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June 2012 Archive for Economic Sense

RSS By: Matt Bogard, AgWeb.com

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

Food Democracy -- Not Now, Not Ever

Jun 24, 2012

By Matt Bogard

Are food choices something that should be determined by democratic decision making? To answer this, it is important to understand the fundamental problem of economics known as the knowledge problem. The problem facing all forms of government including democracies is that centralized decision makers never have enough information or proper incentives to act on the information at hand. As economist F.A. Hayek described it (1945):

"the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form, but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all separate individuals possess"

The price system allows us to channel the imperfect knowledge of multitudes of imperfect people with imperfect incentives and utilize it to coordinate decisions. Democratic decision making, on the other hand, allocates resources using command and control based on the more limited knowledge and preferences of a few voters, elected officials or appointed bureaucrats. So, when we move from market based food choices to democratically based choices, we are drastically reducing the amount of information we are willing to consider in making these decisions.

Many people complain about phone and cable bundling packages. Voting is the ultimate form of bundling, only worse: the voter often doesn't get to even choose the "service." As explained in the article "The Public Choice Revolution"  (Regulation, Fall 2004):

"In our democracies, voters do not decide most issues directly. In some instances, they vote for representatives who reach decisions in parliamentary assemblies or committees. In other instances, they elect representatives who hire bureaucrats to make decisions. The complexity of the system and the incentives of its actors do not necessarily make collective choices more representative of the citizens’ preferences."

Voting also fails to capture the intensity of our preferences. When we vote, it's just one vote, no matter how intensely we may care about an issue. With a price system, we can express our interests penny by penny and minute by minute (as we toil to earn an income).

Does that mean that we should leave the country or start a dictatorship? Of course not. We should, however, limit democratic decision making and government involvement to as few areas of our lives as possible, which is what our founders had in mind when they created our constitutional republic.

So what does that mean for food choices? Food is an extremely personal and detailed consumption product. Of all areas of our life, food is an area where we would hope our choices can be expressed as precisely and intensely as possible, based on our own private knowledge, tastes, and preferences, not bundled with the preferences of others or subject to how some stranger may "vote" about it or some politician or bureaucrat may dictate (sorry, Mayor Bloomberg).

In fact, the market does a pretty good job of providing consumers a variety of food choices, from non-GMO organic, to local, to an array of modern sustainable choices made possible by companies like Cargill, ADM and Monsanto. Food in a democracy should be food that we choose to consume, not food that we vote to consume. 


References:

"The Public Choice Revolution," Regulation (Fall 2004).

"The Use of Knowledge in Society." F.A. Hayek. American Economic Review, vol. 35, no. 4 (Sept. 1945), pp. 519-30.

Hybrid Corn vs. Hybrid Cars

Jun 03, 2012

 

By: Matt Bogard
 
Which is better for the environment, hybrid corn (with biotech traits) or hybrid cars? Which is most easily adaptable and consumable on a scale large enough to have any meaningful impact on the environment? Which can be achieved most easily through social cooperation vs. manipulation and force?  I’ll answer these questions and more below. 
 
According to research from PG Economics, in 2009 alone,  greenhouse gas reductions associated with biotechnology were equivalent to removing 7.8 million cars from the road. I like to contrast this with the stats related to the much beloved hybrid car. Worldwide there have been only about 1.6 million hybrid cars sold as of 2009.  As far as cars on the road, the US and Japan have about 600,000.  And, I understand that the Obama Administration is calling for  1 million plug in hybrids on the highway by 2015. 
 
 So with hybrids we are talking a few million cars at most, that  are still on the road, and still one way or another require electricity, coal, or gasoline, which still creates pollution.  And there is all of this hype and interest in government setting mandates or creating subsidies to coerce consumers into buying hybrids. 
 
 Of course, if we all drove hybrids the impact might dwarf the 7.8 million figure above, but we would still have to net out the effects of driving hybrids.  It would take more than 7.8 million hybrids to match the green impact of biotech!  And it might take a lot of coercion by government. It seems a lot easier for me as a consumer to freely choose to have a drink with high fructose corn syrup derived from GMO corn than to make a huge change in my lifestyle and devotion of resources to getting a hybrid! 
 
And that’s not counting the positive impact of biotech and pharmaceutical technologies in beef and dairy  production. Many are familiar with Jude Capper's research:
 
" the carbon footprint for a gallon of milk produced in 2007 was only 37 percent of that produced in 1944. Improved efficiency has enabled the U.S. dairy industry to produce 186 billion pounds of milk from 9.2 million cows in 2007, compared to only 117 billion pounds of milk from 25.6 million cows in 1944. This has resulted in a 41 percent decrease in the total carbon footprint for U.S. milk production." 
 
Based on research by Alex and Dennis Avery and the Leopold Center for Sustainable Agriculture.
 
"Grain feeding combined with growth promotants also results in a nearly 40 percent reduction in greenhouse gases (GHGs) per pound of beef compared to grass feeding (excluding nitrous oxides), with growth promotants accounting for fully 25 percent of the emissions reductions"
 
Yet again another case where the invisible green hand trumps rhetoric and force, and another case where I’m not so sure that ‘carbon’ isn’t already accounted for and rationed by the voluntary decisions of billions of producers and consumers.
 
References:
 
GM crops: global socio-economicand environmental impacts 1996-2009. Brookes and Barfoot.
 
 
 
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.

Organic, Natural and Grass-Fed Beef: Profitability and constraints to Production in the Midwestern U.S. Nicolas Acevedo John D. Lawrence Margaret Smith August, 2006. Leopold Center for Sustainable Agriculture)
The environmental impact of dairy production: 1944 compared with 2007. Journal of Animal Science,Capper, J. L., Cady, R. A., Bauman, D. E. 2009; 87 (6): 2160 DOI: 10.2527/jas.2009-1781

 

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