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January 2010 Archive for Economic Sense

RSS By: Matt Bogard, AgWeb.com

Matt's primary interest is in the biotech industry and ag policy.

Big Fat America or Big Fat Facade ?

Jan 12, 2010

By: Matt Bogard

At first I thought that Forbes was emulating TIME magazine with more point of view journalism targeting agriculture and family farms. However, to Forbes credit, this was located on the 'opinion' tab if you go to the website.

Big Fat America - link

Even so, here are some of the outlandish statements I found in the piece:

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

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

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

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

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

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

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

It is true, high fructose corn syrup is not the same as table sugar in some practical terms. I can spoon table sugar directly into my coffee, but I don't think anyone does this with liquified HFCS. The author makes a similarly pale distinction and leaves us with the conclusion that this is bad, again without evidence. In fact, nutritionally, the two are very similar in terms of their content of glucose and fructose.  High Fructose corn syrup, in the highest formulation used in most foods and beverages is 55% fructose. The author doesn't bother to mention that the alternative that they propose, table sugar is 50% fructose! Most recent research indicates that the effects of sugar sweetened beverages ( mostly sweetened with HFCS) have no statistical link to obesity.

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

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

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


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

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

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

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

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

Avatar, Property Rights, and the Environment

Jan 09, 2010
By Matt Bogard

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

First, the movie was full of clues that the Na'vi people embraced property. First of all, what is property, other than a formal relationship between indifviduals and resources. They  appeared to take exclusive ownership in some of the animal life. If  they had no sense of property, why would they care to fight for their land and homes?

Now it certainly did appear that they lived in harmony with their environment, but there was little mention of extensive institutions of property like deeds and titles. However,  the fact that they appeared to live in harmony with themselves and their environment indicates to me that they had some formal system of property rights vs. living in a commons.   If you review the literature on property and the environment (Coase, Demsetz, Hardin particularly) you will find a common theme illustrating the role of property rights in dealing with conflicts of interest, and providing the incentives for individuals to live in harmony with one another and their environment. In fact,  contrary to what some environmental activists may preach about property rights and environmental exploitation, property rights often evolve as a mechanism to specifically ensure that we are living in harmony with others and the environment. If this gets out of balance, new forms of property develop to deal with the problem. Of course this only works if property rights are enforced! As seen in the movie, the peace and harmony ended and environmental destruction began as soon as the 'Sky People' started disregarding the property rights of the Na'Vi.   

Property rights were not just an invention of western culture. Demsetz looks specifically at various groups of Native Americans and the relationship between resources, scarcity, enforcement costs, technology, and property. In cases where technology is insufficient or enforcement costs are too great, property rights may not evolve. In other cases, when resources become scarce, there are not technological barriers, ( or there are technological breakthroughs) and enforcement costs are low, more extensive systems of property rights may develop.

It appeared from the movie, that on Pandora, resources were relatively abundant. There appeared to be no need to develop more complex and intricate forms of property than what they had. As I mentioned above, property rights often evolve to make sure that we are living in harmony with others and the environment. It appears in the movie, that the limited forms of property that the Na'vi had adopted were sufficient to keep the balance.  It doesn't mean that they rejected the idea of property, or that they wouldn't develop more complex systems in the future if necessary. 

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

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

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


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

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

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


Avatar Movie: Anticapitalist? Not Really

Jan 02, 2010
By Matt Bogard

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

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

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

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

Avatar was about a lot of things, but capitalism was not one of them.
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