Saturday, December 20, 2014

Yes, We're Fat, but Farm Subsidies Aren't the Cause

11/07/2010

Americans are fat because of farm subsidies, right? Everybody knows that.

DTN's Urban Lehner writes about a study conducted by three ag economists who attempt to quantify how farm subsidies affect caloric intake. What they found is that subsidies have a "negligible" effect on both what Americans pay for food and how many calories they pump down the old pie hole. 

Americans are growing more obese. In 1970, 15 percent of the nation was obese, rising to 31 percent by 2000. Common wisdom is that grain subsidies have reduced the price of food so much that we are simply eating more. And that's what has led to the epidemic of fat.

When the economists (from UC Davis, Cornell and the USDA's Economic Research Service) did their calculations, they found there was little relationship between subsidies and food cost or caloric intake. For instance, if you got rid of all grain subsidies, each American would reduce her (or his) feed by 977 calories A YEAR, Lehner reports. Or, a double cheese and fries.

If the feds eliminated ALL farm subsidies, we would actually eat MORE calories. How's that? Well, the federal government limits importation of sugar and that raises the price of some foods while decreasing consumption. Get rid of the restrictions and we'd eat more, cheaper food.

Either way, however, the effects of subsidies is tiny. Basic commodities don't contribute much to the cost of food, so the subsidies affect just a tiny part of a tiny part of the price.

The real contributor to cheap food has been innovation and increased farm productivity, according to the authors. We are producing more food and that's making it cheaper. And isn't that a good thing? The authors write

Farm commodities have indeed become much more abundant and cheaper over the past 50 years in the world as a whole as well as in the United States, but not because of subsidies. This abundance mainly reflects the effects of technological innovations and increases in farm productivity, which has alleviated hunger and poverty throughout the world while at the same time reducing pressure on the world’s natural resources. If cheaper and more abundant food has contributed to obesity, then we should look to innovations in production agriculture rather than farm subsidies as the fundamental cause. Even so, it would be a mistake to seek to oppose and slow agricultural innovation with a view to reducing obesity rates.

The challenge for policy makers is to find other—more effective and more economically rational—ways to reduce the social consequences of excess food consumption, while at the same time enhancing consumption opportunities for the poor and protecting the world’s resources for future generations.