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
Tuesday, December 17, 2013
Wednesday, December 11, 2013
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
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
Friday, December 06, 2013
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.
"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.
Thursday, November 28, 2013
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.
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.
Wednesday, September 18, 2013
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
Wednesday, September 04, 2013
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."
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."
Saturday, August 17, 2013
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.
Thursday, July 18, 2013
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.
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.”
Sunday, May 26, 2013
How to Really March Against Monsanto - via Fancy Beans
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. "
Wednesday, April 10, 2013
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
Monday, March 18, 2013
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
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
Thursday, March 07, 2013
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."
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."
Tuesday, March 05, 2013
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/
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
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