and technology, and ultimately the variety of foods we choose to consume is an example of what economists refer to as the knowledge problem. While it might be possible to patent a given trait or hybrid, no one company can get too firm a grasp on this knowledge problem, regardless of their market share in the seed industry today. (not to mention, no government agency would have sufficient knowledge either). Given the vast array of considerations in seed choice and management practices, there is always going to be an incentive for some supplier to cater to the unique needs of individual producers, as advances in genomics and technology drive production not farm by farm or acre by acre but inch by inch. That's also why the market has driven companies to treat hybrid selection like a 'big data' problem and they are developing multivariate recommender systems as tools to assist in this (like ACRES and FieldScripts). The market's response to each individual producer's unique circumstances of time and place also ensures continued diversity of crop genetics planted. Referring to the great article Blake Hurst recently wrote in The American, the synergy between genomics, big data, and modern technology in agriculture is amazing!

Another great comment from a seed dealer in the article states "Seed companies, including ours, bring to market those varieties and traits that farmers want to buy" and the author's statement "Farmers drive the demand for the seed that is researched, bought, and sold" pins down exactly how agricultural markets in the seed industry function as they should by solving the knowledge problem related seed choices and technology. That is truly the social function of markets and prices, as imperfect as they may be when we compare them to unrealistic and idealistic standards. The concerns related to monoculture and monopoly in the seed industry are largely overrated when these factors and trade offs are considered.

The comments made in the Huffington post article are based on a survey of farmers. Its likely not scientific, and my comments above are based on my own industry knowledge and personal experiences from past years working as a crop consultant as well as a few producers I know. I'd be curious to know what the mindset of a larger number of producers is on this issue.

See also my previous posts:  Big Ag Meets Big Data Part1 & Part 2 and  Monsanto Antitrust Case

Our Stake in GHG Emissions

I recently saw this tweet (which I'll keep anonymous out of respect of the author):

"We all cause greenhouse gases to be released into the sky; but most of us do not have special interest in continuing to do so"

I'm not sure that is true. Of course, it's true we don't all have special interests in the context of a team of lobbyists and a corporate rent seeking apparatus. But we all do have an interest in GHGs being released into the sky. We all enjoy refrigeration, air conditioning, transportation, fire, police, and rescue services, as well as telecommunications, personal computing, smartphones, iPads, google wickipedia, Instagram etc. Access to all of these goods and services at affordable prices involve trade offs related to GHG emissions and we all have direct interests in their continual release into the atmosphere, and indirect but strong interests in the 'special' interests that work to keep that path as clear and unobstructed as possible.

A Note on Information Asymmetry (Cafe Hayek Reblog)

http://cafehayek.com/2013/11/a-note-on-information-asymmetry.html

A nice quote.

"Perhaps the greatest information asymmetry of all is the stark difference between the enormously deep, rich, and personal knowledge that each individual has of himself or herself and the necessarily sparse and inadequate knowledge that government officials have of each of the individuals over whom they are empowered to rule"

In the comments, the discussion turns to GMO labeling, for which this readily applies.

Positive Externalities of Biotech Bt Traits on Non-Biotech Crops and Non Target Insects

The following articles highlight positive externalities associated with Bt corn and cotton production :

Communal Benefits of Transgenic Corn. Bruce E. Tabashnik  Science 8 October 2010:Vol. 330. no. 6001, pp. 189 - 190DOI: 10.1126/science.1196864

 "Bt corn planted near non-Bt corn can provide the unmodified plants with indirect protection from pests"

Areawide Suppression of European Corn Borer with Bt Maize Reaps Savings to Non-Bt Maize Growers. Science 8 October 2010:Vol. 330. no. 6001, pp. 222 - 225 DOI: 10.1126/science.1190242W. D. Hutchison,1,* E. C. Burkness,1 P. D. Mitchell,2 R. D. Moon,1 T. W. Leslie,3 S. J. Fleischer,4 M. Abrahamson,5 K. L. Hamilton,6 K. L. Steffey,7, M. E. Gray,7 R. L. Hellmich,8 L. V. Kaster,9 T. E. Hunt,10 R. J. Wright,11 K. Pecinovsky,12 T. L. Rabaey,13 B. R. Flood,14 E. S. Raun15,

"Cumulative benefits over 14 years are an estimated $3.2 billion for maize growers in Illinois, Minnesota, and Wisconsin, with more than $2.4 billion of this total accruing to non-Bt maize growers."

A Meta-Analysis of Effects of Bt Cotton and Maize on Nontarget Invertebrates.Michelle Marvier, Chanel McCreedy, James Regetz, Peter Kareiva Science 8 June 2007: Vol. 316. no. 5830, pp. 1475 – 1477

The Economics of Local Food

I am very excited to see that on September 11,2013 the WKU  BB&T Center for the Study of Capitalism is hosting Pierre Desrochers (also a Mercatus Institute Fellow), co-author of The Locavore’s Dilemma: In Praise of the 10,000-Mile Diet.

Pierre Desrochers discusses his book here at this Cato book forum. 

I've written about local food before at my Economics Principles and Applications blog, but I thought I'd re post here. (also see more recent local food and sustainability related posts here.)

”It is a maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy.” - The Wealth of Nations

This is tied to the concept of comparative advantage and gains from specialization and trade, which lead to an increase in the size of the ‘economic pie’ which can be used to make everyone better off. Modern food supply chains, made possible by companies such as Cargill, ADM, and retailers like Wal-Mart, have helped to reduce our impact on the environment.

Below are some excerpts of articles related to local food:

The Inefficiency of Local Food
 Steve Sexton
11/14/2011

http://www.freakonomics.com/2011/11/14/the-inefficiency-of-local-food/

Forsaking comparative advantage in agriculture by localizing means it will take more inputs to grow a given quantity of food, including more land and more chemicals—all of which come at a cost of carbon emissions.....In order to maintain current output levels for 40 major field crops and vegetables, a locavore-like production system would require an additional 60 million acres of cropland, 2.7 million tons more fertilizer, and 50 million pounds more chemicals. The land-use changes and increases in demand for carbon-intensive inputs would have profound impacts on the carbon footprint of our food, destroy habitat and worsen environmental pollution.

It’s not even clear local production reduces carbon emissions from transportation. The Harvard economist Ed Glaeser estimates that carbon emissions from transportation don’t decline in a locavore future because local farms reduce population density as potential homes are displaced by community gardens. Less-dense cities mean more driving and more carbon emissions. Transportation only accounts for 11 percent of the carbon embodied in food anyway, according to a 2008 study by researchers at Carnegie Mellon; 83 percent comes from production. 

The locavore’s dilemma 
Urban farms do more harm than good to the environment
Edward L. Glaeser
http://articles.boston.com/2011-06-16/bostonglobe/29666344_1_greenhouse-gas-carbon-emissions-local-food/2
Berkeley graduate student Steven Sexton estimates that an American switch to more local corn production would require 35 percent more fertilizer and 22.8 percent more energy....But the most important environmental cost of metropolitan agriculture is that lower density levels mean more driving. Today, about 250 million Americans live on the 60 million acres of this country that are urban — which is about four people per acre....If halving densities also doubled distance to the metropolitan area center, this would add an extra 44 gallons of gas annually. Together, the increased gas consumption from moving less than a tenth of agricultural farmland into metropolitan areas would generate an extra 1.77 tons of carbon dioxide per year, which is 1.77 times the greenhouse gases produced by all food transportation and almost four and a half times the carbon emissions associated with food delivery.


From Marginal Revolution: Food Miles

"How far your food travels matters a lot less than what kind of food it is, or how it was produced. According to a recent study out of Carnegie Mellon University, the distance traveled by the average American’s dinner rose about 25 percent from 1997 to 2004, due to increasing global trade. But carbon emissions from food transport saw only a 5 percent bump, thanks to the efficiencies of vast cargo container ships. Should we minimize our “music miles” and boycott bands on tour?"

Eating Local and Climate Change link from National Geographic ("Eating Local" Has Little Effect on Warming, Study Says. Mason Inman  National Geographic News April 22, 2008)

"Being a "locavore" and eating foods grown near where you live may not help the environment as much as you might think, according a new study.When it comes to global warming, focusing simply on where food comes from will make only a small difference, the study's authors say."

Cited research: Environ. Sci. Technol. 2008, 42, 3508–3513

"Despite significant recent public concern and media attention to the environmental impacts of food, few studies in the United States have systematically compared the life-cycle greenhouse gas (GHG) emissions associated with food production against long-distance distribution, aka “food-miles.” We find that although food is transported long distances in general (1640 km delivery and 6760 km life-cycle supply chain on average) the GHG emissions associated with food are dominated by the production phase, contributing 83% of the average U.S. household’s 8.1 t CO2e/yr footprint for food consumption. Transportation as a whole represents only 11% of life-cycle GHG emissions, and final delivery from producer to retail contributes only 4%. Different food groups exhibit a large range in GHG intensity;on average,redmeat is around 150% more GHG intensive than chicken or fish. Thus, we suggest that dietary shift can be a more effective means of lowering an average household’s food-related climate footprint than “buying local.”

Although the authors above seem to suggest dietary shifts away from meat consumption, it is important to not forget the huge strides in sustainability that are occuring in the livestock industry that is largely technology driven and a major reason that conventional modern food supply chains are in fact more sustainable.

See beef and livestock related citations in the post Sustainable Agriculture Bibliography  and the accompanying video for more details.

See also:

Food miles, Kowalski's and that steak on your plate
MPR News

"That steak you bought at the farmers' market from the family operation down the road might have taken more fuel to get to you than the rib-eye from a steer slaughtered in Kansas."

Read the article here.

The actual research is here.

Comparing the Structure, Size, and Performance of Local and Mainstream Food
Supply Chains

USDA Economic
Research
Report
Number 99
June 2010

"Transportation fuel use is more closely related to supply chain structure and size than to the distance food products travel. Products in local supply chains travel fewer miles from farms to consumers, but fuel use per unit of product in local chains can be greater than in the corresponding mainstream chains. In these cases, greater fuel efficiency per unit of product is achieved with larger loads and logistical efficiencies that outweigh longer distances."

See also this entry from the EconLog blog:

 The Locavore's Dilemma: Why Pineapples Shouldn't Be Grown in North Dakota

In this post four arguments related to local food are discussed:
1: Buying Local Foods is Good for the Local Economy
2: Buying Local Foods Is Good for the Environment
3: Local is Fresher and Tastier
4: Local Food is Healthier and Should be Served in School

The authors conclude:

"Economists are a diverse bunch, but we have a few core principles, two of which are that there is a balance of payments and that there are gains from trade. These universal principles are as timeless as the law of gravity. If politicians and activists proposed to suspend belief in gravity, physicists would not cower. They would resolutely defend reality. So should we."

Diversity in Crop Production

Market forces accommodating producer demands for traits optimized for diverse conditions and environments and the risks they pose drive technological advances in biotechnology and plant breeding. 

Schap and young make this point in their 1999 Cato Journal article:

Enterprise and Biodiversity: Do Market Forces Yield Diversity of Life? David Schap and Andrew T. Young Cato Journal, Vol. 19, No. 1  (Spring/Summer 1999)

"At the root there appears to be a conflict between the efficiency of the market and the preservation of biodiversity. The conflict is real, however, only if the market is at odds with biodiversity. Does the market destroy biodiversity? We contend that it does not. Rather the market often can, and indeed does, provide biodiversity—both deliberately and as an unintended consequence of market forces. In the specific case of hybrid maize seed, we show that biodiversity is provided unintentionally both at the industry level and at the level of the individual firm. We explain that maize seed firms behave according to economic theories of monopolistic competition and optimal diversification, furnishing biodiversity as a fortuitous byproduct of their pursuit of profit."

Previous work in the journal Crop Science supports Schap and Young: 

''Diversity of United States Hybrid Maize Germplasm as Revealed by Restriction Fragment Length Polymorphisms.'' Smith, J.S.C.; Smith, O.S.; Wright, S.; Wall, S.J.; and Walton, M. (1992) Crop Science 32: 598–604

In addition to actual crop diversity, new technologies like Bt traits actually help improve the diversity of insect populations, as indicated in the following 2007 article in Science:

A Meta-Analysis of Effects of Bt Cotton and Maize on Nontarget Invertebrates.Michelle Marvier, Chanel McCreedy, James Regetz, Peter Kareiva Science 8 June 2007: Vol. 316. no. 5830, pp. 1475 – 1477

If we think of 'monoculture' and 'diversity' in a very strict and narrow sense, we might lead ourselves to believe that modern agriculture has serious problems. However, the real actions taken by risk averse producers that rely on a diverse portfolio of genetic assets to achieve narrow margins in a fast paced ever changing environment prove otherwise. In many ways, 'monoculture' is a myth. 

See also: 

''Hybrid Corn.'' Abelson, P.H. (1990) Science 249 (August 24): 837.

I, Chicken

“I was really shocked when I bought my first ever whole chicken tonight. Five bucks? For a whole chicken? KFC charges five bucks for one breast and one wing. How can a farmer breed, hatch, raise, feed, house, butcher, package, and ship a chicken for five bucks? Blows my mind.”

This was a very insightful observation made by a friend of mine. The subject of economics in a lot of ways is just a collection of stories consisting of observations and insights like this. This particular insight speaks directly to the concepts of comparative advantage from Ricardo and specialization and trade from Adam Smith- read more about these economists at the Library of Economics and Liberty.

Because of the principle of comparative advantage,  you choose to buy the chicken from the retailer at $5 as opposed to raising it yourself or even sourcing it locally at a much greater cost in terms of money, time, and perhaps the environment.  Because of the principle of comparative advantage we often don’t raise most of our own food or make our own cars or many of our own clothes or even source most of these things locally either. The concept of comparative advantage and the associated gains from specialization and trade lead to an increase in the size of the ‘economic pie’ which can be used to make everyone better off. 

Getting a chicken at your local retailer for $5 is also a testament to the market’s ability to solve the the fundamental problem of economics, the knowledge problem. This is a problem that exists because the necessary information for allocating scarce resources does not exist in concentrated or integrated form, but is incomplete and dispersed among individuals. Through markets, prices bring all of this incomplete and dispersed information together in a coordinated manner, producing a ‘spontaneous order’ as described by economist F.A. Hayek.

 We get $5 chicken because a spontaneous order comprised of specialized farmers, feed and nutrition specialists, veterinarians, pharmaceutical companies, breeders, packers, processors, supply chain managers, and retailers all cooperate to bring healthy, sustainable, and affordable food to your table. Modern food supply chains, made possible by companies such as Cargill, ADM, and retailers like Wal-Mart, have not only allowed us to get foods cheaper than we can produce ourselves or source locally, but may have also helped to reduce our impact on the environment.  

Another way to think about the knowledge problem and the concept of a spontaneous order in relation to $5 chickens is to admit that no single person really knows how to make a chicken any more than a pencil, as illustrated so perfectly by Leonard E. Read in his famous essay ‘I, Pencil.’ Milton Friedman does a good job summarizing the essay in 2 minutes in the following You-Tube video: 

 

It is also important to recognize that $5 chicken owes a great debt to entrepreneurial driven technological change and economic growth, and this is truly mind blowing. As economist Robert Lucas said “once you start thinking about growth it's hard to think about anything else.”

Think, “I’Chicken.”

How to Really March Against Monsanto - via Fancy Beans

How To Really March Against Monsanto

http://www.fancybeans.com/blog/2013/05/25/how-to-really-march-against-monsanto/

This article makes a great point- despite frictions introduced by subsidies and monopolistic rents by companies like Monsanto, the food on your table is largely the result of a spontaneous order produced by the interaction of thousands of family farms, agribusinesses, and biotechnology companies.(I,Pencil might be worth re-reading). No one person knows how to produce an ear of corn. Despite its huge role in the proliferation of innovative green technologies, Monsanto plays a very small part overall. Take for example John Deere:"For all their success, innovations like tractors, hybrid varieties, decades of intensive breeding, soil testing and careful fertilization are far more important in supporting massive corn and soy production. But no one would "March Against John Deere" even though the tractor is probably one of the most important innovations in agriculture in all of history — and John Deere the company controls at least 60 percent of the farm equipment market. "

Discussion of Labeling Genetically Modified Foods on Agritalk

Recently I was invited on AgriTalk to discuss the science and economics of labeling genetically modified foods and take questions from callers. You can find the show in the archives (April 4,2013). You can also find this via iTunes here: or iTunes https://itunes.apple.com/WebObjects/MZStore.woa/wa/viewPodcast?i=143629496&id=619537283

AgBioForum 12(1): Persistent Narratives: Why is the "Failure of Bt Cotton in India" Story Still with Us?

A nice combination of empirical evidence and social network analysis explains a leading misconception and conspiracy theories about Bt cotton in India:

Abstract

"Science can say nothing conclusive about many important dimensions of the global cognitive and political rift on transgenic agricultural crops. Empirical studies will not answer questions in the realms of food preference, risk aversion, cultural constructions of rural society, or theology. But there are critical empirical questions and much empirical work on transgenic crops. This essay analyzes a puzzle: reports of "the failure of Bt cotton in India"—on agronomic, economic, and environmental grounds—continue to spread globally but are inconsistent with both farmer behavior and scientific studies. This narrative of agro-economic failure has arguably crowded out the more empirically robust story of farm-level success of one trait (insect resistance) in one crop. Why? Understanding this outcome requires conceptualizing the social conditions—interests, relations, cognitive frames—in which production of knowledge claims is embedded. This article argues that there is a critical role for "epistemic brokers," or hinges, between local, national, and international advocacy groups within larger transnational advocacy networks. Reports of failure of the Bt technology in India are not sustainable scientifically but do serve interests in the contentious politics around GMOs globally."

From: AgBioforum

http://www.agbioforum.org/v12n1/v12n1a02-herring.htm

Internalizing Externalities Related to Herbicide Resistance

An example of a cooperative market based solution to internalizing negative externalities associated with herbicide resistance. (Note: Roundup Ready technology itself is an example of the price system and technological change working to internalize negative externalities associated with soil erosion, pollution, and climate change).

http://www.realagriculture.com/2013/03/basf-monsanto-team-up-to-encourage-tank-mixing/

"The two companies, in conjunction with retailers in Eastern Canada, are offering farmers a $1-per-acre rebate when RoundupWeatherMax is purchased with matching acres of Integrity, Eragon, Marksman or Armezon herbicides. These tank-mix partners, when applied together on the same fields, deliver multiple modes of weed-killing action while providing herbicide-resistance management."

Big Ag Meets Big Data (Part 1)

Over at my econometrics blog, I'm discussing the ramifications of social media and big data on the ag industry.

Social media has allowed farmers to organize and communicate about their industry.  The #agchat conversations on twitter are a good example. Not to mention Facebook (see Agriculture Proud for example) and YouTube ( like this look behind the scenes of a family farm). We've seen powerful examples of how social media can be used to mobilize voices and impact perceptions on a national level ( for example issues related to Yellow Tail wine and Pilot Travel Centers).

Social media also provides a rich data source for measuring sentiment or perceptions about the industry....Of course, it doesn't take a rocket scientist to read tweets, Facebook posts, or blog comments to know when people are upset about a product. But there is also a wealth of knowledge to be gained from this type of information that is so voluminous, it would take an army of social media experts to glean and analyze. This is the essence of what has been termed in the industry as 'big data.' It requires new tools for capturing, storing, processing and analyzing this data, and a new type of analyst referred to as a data scientist.  These powerful analytics could be very beneficial to those in the ag industry or agvocacy groups. But this goes beyond social media, and I will discuss how big data is revolutionizing agriculture at the farm level in the second part of this two part series on big data.


Continue reading....





 
*Note: I’m not using the term ‘big ag’ in the derogatory sense used by anti-agricultural activists, but in a complimentary sense referring to the complex network of modern family farms, biotechnology companies, food processors, other agribusinesses and retailers that cooperate to bring healthy and sustainable food to your table.

References:

Social Media Analytics. Matt Bogard, Applied Econometric and Analytical Consulting.
http://econometricsense.blogspot.com/2012/09/social-media-analytics.html

With Hadoop, Big Data Analytics Challenges Old-School Business Intelligence. Doug Henschen, Information Week
http://www.informationweek.com/software/business-intelligence/with-hadoop-big-data-analytics-challenge/240001922

Big Bets On Big Data. Eric Savitz, Forbes.  http://www.forbes.com/sites/ciocentral/2012/06/22/big-bets-on-big-data/

Creative Commons Image Attributions:

Handheld GPS

By Paul Downey from Berkhamsted, UK (Earthcache De Slufter  Uploaded by Partyzan_XXI) [CC-BY-2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Satellite: NAVSTAR-2 (GPS-2) satellite Source: http://www.jpl.nasa.gov/images/grace/grace_083002_browse.jpg Status: PD-USGov-Military-Air Force {{PD-USGov-Military-Air Force}} Category:Satellites

Tractor: bdk [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

California Proposition 37: Capitalizing on Information Asymmetry and Government Regulation to Corner the Market on Sustainable Food

Proposition 37 is a crystal clear example of rent seeking in the food industry. Some natural and organic and other food special interests are utilizing this legislation to obtain market share that they otherwise would not be able to obtain through the marketplace.  To see this, its important to understand the dynamics of the market for sustainable ag products as it has evolved over the last 15 years.

In the last 10-15 years, modern agriculture utilizing advances in management, information technology, genetics, biotech, and pharmaceutical technologies has closed the sustainability gap between conventional and organic production. (see Modern Sustainable Agriculture). In terms of reduced chemical use, improved biodiversity, reduced pollution and carbon footprint, and overall safety, the biotech industry and modern Ag could pose steep competition for  some natural and organic food producers.

While most members of the agriculture industry don’t think the industry should be defined by an ‘us vs. them’ paradigm, some are willing to exploit consumer fears and asymmetric information by using the government’s regulatory apparatus to get a competitive edge. Some see modern ag as a competitor as opposed to a partner in an overall mission to provide the world with safe sustainable food. Consumer apathy also works against some promoting niche organic and natural markets. Uncaring customers represent lost revenue potential. A scary Hollywood horror movie label like ‘genetically modified’ may be enough to drum up business. How?

The Role of Information Asymmetry

Whenever one party has better information about their product or service than the buying public, information asymmetries may exist.  Proponents of proposition 37 claim that their initiative is to reduce information asymmetry and improve the functioning of markets, as stated in this recent Forbes article:

“Free markets only work when there is transparency and people are able to make decisions based on information, which does not exist in the case of GMOs. If Prop 37 is enacted, and, armed with this information, a significant enough number of consumers decide not to buy these products, the onus will be on the companies to conduct more research and produce better data.”

Will including the words ‘Genetically Modified’  on food labels really serve to inform the public or create more confusion? This form of labeling won’t do any thing to decrease information asymmetry in and of itself. The actual language in the law may in fact make it worse. This is made clear on page 10 of a report by  Northbridge Environmental  Management Consultants (The Genetically Engineered Foods Mandatory Labeling Initiative Overview of Anticipated Impacts and Estimated Costs to Consumers):

"The Genetically Engineered Foods Mandatory Labeling Initiative (A.G. File No. 11-0099 – hereinafter the Initiative) would have a substantial impact on California consumers. The Initiative would change how many of the foods they eat are produced and would make that food more expensive. At the same time, however, the Initiative would provide relative little by way of consistent and useful information to consumers because of the loopholes and exceptions in its language and the uneven ways in which it would apply to the same food consumed in different settings. "

 If informing consumers were the primary goal, then there are much more intelligent ways to do so, perhaps in the ingredients listing following industry standards (instead of using ‘genetically modified' if a product contains GMO corn, list instead ‘rCORN’, an idea I reluctantly entertain here) If it alarms otherwise apathetic consumers, are they really going to invest the time researching the safety of biotech foods  to close the information gap or are they going to turn to the unqualified opinions of celebrities like Dr. Oz or Oprah?  I would bet that the special interests are counting on consumers weighing heavily the opinions of celebrities and conspiracy theorists, and therefore letting the information asymmetries associated with biotech direct them to their own products.  In this way, Prop 37 is specially designed by special interests to take advantage of information asymmetries and exploit the fears of the public in an effort to drive market share.

***UPDATE

Here is a link to a great interview from Berkeley professor of Molecular and Cell Biology Michael Eisen via the Foodstuff's FoodLink Food and Farm Podcast with Ray Bowman that highlights the information asymmetry, special interests, trivialization of science, and near conspiracy theory aspects of  Proposition 37. 

See also, Eisen's piece 'Prop 37 and the Right to Know Nothing.' 

Monsanto Seed Patent Case Gets U.S. Supreme Court Review - Businessweek

http://mobile.businessweek.com/news/2012-10-05/monsanto-seed-patent-case-gets-u-dot-s-dot-supreme-court-review


The merits of the US IPR system are debatable, but that doesn't make Monsanto any different than Apple. Saved seed is genetically copied and freely distributed intellectual property. If its not OK to copy and distribute freely the iPad OS, then it's not OK to do it with Roundup Ready soybeans. You either accept IPR or not, which again is a debatable concept. But if you reject that IPR is really 'property' as some economists do, then your beef is with the US government, not specifically Monsanto. It just puts Monsanto and Apple in the same boat. Apple has the advantage that it's much harder to copy and distribute their OS than it is to copy the OS of a self pollinated plant, so enforcement costs illicit different tactics from different companies. i.e. Monsanto gets more attention from the far left as they hold hands with far right wing conspiracy theorist counterparts that have somehow convinced themselves that it is OK to restrict 'economic' freedom to promote 'food' freedom (i.e. prop 37, gmo bans, etc)

Food and Farm Freedom Q & A

Farm Food Freedom KY is a KY based interest group that has gotten some attention from a few of our lawmakers in Frankfort. But, are they really interested in economic freedom for all KY farmers?  Do they support the current heavy regulatory burden faced by most KY farmers? Would they actually support more interventions that would burden farmers and limit consumer choice? Why do they consider big government left wing special interests to be among their national allies? Well, let's ask and see. I contacted the administration at fffky and asked them the following questions: 

1) What is your definition/conception of 'food' freedom and how is it similar to or different from 'economic' freedom?

2) Your page does a good job highlighting many food freedom related issues such as the regulations that hinder the sale of raw milk and other locally sourced food products.  However some of the tweets posted on the http://www.fffky.org/contact-us/ web page (which I assume @FarmFoodFreeKy is your official twitter account) are critical of GMO foods. Particularly one tweet states that the U.S. is behind with regard to a ban on GMO foods in France.  Seehttp://t.co/xkLVrZtF . Other tweets also seem to support Proposition 37 in California, which seeks to require mandatory labeling of GMO foods.

a. Would you support a similar labeling requirement in KY similar to California's Proposition 37?
b. Do you feel we need less regulation of locally sourced foods (like raw milk, processed meat etc.) but more regulations or even bans on GMO foods?

3) Are you associated with the NoGMOKentucky Facebook page? Is that fffky.org's official facebook page?
http://fb.me/1g6k5Ah3D

If so, the mission statement says:

"To stop GMOs from being planted or pursued in the great Commonwealth of Kentucky."

Is this mission primarily about consumer education and persuasion or would you consider legislative or regulatory approaches to reduce the planting of GMO crops in KY?

4) If you agree with the mission statement, how would a mission to stop GMOs in Kentucky be consistent with the food and economic freedoms of the many family farmers that rely on corn and soybeans that utilize this technology?

5) On the fffky.org website, there is a section titled 'National Allies' and a link labeled 'like minded sites.' Among these include links to CSPI (Center for Science in the Public Interest), EWG, and HSUS. These groups have not historically been friendly to agriculture (i.e. CSPI supports NYC's soft drink regulations, EWG campaigns for less meat consumption, and HSUS supports initiatives to increase regulation of family owned livestock farms). 

Why do you consider these groups to be 'like minded' even though they support initiatives and regulations that limit consumer choice and economic freedom as it relates to food an agriculture?  

Microsoft Word - Northbridge CA GMO Report 7-25.docx

From the introduction on p.10: 

"The Genetically Engineered Foods Mandatory Labeling Initiative (A.G. File No. 11-0099 – hereinafter the Initiative) would have a substantial impact on California consumers. The Initiative would change how many of the foods they eat are produced and would make that food more expensive. At the same time, however, the Initiative would provide relative little by way of consistent and useful information to consumers because of the loopholes and exceptions in its language and the uneven ways in which it would apply to the same food consumed in different settings. "

http://www.noprop37.com/files/Prop.-37-Will-Raise-Grocery-Bills-400-Annually.pdf

Oh the wonders and joys of rent seeking.