Animal Agriculture Facing Pressure from Regulations and Private Standards
Agricultural Economics
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05/02/2016
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2016 Filley-Garey Lecture
Animal agriculture faces pressures from government regulations and private buyer standards, including those related to labeling. This presentation will review economic relationships for several important issues related to poultry, pork, beef and milk industries. These issues have a common theme: widespread concerns about farm or food system practices are based on misperceptions or misinterpretations. Also, that changes in practices and product characteristics have been imposed by government regulation or intermediate buyer standards that limit consumer choices, rather than by effective market demand by end use consumers.
Among the most significant implications of these trends in animal agriculture are disincentives for application of science and technology to agricultural and food practices. Such disincentives for innovation may foster slower farm and food system productivity growth, slower declines in food prices, slower improvements in food safety, and slower reductions in food waste. In rich, relatively well-fed economies the impacts are substantial but affect a relatively small part of the economy and a small share of most consumer budgets. Among the poor of the world, the consequences are vital and include less nutritious diets and resultant health threats for a billion people.
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- [00:00:00.000]This is our annual Filley-Garey Lecture.
- [00:00:02.288]This is a special lecture of the Ivy Cum De Promen.
- [00:00:04.907]Once a year we get together
- [00:00:07.097]thanks to Dr. Filley and Dr. Garey,
- [00:00:10.014]who left money for us to focus on an issue of interest
- [00:00:13.873]to agricultural to the state.
- [00:00:17.133]I will say a little bit about them because we are
- [00:00:20.133]very thankful that they have left us their legacy
- [00:00:23.593]and a little bit of money for this.
- [00:00:26.133]Dr. Filley was the first department head
- [00:00:29.084]of the Ag-Econ Department, and he was department head
- [00:00:31.575]for 40 years, from 1914-1949.
- [00:00:35.636]He was hired in 1911, when the department didn't exist yet,
- [00:00:40.944]to develop a program in farm management
- [00:00:43.440]that is now our department.
- [00:00:45.880]He was educated at Wayne State Normal School, and he also
- [00:00:50.530]served in the Nebraska legislature from 1911-1912.
- [00:00:54.902]He received a Bachelor's and an MA from UNL
- [00:00:59.219]and his PhD from the University of Minnesota in 1931.
- [00:01:02.739]He was well-known,
- [00:01:05.529]and a well-known speaker in extension programs.
- [00:01:07.925]He wrote and taught on farm management and farm economics,
- [00:01:11.564]and our building now since 1972 is named after him.
- [00:01:16.411]Dr. Garey, who was also a professor
- [00:01:18.837]of agricultural economics here for around six years,
- [00:01:21.976]was his son-in-law,
- [00:01:25.526]Filley's son-in-law.
- [00:01:27.546]He was from Nebraska, had a Bachelor from UNL in 1915,
- [00:01:34.103]and then he went to Minnesota
- [00:01:35.853]where he was a history instructor.
- [00:01:38.333]After he finished a PhD while he was a history instructor
- [00:01:42.473]in Minnesota, his PhD was from Cornell University,
- [00:01:45.513]he wrote and taught in rural development.
- [00:01:48.192]After he retired from the University of Minnesota,
- [00:01:50.269]he came here and he taught in the department for six years.
- [00:01:54.849]So we are grateful for their leadership
- [00:01:56.593]and their contribution, and we want to make sure
- [00:01:59.233]that their legacy lives on.
- [00:02:02.343]This time we have, this year we have
- [00:02:04.765]the privilege of having Dan Sumner.
- [00:02:07.225]Professor Sumner is the Director of the
- [00:02:10.375]Agricultural Issues Center at the University of California.
- [00:02:13.798]He's also a distinguished professor of agricultural
- [00:02:16.878]economics at the University of California, Davis.
- [00:02:20.059]He was born and raised
- [00:02:23.667]on a farm in California,
- [00:02:27.027]and he says between Suisun Valley,
- [00:02:29.386]which is between Berkley and Davis.
- [00:02:35.715]It was a fruit farm.
- [00:02:37.454]His Bachelor is from Cal Poly, then he went
- [00:02:40.614]to Michigan State, University of Chicago,
- [00:02:44.484]he was a professor at North Carolina State,
- [00:02:47.262]he was a Senior Economist at the Council of
- [00:02:51.459]Economic Advisers of the President's,
- [00:02:53.981]this is the 80s and early 90s.
- [00:02:56.195]He was also Assistant Secretary
- [00:02:59.165]for Economics at the USDA,
- [00:03:03.125]and Deputy Assistant Secretary USDA before that.
- [00:03:06.370]He then went to California,
- [00:03:09.695]and has been a mentor to many people
- [00:03:14.465]that are now in the profession.
- [00:03:16.149]We have learned a lot from him.
- [00:03:18.249]I would say,
- [00:03:20.909]"What's his trademark?"
- [00:03:23.059]I would say he is a critical thinker.
- [00:03:25.941]He is provocative, and he is not afraid
- [00:03:30.351]of tackling issues that seem to taboo
- [00:03:33.124]or some call politically incorrect,
- [00:03:35.984]and he uses his economic tools and his economic intuition
- [00:03:40.256]to give insight into these policy issues that might affect
- [00:03:45.124]a lot of people, and among these people, people that are
- [00:03:49.314]very much related to the agricultural sector.
- [00:03:52.254]So it's a privilege to welcome him to Lincoln,
- [00:03:56.575]and thanks, Dan, very much for being here.
- [00:03:59.914](applause)
- [00:04:06.343]I want to thank all of you for being such good hosts
- [00:04:10.983]so far, we'll if that continues.
- [00:04:12.933](laughter)
- [00:04:15.453]Lia, Dick, and Lilyan were sort of my hosts,
- [00:04:18.813]picking me up and arranging things and all that,
- [00:04:20.853]and thank you very much for that because that was great.
- [00:04:24.343]I was asked to prepare some remarks that would be applicable
- [00:04:27.278]to a broader audience, not just the economists.
- [00:04:29.639]I know it's mostly economists in the room,
- [00:04:31.879]but I'm going to speak a little more broadly
- [00:04:34.459]and I hope at least the economics that I talk about
- [00:04:37.689]will resonate with most of you, and you'll be able to see
- [00:04:41.139]sort of between the lines or what I'm getting at.
- [00:04:43.772]Some of what I'll say will sort of speak more specifically
- [00:04:47.311]to the economists as I go by, but I hope at least
- [00:04:51.391]what I'm going to talk about is broader than that.
- [00:04:53.792]And I have a clicker, that's what I was...
- [00:04:57.151]I wanted to go like this, but nothing was happening.
- [00:04:59.228](laughter)
- [00:05:05.408]So what I'm going to talk about is
- [00:05:07.080]Private Standards for Agricultural Practices.
- [00:05:09.460]What I'm going to say is derived from
- [00:05:11.840]and will draw on some remarks I made
- [00:05:14.360]at the San Francisco meetings last summer.
- [00:05:16.820]And you'll see even some of the illustrations
- [00:05:18.560]will be similar, and I go in a little more depth
- [00:05:20.820]on a couple of cases, so I apologize to those of you
- [00:05:25.520]who see some slides and perhaps some discussion
- [00:05:29.053]that's similar to what I did at an address
- [00:05:32.693]at econ meetings last summer.
- [00:05:35.048]But I think there's enough other interesting things going on
- [00:05:37.528]that you can wake up occasionally and be interested again.
- [00:05:41.948]And of course most of the audience wouldn't have been there
- [00:05:45.408]so that's just for those of you who happened to be there.
- [00:05:48.768]So here's my motivation.
- [00:05:50.608]It's my argument then that markets
- [00:05:52.548]for food products are driven by practices.
- [00:05:55.028]The markets are now more and more driven by practices
- [00:05:57.448]all along the chain, back to the farm,
- [00:05:59.628]and I think we've noticed that.
- [00:06:02.088]It may well have always been true
- [00:06:03.868]but certainly we're talking about it more
- [00:06:05.968]now than a long time ago.
- [00:06:08.328]And I want to talk particularly here not about regulations,
- [00:06:13.268]I'll mention a few as I go along, but I don't want
- [00:06:15.778]to talk about government policy,
- [00:06:17.298]which I've spent a lot of time on in my career,
- [00:06:19.798]but I want to talk about private standards
- [00:06:21.258]because I think that's really, for an economist
- [00:06:24.639]like me, the more interesting part of the question,
- [00:06:27.838]the more puzzling part of the question.
- [00:06:30.449]It's very easy for economists to point to this or that
- [00:06:32.886]government policy and say,
- [00:06:34.126]"Gee, where'd they come up with that?
- [00:06:37.446]"That's sub-optimal in all these ways,
- [00:06:39.476]"and the costs are bigger than the benefits
- [00:06:41.606]"from this or that government policy."
- [00:06:45.095]When something's disciplined by the markets,
- [00:06:48.631]most economists recognize there's lots of market forces
- [00:06:52.359]that you have to think about pretty hard,
- [00:06:55.658]and I think private standards are along that form.
- [00:06:59.039]There's something about two firms
- [00:07:01.259]that have a market relationship with each other.
- [00:07:04.199]They may have some standards
- [00:07:05.619]about the product characteristics say,
- [00:07:07.345]and could that be somehow sub-optimal.
- [00:07:10.296]And it won't be in a purely competitive market
- [00:07:12.524]with perfect information, etc, etc,
- [00:07:14.384]but I will argue it can be.
- [00:07:16.803]That is, many of the standards are based on
- [00:07:18.624]mistaken notions or particular interests,
- [00:07:21.683]and so that's where I'm starting.
- [00:07:22.964]That's the overview and if that's enough for you,
- [00:07:28.234]that's what I'm going to talk about.
- [00:07:30.620]And I'm going to consider a number of cases,
- [00:07:32.886]and one I've spent a lot of time with
- [00:07:35.126]with my colleagues in animal science, and psychology,
- [00:07:37.547]and engineering in other places, has to do with standards
- [00:07:42.397]for hens that lay eggs.
- [00:07:46.997]And it's a very particular industry,
- [00:07:48.517]and it's a huge industry,
- [00:07:49.692]but it's one that's particularly interesting
- [00:07:51.332]and I'm going to talk about that.
- [00:07:52.752]I'll also talk about antibiotics a little bit,
- [00:07:55.452]practices for ground beef processing,
- [00:07:58.372]another case I've been working on a lot recently,
- [00:08:01.212]and then origin labeling, which is another case
- [00:08:03.272]that I want to talk about because origins,
- [00:08:06.762]local, things like that, are really a major part
- [00:08:08.932]of the food system now,
- [00:08:10.262]and I'm going to talk about some of those issues.
- [00:08:12.172]And I want to illustrate cases in which
- [00:08:14.643]the spill-overs are actually negative not positive.
- [00:08:17.450]So it's not that we have these new standards
- [00:08:19.990]and they improve things for society and the economy,
- [00:08:23.131]that can certainly happen, that's sort of the standard case
- [00:08:26.091]if you will, and so I want to think about
- [00:08:28.991]negative consequences for public goods and social values
- [00:08:32.941]and things that are also likely negative for consumers.
- [00:08:39.611]So that means I keep in mind this distinction
- [00:08:42.454]between consumer demand, which is expressed through
- [00:08:45.734]markets, a willingness to pay for some services or some
- [00:08:48.934]product characteristics, and then other participants
- [00:08:52.274]in a market who express their interest through
- [00:08:54.454]economic influence, particularly on intermediate buyers.
- [00:08:57.709]So that's the idea, and I'll illustrate that,
- [00:08:59.878]intermediate buyers that then
- [00:09:01.329]affect the ingredient supplies.
- [00:09:05.099]And this is in a context where I would say most consumers
- [00:09:08.137]are optimally ignorant, that is they don't know much
- [00:09:11.136]about food, and they shouldn't, it's complicated.
- [00:09:15.447]They know some things.
- [00:09:17.381]Most people reach maturity and live
- [00:09:19.886]and stay nourished enough to stay alive,
- [00:09:22.426]but they certainly don't know much
- [00:09:24.506]about the whole production process
- [00:09:26.167]or everything that influences.
- [00:09:28.067]And that's complicated and costly,
- [00:09:30.407]and they're not going to.
- [00:09:31.667]And then the other context for this
- [00:09:33.927]is a lack of trust, that in this political season
- [00:09:36.987]I don't have to talk much about
- [00:09:38.427]because everybody on the nightly news is always
- [00:09:40.107]talking about it in terms of politics.
- [00:09:42.107]But I think it is true that a lack of trust is endemic
- [00:09:46.197]and it's not really ideological,
- [00:09:49.307]and certainly in the presidential election
- [00:09:51.666]we've had lots of observers say sort of a lack of trust,
- [00:09:54.587]lack of acceptance of the mainstream or the authority
- [00:09:59.576]in both political parties for example.
- [00:10:03.955]So here's the hypothesis that I want to explore,
- [00:10:06.645]and I'll read it out.
- [00:10:08.080]That is, private standards are often set in response
- [00:10:10.495]to private, non-commercial interests,
- [00:10:13.335]you can think of NGOs which is the jargon some people use,
- [00:10:17.764]and its pressures from those interests, and these standards
- [00:10:21.532]have the potential to and often do
- [00:10:23.472]turn public interest in food practices.
- [00:10:26.292]Everyone's interested in what they eat,
- [00:10:28.371]and where it comes from and how it's grown.
- [00:10:31.471]They turn those public interests into private standards
- [00:10:34.453]that cause negative public consequences.
- [00:10:36.928]So it's really the private system affecting
- [00:10:39.467]the public domain, sometimes in ways that might
- [00:10:43.578]otherwise be dealt with with public policy.
- [00:10:49.453]When I started this line of work, the first thing
- [00:10:51.413]I wanted to do, because I'm an empirical sort of person,
- [00:10:53.774]was to get a bunch of data and say,
- [00:10:55.873]"How much has interest in food evolved
- [00:10:58.744]"and changed and grown?"
- [00:11:00.694]Because every time I'd pick up a newspaper,
- [00:11:02.234]or a farm magazine for that matter,
- [00:11:04.724]the first sentence would be something like,
- [00:11:06.774]"Everyone knows the interest in food has grown
- [00:11:08.573]"a lot recently, or over the last decade or so."
- [00:11:13.184]And so I scratch my head and I say,
- [00:11:14.613]"Wait, my mother didn't care about food?
- [00:11:16.554]"I thought she did. I'll be darned."
- [00:11:18.873]And so I said, "Well could I get some data?"
- [00:11:20.973]And so the data that people would present to me
- [00:11:23.554]would be the last four years of Twitter feeds.
- [00:11:26.573]Well that's not the time horizon I'm...
- [00:11:28.594]ya know, so look, there's more Twitter feeds
- [00:11:30.374]now about food than there was five years ago,
- [00:11:33.792]even relative to all Twitter feeds,
- [00:11:35.595]so it's even standardizing a bit.
- [00:11:37.576]And so I looked at some of that, or blogs,
- [00:11:40.326]or website hits, or other things,
- [00:11:42.436]but none of them gave me,
- [00:11:43.861]My mother didn't Twitter or tweet
- [00:11:46.276]or whatever, any of those things.
- [00:11:48.136]She loved hummingbirds,
- [00:11:49.556]but she didn't spend much time with Twitter.
- [00:11:53.336]But it seems to me there was lots of interest in the past.
- [00:11:58.155]I don't know how to quantitatively measure that.
- [00:12:01.009]For example, New York Times has been around
- [00:12:03.029]for a century and a half or so,
- [00:12:05.829]so maybe I could go to New York Times' articles
- [00:12:09.749]or lines or there are various ways
- [00:12:11.689]to search these things historically.
- [00:12:14.519]I haven't figured out a way to find the right keywords
- [00:12:17.499]to see that that works.
- [00:12:18.889]I will tell you that the New York Times
- [00:12:20.529]used to write a lot more articles
- [00:12:21.989]about the Farm Bill than they do now.
- [00:12:24.329]And agriculture, generally, back when
- [00:12:27.129]it was 30% of the economy, was a bigger part
- [00:12:29.715]of the New York Times than it is now,
- [00:12:31.635]even if you counted all this food stuff.
- [00:12:34.115]But that's not what we quite mean,
- [00:12:36.470]so the question is how do you get it,
- [00:12:39.209]and I haven't figured out a way.
- [00:12:41.049]What I will say is that if you go back a half a century
- [00:12:45.309]or a half a century before that,
- [00:12:48.559]food and the farm and the food system
- [00:12:51.209]was much more intimate than it is now.
- [00:12:53.924]So that when I think of my mother,
- [00:12:55.503]she knew something about the food
- [00:12:57.444]because they either grew some of it on her farm
- [00:12:59.883]or she produced it in her kitchen, canning
- [00:13:03.194]or freezing or otherwise processing food,
- [00:13:06.023]and so in a sense she didn't need to rely
- [00:13:08.844]on a blog or a website to get information
- [00:13:11.803]about this food process because it was much more intimate.
- [00:13:17.553]The best I would say is that the interest has remained
- [00:13:21.916]and it's reasonable and understandable
- [00:13:25.516]that what's intensified is ignorance.
- [00:13:28.328]That is, we know less, almost all of us know much less
- [00:13:32.888]about food than, for half of this audience, your grandmother
- [00:13:36.488]knew about food, and for some of you,
- [00:13:38.278]your mother knew about food.
- [00:13:42.014]I do think there's less trust than respect,
- [00:13:45.809]and I don't think that's unique to food though.
- [00:13:47.699]I think food may be a leading edge of a skeptical response
- [00:13:52.167]to any claim of authority or expertise,
- [00:13:56.327]and maybe that's rightly deserved.
- [00:14:00.313]Certainly we want to teach our students
- [00:14:02.772]to be critical thinkers not just accept whatever they read.
- [00:14:05.949]We certainly train them not to believe
- [00:14:07.749]everything they see on the internet,
- [00:14:10.829]but where you draw the line between expertise
- [00:14:14.354]and authority is a difficult one.
- [00:14:16.584]And I don't know how new any of this is, really.
- [00:14:21.614]So here's a case of Nestlé.
- [00:14:23.494]Nestlé's a firm I've dealt with some.
- [00:14:26.294]I was at a water meeting with Nestlé recently
- [00:14:28.454]where they were bragging about
- [00:14:32.054]using less water in their ice cream factory,
- [00:14:36.694]and they were very happy with that.
- [00:14:37.963]I did a quick calculation, I was the chair of this session,
- [00:14:40.441]I did a quick calculation and I said,
- [00:14:42.861]"So you save as much water as they use
- [00:14:46.181]"on one acre of alfalfa to feed the cows
- [00:14:48.521]"that give the milk to this factory you're doing."
- [00:14:51.506]Which, Lilyan says sometimes people,
- [00:14:54.216]she was very polite about it,
- [00:14:55.574]but she said a lot of people don't like me.
- [00:14:58.599]She didn't phrase it quite like that,
- [00:15:01.059]but that's what she said.
- [00:15:02.744]And I tried to be nice to this guy,
- [00:15:06.167]but it really was the case that they were bragging
- [00:15:08.067]about all this sustainable resource use,
- [00:15:10.807]and they were going to set standards
- [00:15:14.457]for these various resource uses, but they hadn't...
- [00:15:19.092]And he knew this arithmetic, but he thought he was talking
- [00:15:21.257]to a public relations audience, he was actually talking to
- [00:15:23.877]a group economists and misunderstood who his audience was,
- [00:15:27.347]but this is the kind of thing you see from Nestlé.
- [00:15:29.953]I teach a course called The Economics of Agricultural
- [00:15:33.293]Sustainability for undergraduates, and about half
- [00:15:36.753]the students are Managerial Economics undergraduates,
- [00:15:39.898]and they have very strong motivation.
- [00:15:42.328]They want to get a job.
- [00:15:43.868]That's all they want in life, is to get a job.
- [00:15:46.548]And if they go to the websites of Fortune 500 companies,
- [00:15:51.029]they know that the only thing these companies
- [00:15:53.338]care about is sustainability.
- [00:15:56.119]Mars doesn't make candy, they make sustainability.
- [00:15:59.848]Nestlé doesn't make, well Nestlé makes everything,
- [00:16:02.989]from bottled water on all around, but it's all done
- [00:16:06.299]only so that they can make the planet a better place,
- [00:16:09.168]I mean if you looked at their websites.
- [00:16:11.180]And so these students say, "Gee, I have this course
- [00:16:13.010]"called Economics and Sustainability.
- [00:16:15.046]"That will help me get a job."
- [00:16:16.547]So they're in my class because they've looked
- [00:16:18.587]at things like that website I just showed you.
- [00:16:22.491]This expansion, I use Michelle Obama as an example here,
- [00:16:26.893]because she's certainly the first, as far as I know,
- [00:16:29.404]the first First Lady to make this her theme.
- [00:16:32.964]And it's not just a we speed,
- [00:16:34.444]but it's all kinds of things about knowing your food.
- [00:16:38.324]This is the first USDA that said
- [00:16:40.284]you ought to know your farmer.
- [00:16:42.284]This is at a time where, at least most the farmers I know,
- [00:16:45.604]don't have a lot of interest in knowing everybody.
- [00:16:47.984]I mean they're nice guys, but it's not what they're,
- [00:16:50.189]the reason they're in business farming
- [00:16:51.629]isn't to individually know people
- [00:16:54.169]who buy the bacon that comes from the hog
- [00:16:57.809]that comes from the corn and soybeans
- [00:16:59.163]that this farmer may have produced.
- [00:17:03.461]And here's where I make this point
- [00:17:05.039]that there's really no clear metric
- [00:17:06.798]that I've been able to get about this growth.
- [00:17:09.559]I'm not the only one, I think,
- [00:17:10.739]that's attempting to document this.
- [00:17:12.959]Here's a little, what started off
- [00:17:15.219]as a Venn diagram and then got more ugly.
- [00:17:19.734]What we're talking about here is a set of
- [00:17:22.244]standards and I'm going to focus on
- [00:17:24.894]animal welfare, environmental standards,
- [00:17:26.994]and food safety claims and some social responsibility,
- [00:17:30.315]and it sits here putting some demands on the food system.
- [00:17:33.835]We've got nutritional security,
- [00:17:36.094]which is a blue circle I've drawn here,
- [00:17:38.614]and we've got climate change concerns that are
- [00:17:40.374]a little different than local environmental concerns
- [00:17:43.294]because the externality, to the extent that there is one,
- [00:17:46.154]is broader, and then
- [00:17:49.534]I put right in the middle innovation
- [00:17:51.454]because I'm talk a lot about innovation in this context.
- [00:17:54.655]So I'm thinking about nutritional security,
- [00:17:56.863]but a lot of other people are thinking about
- [00:17:58.653]climate change and all of these things,
- [00:18:00.842]and you get a little bit of overlap, maybe this section
- [00:18:03.663]right here, where you can have all this stuff.
- [00:18:07.903]And it's very hard to do all of this,
- [00:18:11.263]and get nutritional security for everybody
- [00:18:14.142]and deal with climate, and the way you can do that is,
- [00:18:17.742]what makes that possible, is this innovation bit.
- [00:18:21.736]So we're going to talk about trying
- [00:18:23.376]to get in that little area there,
- [00:18:25.873]and how some of this make that harder,
- [00:18:27.752]and that's the context in which I mean private sector firms.
- [00:18:33.756]The next thing I want to talk about is water.
- [00:18:35.721]General Mills here says what they're on a mission
- [00:18:39.101]is to conserve and protect natural resources
- [00:18:41.781]because that's what their business depends on,
- [00:18:44.041]and they're right and they're telling the truth there.
- [00:18:47.531]I suspect they're interested in other things too,
- [00:18:50.181]but again this is front and center for this company.
- [00:18:55.684]And I'm going to give an example from the California drought
- [00:18:57.844]that I've used quite a bit recently,
- [00:18:59.564]particularly when I talk to water people.
- [00:19:01.484]And it's one I would've used
- [00:19:02.663]with the Nestlé guy for example,
- [00:19:04.224]and here's a case where a bunch of people,
- [00:19:06.644]particularly in the Netherlands,
- [00:19:07.963]had done a lot of calculations on how much
- [00:19:10.343]water is embedded in each food,
- [00:19:12.404]and so this afternoon we were talking
- [00:19:14.383]about exporting virtual water,
- [00:19:16.344]and they've done a set of engineering calculations.
- [00:19:21.774]I would argue that bit of engineering
- [00:19:25.783]is hard enough to do,
- [00:19:27.543]making it interesting and relevant for decision making
- [00:19:30.733]is immensely more complicated,
- [00:19:32.931]and that's where people usually don't do very much.
- [00:19:36.511]There in California, the top of the list
- [00:19:39.511]for water use is beef, and we do produce
- [00:19:41.981]some beef in California.
- [00:19:43.270]Lots of cows and calves, lots of feeder calves,
- [00:19:45.511]most of those come to Nebraska to be fed,
- [00:19:49.781]maybe Kansas a little bit, but some of them stay there.
- [00:19:53.939]There's a few feed lots left in California,
- [00:19:56.439]and there's even...
- [00:19:59.069]So there's pastures and few feed lots there.
- [00:20:02.027]The recommendation from our governor
- [00:20:04.038]was eat veggie burgers because we have a drought,
- [00:20:08.306]and this is a direct quote from him.
- [00:20:09.786]He's a bright guy, he's sort of a policy nerd.
- [00:20:13.606]He's more well-informed than almost any politician.
- [00:20:18.906]But the general advice to consumers is to eat responsibly,
- [00:20:23.185]and I think a number of you probably, in this room,
- [00:20:27.865]followed or should have been following, the USDA
- [00:20:31.805]food recommendations that came out
- [00:20:33.185]here just a few weeks ago.
- [00:20:35.393]And for a while they were going
- [00:20:36.493]to include sustainability as a metric for nutrition,
- [00:20:40.341]and they ended up not doing that in the end,
- [00:20:44.581]and the way that was played politically
- [00:20:47.540]was that agribusiness put enough pressure on USDA
- [00:20:50.501]that they backed down and chickened out.
- [00:20:52.733]I have a little different...
- [00:20:56.333]That may well have been true, I mean,
- [00:20:57.553]I'm not internal to the politics of that,
- [00:21:00.833]but here's an example:
- [00:21:03.333]a three ounce steak, 880 gallons.
- [00:21:05.713]There's some calculations that Nina Anderson
- [00:21:07.693]and I did recently that I had vetted
- [00:21:09.773]with our friends in the animal science department,
- [00:21:13.043]almost all of that is rainfall that falls on hillsides.
- [00:21:16.513]So I'm talking about a cow calf pair and the
- [00:21:18.153]hillsides of California, it rains on those hillsides.
- [00:21:21.773]That water's not going anywhere.
- [00:21:23.313]If it doesn't grow grass, it grows something,
- [00:21:26.693]and if the cow doesn't eat it,
- [00:21:29.273]it doesn't mean the grass doesn't grow
- [00:21:30.893]and it doesn't mean the rain doesn't fall.
- [00:21:32.874]That water's not going into streams,
- [00:21:35.135]the amount that does get off that hillside
- [00:21:37.134]and into the stream, probably more of it would
- [00:21:38.903]get into the rest of the water system
- [00:21:40.863]if the cow wasn't there, as a matter of fact.
- [00:21:43.764]Excuse me, yeah, probably more of it
- [00:21:47.383]would get in there if the cow was there.
- [00:21:51.003]That water is not relevant to the California drought,
- [00:21:54.263]it's not going down the rivers, in terms of alternative
- [00:21:59.062]uses of that water, there's no alternative use.
- [00:22:01.708]It's going to rain on the hillside and grow grass
- [00:22:04.088]on that hillside whether the cow's there or not.
- [00:22:06.748]So that calculation doesn't provide drought relief.
- [00:22:10.948]If you took the cows out of the California
- [00:22:12.688]because you didn't eat any meat, that wouldn't
- [00:22:15.034]help anybody in the drought.
- [00:22:17.413]About 10% of the water that's embedded in meat
- [00:22:20.334]in California is Nebraska water.
- [00:22:22.673]We get trainloads of corn and beans from Nebraska,
- [00:22:26.504]goes directly to the feed lots in California
- [00:22:28.873]so to the extent that a steer stays in California,
- [00:22:31.993]that water is Midwest water, not California water.
- [00:22:34.793]So that has nothing to do
- [00:22:35.833]with the drought in California directly.
- [00:22:38.533]There's about ten gallons per serving of beef
- [00:22:41.444]in California that comes from hay,
- [00:22:44.274]if we assume all of that hay comes from California.
- [00:22:46.954]That is, none from Idaho and the other places
- [00:22:50.273]where hay gets shipped in from,
- [00:22:51.773]but assume it's all from California,
- [00:22:53.632]that's about ten gallons per serving of beef
- [00:22:56.793]that are either irrigation water that could be shifted,
- [00:23:01.033]say, to urban uses or golf courses or taking showers
- [00:23:04.242]or all the other things people worry about.
- [00:23:07.063]These calculations Nina and I worked
- [00:23:08.622]out in some gory detail.
- [00:23:11.083]We also did it for lots of other commodities.
- [00:23:13.742]The bottom line here is that that ten gallons for beef is
- [00:23:17.082]not 880 gallons, it's ten that's relevant for the drought.
- [00:23:21.322]Orders of magnitude different,
- [00:23:23.422]and it's in the same scale with broccoli or tomatoes
- [00:23:26.422]depending on how many decimal places
- [00:23:28.223]you take these various calculations out.
- [00:23:30.402]There's no difference, so the governor
- [00:23:32.421]was just wrong about that.
- [00:23:34.481]He could have easily said,
- [00:23:35.800]"Make sure you eat a steak but don't eat almonds."
- [00:23:38.501]Or he could have said, "Don't drink wine or milk."
- [00:23:41.321]Because they are a little higher.
- [00:23:42.479]Each of those are higher than steak it turns out,
- [00:23:45.339]and it's because you have to actually know
- [00:23:47.159]something about these water flows.
- [00:23:48.979]There's no reason to think the governor of California
- [00:23:50.659]is supposed to know this stuff.
- [00:23:52.059]I'm not criticizing him for not knowing it,
- [00:23:55.439]I may be criticizing him for talking
- [00:23:57.869]about stuff he doesn't know anything about,
- [00:23:59.579]but I won't criticize for that.
- [00:24:02.105]I might have, but I won't.
- [00:24:05.175]What is scary, however, are the buyer standards.
- [00:24:08.253]So a company like Nestlé won't get to this slide,
- [00:24:11.973]they'll be up with the slide at 880 and say,
- [00:24:14.983]"Look we're not going to source
- [00:24:17.539]"from people who grow cattle,
- [00:24:19.419]"and if the feeder calf comes from California,
- [00:24:22.099]"we won't source the product."
- [00:24:23.459]It wouldn't be Nestlé, but imagine
- [00:24:27.349]McDonald's or Costco, imagine if Costco said,
- [00:24:29.895]"Gee, they have a drought in California
- [00:24:31.635]"so if your feed lot takes calves from California
- [00:24:36.175]"we're not going to deal with you."
- [00:24:38.564]Those are the kind of private standards
- [00:24:40.187]that we're talking about here.
- [00:24:45.157]I can tell you, we're looking at people
- [00:24:48.055]thinking about private standards on exports
- [00:24:50.490]of agricultural products because they have
- [00:24:52.090]water embedded, so this is not fanciful.
- [00:24:55.550]I want to spend a little more time on the egg issue,
- [00:24:57.889]because it's one that I think has gone a lot further,
- [00:25:00.229]and there we really do have private standards
- [00:25:04.060]that we're dealing with.
- [00:25:09.532]I'm going to talk a little about some regulations.
- [00:25:11.657]It turns out the regulations that I'm going to talk about
- [00:25:13.537]are in California and they've got lots of publicity.
- [00:25:16.677]They are now irrelevant, or mostly irrelevant,
- [00:25:19.817]and what's relevant to the egg industry
- [00:25:21.597]are the private standards.
- [00:25:22.901]It's McDonald's or Burger King or Walmart
- [00:25:25.357]or Safeway or Kroger's, all of which
- [00:25:29.717]have announced private standards for the housing
- [00:25:32.908]of hens for the eggs that will be in their stores.
- [00:25:35.548]Some of those are already implemented, in fact,
- [00:25:37.588]most of them already have some private standards,
- [00:25:40.668]all different by the way, which is enough of a headache,
- [00:25:43.308]and they're all moving over the next three, four, five years
- [00:25:47.527]depending on which company, to a cage-free standard,
- [00:25:50.508]and I'm going to tell you a little about what that means
- [00:25:52.407]and what the economics is on that.
- [00:25:55.273]Actually, on Wednesday, I was putting together
- [00:25:58.641]some of these slides and as is my normal practice
- [00:26:01.041]every morning, I went to the website Beef Today.
- [00:26:04.061]Actually I do that every morning, sad to say,
- [00:26:09.650]and there was the quote right at the top of an article,
- [00:26:14.301]"If anybody thinks the beef industry is too cowboy
- [00:26:17.501]"to be forced into change,"
- [00:26:19.021]I love that line, "too cowboy to be forced into change,
- [00:26:21.941]"take a look at what's happening
- [00:26:23.061]"to pork and egg industries."
- [00:26:24.941]And they're talking particularly about this housing for hens
- [00:26:27.741]and what does that mean next year, the year after,
- [00:26:30.251]the year after that, for practices
- [00:26:33.593]on not just feed lots,
- [00:26:35.573]but in extension back to the cow calf operations.
- [00:26:39.199]So for example, water use standards for feeder calves
- [00:26:42.559]and where you can bring feeder calves from
- [00:26:45.479]based on resource use for example.
- [00:26:50.561]And here's McDonald's,
- [00:26:51.421]McDonald's has been at the center of this.
- [00:26:54.041]Here they talk about welfare audits by which they mean
- [00:26:59.321]the hen housing standards, but they also
- [00:27:02.028]have standards about tail docking and lots of other things.
- [00:27:06.254]Alternative housing for sows, they refer back to 2012,
- [00:27:10.934]they're pretty much all the way done.
- [00:27:13.359]By 2017, it says they will source pork only from producers
- [00:27:16.939]who quote, "share this commitment."
- [00:27:19.204]By 2022 they've got some further standards.
- [00:27:23.975]So these are private standards for what
- [00:27:25.509]they claim is a public purpose.
- [00:27:27.689]Is there any particular reason to think they got it right?
- [00:27:30.309]It certainly wasn't vetted through
- [00:27:32.129]any kind of public action.
- [00:27:34.609]This was based on private standards
- [00:27:37.649]by generally NGO activity.
- [00:27:40.894]This is not from customers, it's not the average
- [00:27:44.074]mom that goes into McDonald's and says,
- [00:27:45.754]"Dammit, I demand that you have
- [00:27:48.575]"alternative housing related to gestation."
- [00:27:51.654]That has not happened,
- [00:27:53.456]but what happens is this, these private standards.
- [00:27:57.215]So let me put the context for eggs and start with a voter
- [00:28:00.500]proposition that we worked a lot on back in 2007 and 2008.
- [00:28:07.041]And this was case where the egg industry
- [00:28:08.832]came to me and said,
- [00:28:09.992]"Would your center look at some of this stuff?
- [00:28:11.837]"We would fund you to do some work on this."
- [00:28:14.817]And I said, "No, thank you, I don't want your money.
- [00:28:18.633]"Fascinating issue, I don't want your money."
- [00:28:20.573]I was really smart because actually I was sued
- [00:28:24.013]by The Humane Society of the United States
- [00:28:25.873]because they saw some internal memo
- [00:28:28.533]where somebody in the egg industry
- [00:28:30.054]said they were going to fund something at UC Davis.
- [00:28:33.133]What they didn't see was the email back
- [00:28:35.153]saying, "No, I don't want your money."
- [00:28:37.353]So they were suing me, trying to get my records
- [00:28:40.353]that our work had been funded by the egg industry.
- [00:28:43.192]Turns out what we found was not at all consistent
- [00:28:46.191]with what the egg industry wanted us to find anyway.
- [00:28:50.051]There was all kinds of,
- [00:28:51.601]so what happened was two-thirds of the voters in California
- [00:28:54.221]voted that for eggs produced in California,
- [00:28:57.981]the hens had to have roughly 60%, 50% more space
- [00:29:02.561]than they had in the normal cages,
- [00:29:04.321]what are called conventional cages.
- [00:29:06.386]So in California they had about 70 square inches
- [00:29:09.006]and they had to go up to 115,
- [00:29:10.706]so it's about 50% more space, a little more.
- [00:29:16.316]And that's what it said, now it was phrased,
- [00:29:18.571]and I'm making it simple, it didn't actually say that,
- [00:29:21.051]and I'll show you the language in a second.
- [00:29:23.610]But more space is costly, so it was simple,
- [00:29:27.711]we did a little study and said,
- [00:29:28.811]"So the egg industry leaves California,"
- [00:29:30.621]because actually about 1/3 of the eggs
- [00:29:33.182]were coming into California already from the Midwest
- [00:29:36.587]and this would've raised the cost enough that
- [00:29:38.967]California wouldn't have been competitive.
- [00:29:40.387]Shipping eggs is pretty cheap.
- [00:29:42.627]California's shipping a lot of grain in to feed
- [00:29:44.207]the chickens, and the alternative is to ship the eggs in.
- [00:29:47.026]If you made the housing standards more severe
- [00:29:49.957]then California wouldn't have been able to import.
- [00:29:52.327]And this was a proposition about eggs
- [00:29:55.216]produced in California, that's what it was about.
- [00:29:58.749]There were TV ads showing terrible conditions
- [00:30:00.848]and ugly chickens, and particularly people,
- [00:30:03.269]young workers being mean to hens.
- [00:30:06.149]The proposition didn't have anything to do with that,
- [00:30:08.169]and it also showed downer cattle and slaughterhouses.
- [00:30:10.949]The proposition had nothing to do with that.
- [00:30:15.489]And then on the egg side, they said,
- [00:30:18.229]"Oh the egg price is going to double.
- [00:30:20.879]"They're all going to come from Mexico."
- [00:30:22.249]If you want to scare people, just say Mexico,
- [00:30:24.329]and then they go, "Oh no, must be bad."
- [00:30:28.358]And that was all baloney.
- [00:30:31.639]It's true eggs would've come in,
- [00:30:32.759]but it would've been from Iowa or Idaho or Utah,
- [00:30:35.018]but that it's nearly as scary.
- [00:30:36.959]Mexico has no comparative advantage on eggs
- [00:30:38.819]because they don't have the corn,
- [00:30:40.179]so it made no sense to start with.
- [00:30:44.141]So the impact of this proposition
- [00:30:46.016]would've been where eggs were raised,
- [00:30:48.537]where hens were to lay the eggs,
- [00:30:50.457]not how they were raised.
- [00:30:51.636]It wouldn't have had effect if you thought that
- [00:30:54.047]hens would've been better in bigger cages,
- [00:30:56.492]this had no effect on that.
- [00:30:58.332]And the economics were simple, and several of my colleagues
- [00:31:01.002]said, "Why are you wasting your time
- [00:31:02.360]"on something so boring?"
- [00:31:03.640]Well, it was 35 million voters that were going to vote on it
- [00:31:07.019]plus it's agricultural so we spent some time on it.
- [00:31:12.899]So basically, that was that proposition.
- [00:31:17.287]It never got implemented, because two years later,
- [00:31:20.695]So here was the proposition, yeah,
- [00:31:23.324]"Shall certain farm animals be allowed
- [00:31:25.763]"for the majority of every day to fully extend their limbs
- [00:31:28.604]"or wings and lie down and stand up and turn around."
- [00:31:30.865]So it also applied to gestation crates for sows,
- [00:31:34.796]but we don't have any sows in California so it didn't count.
- [00:31:37.751]I mean there are a few, but they didn't apply to
- [00:31:39.511]the sort of back top, backyard operations that we do have.
- [00:31:43.411]So it really, there was nothing, and it could have applied
- [00:31:46.651]to veal stalls but we don't have any of those either,
- [00:31:49.311]so it was really directed at egg-laying hens,
- [00:31:51.431]and it doesn't apply to boilers
- [00:31:53.551]because they're in big farms anyway.
- [00:31:55.929]The result would have been, you think California
- [00:31:59.069]is a small part of a national market.
- [00:32:02.049]There's a little demand for eggs in the U.S.
- [00:32:03.979]It is a national market,
- [00:32:05.299]there's no separate demand for California eggs.
- [00:32:08.139]It raised the marginal cost such that
- [00:32:10.179]California is now producing some of its own eggs
- [00:32:14.968]but the marginal cost would've been such that
- [00:32:17.465]California would've been priced out of the egg business,
- [00:32:19.345]except for some specialty eggs for 5% of the market,
- [00:32:22.586]that was already well passed these standards
- [00:32:25.605]which is the same as a lot of places.
- [00:32:29.625]It would have had very little effect
- [00:32:31.705]in certain neighborhoods in my town
- [00:32:33.585]because everybody bought expensive farm raised
- [00:32:36.765]pasture specialty eggs anyway.
- [00:32:39.405]All of Berkeley wouldn't have noticed anything.
- [00:32:41.705](laughter)
- [00:32:42.775]Ya know, what can we say?
- [00:32:46.178]In 2010, the legislature evidently read something I wrote,
- [00:32:50.008]probably not, but the egg industry said,
- [00:32:52.057]"Look, do you really want to just
- [00:32:53.837]"put us out of business and leave
- [00:32:55.138]"hens in little tiny cages in Iowa
- [00:32:57.138]"rather than the little tiny cages in California?
- [00:32:59.918]"Why don't we make this law apply
- [00:33:01.097]"to eggs consumed in California?"
- [00:33:03.337]Then that raised a constitutional challenge.
- [00:33:05.778]Can California really pass a law that tells
- [00:33:08.337]other people how to do things?
- [00:33:09.797]This is prior to Vermont and GMOs,
- [00:33:12.738]and the answer was, so far they have.
- [00:33:16.866]So the result of this amendment was that the 97 or so
- [00:33:20.700]percent of consumers who buy conventional eggs
- [00:33:23.161]and bought at least some,
- [00:33:27.041]would have to pay more.
- [00:33:28.591]In effect, that's what happened.
- [00:33:29.990]Starting in January 2015, which is when
- [00:33:32.767]all this got implemented,
- [00:33:36.218]we now have California standard eggs
- [00:33:39.378]and they have to have about 115 square inches.
- [00:33:42.298]That's the way it's been implemented,
- [00:33:45.268]no matter whether they're raised in California
- [00:33:47.018]or raised in Iowa.
- [00:33:50.959]There's a bunch of housing systems for eggs
- [00:33:52.919]and what I want to show you is the one that...
- [00:33:58.558]There's conventional cages, and those have grown
- [00:34:00.478]over size from about 55 square inches
- [00:34:03.159]now up to close to 80 is the standard.
- [00:34:06.977]There's this California standard where you have to have,
- [00:34:10.177]if you have more than nine hens in a cage,
- [00:34:13.408]they have to have 115 square inches.
- [00:34:15.338]There are other ways to do it, but that's
- [00:34:17.188]in fact what everybody does, they're all indoors.
- [00:34:19.478]Then you have something called enriched colonies,
- [00:34:22.378]where they have 60 or so hens per,
- [00:34:25.898]and something like 115-140,
- [00:34:30.398]but they can move around a lot more
- [00:34:32.218]because it's a big cage with more hens in it,
- [00:34:35.658]and in that case they can flap their wings.
- [00:34:38.478]They can meet the California standards,
- [00:34:41.148]but they also furnish those colonies with little,
- [00:34:44.238]hens like nests, and they like to scratch around,
- [00:34:48.218]and dust bathe and things like that,
- [00:34:50.438]and those animal scientists designed these colonies
- [00:34:52.978]to have each of those features in them
- [00:34:54.938]for what they consider the natural behaviors of hens.
- [00:34:58.318]And I'm going to show you some data on that,
- [00:34:59.978]that's why I'm giving you that background.
- [00:35:01.771]The other is cage-free or barn or aviary.
- [00:35:05.271]They're also indoors, they have more space per bird.
- [00:35:09.023]Then there's free-range which has lots of space per bird,
- [00:35:12.083]and has some outdoor access,
- [00:35:14.284]and then pasture-raised where they're outdoors
- [00:35:17.544]most of the time and confined for sleeping.
- [00:35:22.854]Here's a slide saying, "What do people actually care about?"
- [00:35:25.748]based on some survey data.
- [00:35:27.689]Not my survey data, but you see all these things.
- [00:35:30.248]There's cage-free, what's the price, do they have
- [00:35:33.089]no hormones in the feed, is it local,
- [00:35:37.598]what do you know about the egg, the packaging,
- [00:35:40.318]the size, whether it's organic or not,
- [00:35:42.626]is it a brand, what about the brand,
- [00:35:44.608]but all of this is sort of associated with branding.
- [00:35:47.287]What we did was a study with lots of colleagues
- [00:35:51.207]from lots of disciplines all over the country,
- [00:35:54.147]there were people from animal health and well being,
- [00:35:56.608]environment, workers' safety, so we had the number of MDs,
- [00:36:01.147]do these housing systems differ in worker characteristics,
- [00:36:06.113]the food safety, the food affordability, that was me.
- [00:36:09.758]So the economics part was,
- [00:36:11.817]"Does it make eggs more expensive?"
- [00:36:14.198]And in that context, I'll just show you
- [00:36:15.658]a couple of slides here.
- [00:36:16.778]I think only this one can move more quickly.
- [00:36:20.948]AV is the cage-free system.
- [00:36:24.583]Birds die much more rapidly, much more often, and in fact
- [00:36:28.022]one reason they have lower egg production, and that's
- [00:36:31.443]because they're not there to lay eggs because they've died.
- [00:36:34.342]It's not a particularly healthy place for a bird to be.
- [00:36:38.082]The conventional cages is the center,
- [00:36:40.323]so this is all compared to conventional cages.
- [00:36:43.083]The behavior, the aviary, this has to do
- [00:36:45.543]with moving around and these enriched colonies,
- [00:36:50.463]are almost as good as aviary systems,
- [00:36:52.947]but the birds don't move as much.
- [00:36:54.372]They don't have as much space per bird to move around in.
- [00:36:57.933]Cannibalism and aggression is
- [00:36:59.813]a real problem in the aviaries.
- [00:37:01.312]Birds don't like each other,
- [00:37:02.992]and this idea of a pecking order
- [00:37:04.412]really is true my animal scientists friends tell me,
- [00:37:07.753]and keel damage, they break their bones
- [00:37:11.273]when they're in the aviaries.
- [00:37:12.954]They bump into things and that's one reason they die.
- [00:37:17.783]And there's slides like this for food safety,
- [00:37:20.863]for human health, here's one on worker health.
- [00:37:24.143]The aviaries are terrible for the workers
- [00:37:26.222]because of all the dust.
- [00:37:28.083]It's basically 50,000 birds living in their own manure
- [00:37:31.322]for a year, and that's the system,
- [00:37:33.682]and it's not very pleasant for the workers
- [00:37:35.483]who have to work there.
- [00:37:36.482]It's not very pleasant for the birds either.
- [00:37:40.727]So there's all these problems for workers in this system.
- [00:37:44.952]And there's a dozen slides like this one.
- [00:37:47.294]This is sort of the user-friendly version of these slides.
- [00:37:51.294]So there's the cage-free system.
- [00:37:54.704]I don't think I have a picture of the others.
- [00:37:57.548]The furnished colonies I should probably have a picture of,
- [00:38:01.009]and I had some, I just didn't stick them in.
- [00:38:03.709]What we did was look at the costs,
- [00:38:05.688]so we did some cost accounting.
- [00:38:07.248]Fortunately for us, the data we got was from a system
- [00:38:10.588]where we have a single accounting system
- [00:38:13.029]with a single operation and a single manager
- [00:38:16.089]with different housing types, so it was all...
- [00:38:20.889]Some of the problems you run into
- [00:38:22.637]is every farm's a bit different.
- [00:38:24.137]Comparing costs across farms is really hard.
- [00:38:27.017]Here we had, everything was the same,
- [00:38:29.636]except the housing, and what you see is the feed cost
- [00:38:33.857]is almost all, or most of the costs.
- [00:38:36.417]Slightly higher for the conventional
- [00:38:38.497]than the enriched system which was surprising,
- [00:38:40.779]and a penny higher for the aviary.
- [00:38:42.799]The pullet cost turns out very much higher
- [00:38:45.839]for the cage-free, and that's because
- [00:38:49.449]for pullets to operate in cage-free when they're grown
- [00:38:52.319]they have to be operated as cage-free when they're babies
- [00:38:55.437]and that takes a lot more space,
- [00:38:56.916]and is a lot more expensive,
- [00:38:58.336]so that's why the pullets are more expensive.
- [00:39:03.127]The labor cost is substantially higher,
- [00:39:05.361]partly because people have to go find dead chickens
- [00:39:07.621]in the barn, that's the biggest cost there,
- [00:39:10.301]and also find laid eggs that aren't laid in cages
- [00:39:12.760]out in the middle of the manure.
- [00:39:15.501]So that's a problem, and the labor cost is also
- [00:39:18.921]a bit higher in this enriched system over here.
- [00:39:22.340]So the overall operating costs are about 1/3 higher,
- [00:39:25.600]a little more than 1/3 higher
- [00:39:26.840]in the aviary or cage-free system.
- [00:39:32.981]So those are our findings and different operations,
- [00:39:36.040]like every other cost production sort of
- [00:39:38.160]accounting thing you do, they're different in every
- [00:39:41.611]specific system, and I've had egg farmers say,
- [00:39:44.226]"Boy you nailed that one Sumner,"
- [00:39:45.825]and others say, "No, no, my costs are different that those,"
- [00:39:48.066]and they're both right.
- [00:39:53.226]Let me talk for a second, and I'll get back to those costs,
- [00:39:55.986]remember California's going to this sort of big-cage system
- [00:40:00.085]without furnishings so there's not much going on here.
- [00:40:06.556]Interestingly, each person eats roughly,
- [00:40:08.494]if you eat eggs, it's roughly one hen's worth of eggs,
- [00:40:12.633]that's the average so it makes it real easy.
- [00:40:14.534]So you can imagine you have a chicken,
- [00:40:16.821]and you can decide that you want to free your chicken.
- [00:40:19.861]So Liz, you've got a chicken, you say,
- [00:40:21.721]"I want my chicken to be free.
- [00:40:23.621]"I'll eat cage-free eggs, and she can run
- [00:40:25.361]"around with the other hens."
- [00:40:27.851]And hope she's at the right part of the pecking order.
- [00:40:31.441]But if you do that, it's going to cost you 20 bucks or so,
- [00:40:35.097]and then you say, "Well, yeah, I don't know.
- [00:40:37.136]"One chicken, I mean, really."
- [00:40:39.956]So 97% of the people in California chose
- [00:40:43.837]not to spend their 20 bucks.
- [00:40:46.523]If they voted for this proposition,
- [00:40:49.002]they weren't going to free one chicken,
- [00:40:52.363]the same 20 bucks or say 100 bucks for the family,
- [00:40:57.123]would free 30 million chickens.
- [00:41:00.171]Well how cheap are you really?
- [00:41:01.841]I mean, would you pay 20 bucks to free 30 million chickens?
- [00:41:05.881]And it turns out, two-thirds of the people said,
- [00:41:07.461]"Yeah, I'll do that, even though I'll vote
- [00:41:10.381]"to make a product illegal that I buy all the time."
- [00:41:15.251]So it's an interesting vote,
- [00:41:16.736]but as soon as you say by voting for it,
- [00:41:18.816]then I free 30 million chickens, that makes sense.
- [00:41:20.936]But notice what that means.
- [00:41:22.216]Everybody else is just like you,
- [00:41:23.656]they wouldn't pay 20 bucks to free a chicken either,
- [00:41:26.401]but you are imposing on them that they
- [00:41:29.361]have to pay 20 bucks that you wouldn't have paid yourself,
- [00:41:32.528]which is to say you care more
- [00:41:34.008]about the chickens than the people.
- [00:41:36.928]So the way I interpret this is interpersonal utility
- [00:41:40.268]between humans and chickens, but not between people.
- [00:41:43.728]So voters in California said, "I don't care
- [00:41:46.368]"if all my neighbors also agree with me
- [00:41:50.168]"that it's not worth 20 bucks to free a chicken,
- [00:41:52.308]"I will force them to do that,
- [00:41:55.787]"even though it has to be sub-optimal
- [00:41:57.948]"for this society as a whole."
- [00:42:00.268]That's at least my,
- [00:42:02.092]unless I really don't care about my neighbors,
- [00:42:05.653]and I really care about those chickens.
- [00:42:08.713]So that was my campaign slogan,
- [00:42:12.033]vote yes if you care more about chickens than people,
- [00:42:15.833]but it didn't work.
- [00:42:20.933]What's actually happened?
- [00:42:21.933]These are Spring 2016 data.
- [00:42:25.573]Big ranges because these are national, except this one.
- [00:42:30.012]What is a conventional cage egg
- [00:42:33.253]cost per dozen in the Midwest?
- [00:42:35.193]Between one and two bucks.
- [00:42:36.619]If you remember a year ago, it spiked up
- [00:42:38.278]because of the disease.
- [00:42:39.419]It's back down in the dollar to two dollar range,
- [00:42:42.186]and you see supermarket prices throughout those.
- [00:42:45.786]We get data from Urner Barry and a few other places
- [00:42:48.326]where they survey retailers, AMS does that,
- [00:42:51.126]the Bureau of Labor Statistics does that.
- [00:42:54.346]In California, it is now between two and three dollars
- [00:42:57.706]for these hens having more space.
- [00:43:00.394]Now they have about as much space that would...
- [00:43:03.752]The costs are probably about ten or 12% higher
- [00:43:08.130]at the farm, there's no more shipping costs than before
- [00:43:11.751]because they're in the same cartons,
- [00:43:13.472]I mean they're the same thing.
- [00:43:16.226]But the cost has just about doubled,
- [00:43:19.492]maybe up 60-70% at retail.
- [00:43:22.292]So the mark-up on these California standard eggs
- [00:43:24.872]has gone up a lot, and maybe they were losing money
- [00:43:28.572]selling eggs before, but they're certainly not
- [00:43:30.651]losing money now, at the retail level anyway.
- [00:43:33.672]Cage-free eggs range from $2.50 some places
- [00:43:36.632]where they're really cheap, up to about six bucks,
- [00:43:39.952]so again they're substantially more than, say,
- [00:43:42.591]if you went from this one to the ones where
- [00:43:44.632]they live in their own manure for a year,
- [00:43:46.852]you pay an extra three dollars a dozen,
- [00:43:49.972]two or three dollars a dozen.
- [00:43:51.491]Organic of course adds to the cage-free.
- [00:43:53.872]They require the cage-free standards plus some feed,
- [00:43:56.352]and then free-range you can pay just as much as you want to.
- [00:44:00.671]And we have a lot of pasture-raised eggs
- [00:44:05.118]in our neighborhood and you can pay a lot if you want to.
- [00:44:08.945]So Bovay and I, John Bovay and I, got a bunch of data
- [00:44:12.905]on individual precincts and said,
- [00:44:14.805]"Which precinct voted for this proposition?"
- [00:44:17.246]and then linked that with a bunch of census data
- [00:44:19.405]on neighborhoods, sort of on zip codes,
- [00:44:22.655]smaller than zip codes, on census tracks.
- [00:44:25.765]Link census tracks to precincts, and then tried
- [00:44:29.769]to learn what that meant,
- [00:44:31.069]and I interpret that as we found that
- [00:44:34.959]we had a proxy for ideology.
- [00:44:37.449]Is there a Whole Foods that chose
- [00:44:38.909]to be in your neighborhood?
- [00:44:40.734]If Whole Foods moved to your neighborhood
- [00:44:42.095]that signaled something about the neighborhood.
- [00:44:44.194]So what's endogenous there is Whole Foods moving around,
- [00:44:46.755]or people moving to where there was a Whole Foods,
- [00:44:49.735]so that was a signal of something about people.
- [00:44:53.934]And what we found is people with less information
- [00:44:57.045]about eggs, and less economic pressure on them,
- [00:45:00.355]and less empathy for people,
- [00:45:01.794]they tended to vote yes on this proposition.
- [00:45:06.705]And what's really reasonable however,
- [00:45:10.153]is the people that pushed the proposition
- [00:45:12.772]who wanted to move people away from eating animal products
- [00:45:16.132]could make eggs more expensive,
- [00:45:18.093]and that was a useful strategy,
- [00:45:20.312]and also as a long-term strategy for publicity
- [00:45:24.032]about a national set of standards.
- [00:45:26.458]And that's what I want to talk about now,
- [00:45:28.159]just for a minute or two.
- [00:45:30.018]So now we've got cage-free standards coming.
- [00:45:32.499]McDonald's raised their standards from about
- [00:45:35.219]60 square inches up to about 80
- [00:45:39.219]over a four or five year period, and now they've
- [00:45:41.678]announced they're going to abandon that all together,
- [00:45:44.459]and they didn't go to furnished colonies, the ones that
- [00:45:47.738]the animal welfare experts say make a lot of sense.
- [00:45:51.999]They didn't go all the way to pasture-raised,
- [00:45:54.159]which is an idyllic situation
- [00:45:56.738]by much of the animal welfare literature,
- [00:45:59.519]they stopped at the cage-free,
- [00:46:01.299]which has somehow gotten to be a word
- [00:46:03.539]that people appreciate
- [00:46:05.629]or have a picture of in a way.
- [00:46:10.389]And what I've seen at McDonald's directly,
- [00:46:14.962]is you get activists, in this case
- [00:46:17.069]the Humane Society mainly, this is HSUS,
- [00:46:21.448]not your local animal clinic
- [00:46:23.728]or animal welfare group, but the law firm in DC,
- [00:46:28.609]The Humane Society of the United States.
- [00:46:30.418]They put pressure at the CEO level
- [00:46:33.438]of lots of firms to convert,
- [00:46:36.178]with saying that there are potential loses for your firm.
- [00:46:41.148]And so what I want to talk about here,
- [00:46:43.765]and this is an illustration where you have a company
- [00:46:46.345]like McDonald's with a brand name
- [00:46:49.845]that's worth billions,
- [00:46:51.565]that has a company image that says, "We're nice people,"
- [00:46:56.521]that then has the potential for a group to make it seem
- [00:47:01.020]as though, it may be true, that they're not nearly
- [00:47:03.240]as nice as they might seem.
- [00:47:05.620]And so if you want to show up with your kids
- [00:47:07.708]going into McDonald's, there's somebody dressed
- [00:47:09.998]as a not-very-nice-looking chicken standing
- [00:47:13.138]in front of the store saying,
- [00:47:15.519]"Do you really want your kids to walk past here
- [00:47:17.988]"to get an Egg McMuffin or for that matter
- [00:47:20.338]"to get a hamburger or a Coke?"
- [00:47:22.299]And the real point is that as a company,
- [00:47:25.488]eggs aren't a very big deal for anybody.
- [00:47:28.687]Hamburgers aren't a very big deal for a supermarket,
- [00:47:31.446]but if you can affect the whole image of the firm,
- [00:47:34.367]the CEO will penalize customers and suppliers
- [00:47:39.716]to do something optimal for the firm,
- [00:47:42.228]and this has to be a multi-product firm
- [00:47:44.069]with market power or some brand capital
- [00:47:47.328]which I think applies to just about all of them
- [00:47:50.469]that are buying agricultural products these days.
- [00:47:52.629]Almost every food company is a Kraft or a McDonald's
- [00:47:56.489]or a Safeway or a Kroger, those sort of folks.
- [00:48:00.248]And so that's why I think this is important.
- [00:48:04.205]And I think that's what I just said on that slide.
- [00:48:08.881]Tina Saiton and Rick Sexton and I had a paper
- [00:48:10.941]a year ago I guess in the AJAE,
- [00:48:14.625]where we take a model having to do with pork
- [00:48:16.524]antibiotics and there that had the interesting case
- [00:48:19.725]where consumers or the pressure was
- [00:48:22.885]on the firms not for the whole hog,
- [00:48:26.535]so to speak, but only on certain muscle cuts,
- [00:48:29.945]similar to BSE for milk
- [00:48:34.027]where it's only the fluid milk
- [00:48:35.708]that people seem to pay attention.
- [00:48:37.355]They don't pay attention to it when it comes to cheese
- [00:48:39.955]or heavily processed milk products,
- [00:48:43.095]but the thing is if you don't feed the cow the hormone
- [00:48:46.074]or if the pigs don't have antibiotics you can't say,
- [00:48:48.854]"Gee I'm only going to feed the hams the antibiotics."
- [00:48:51.434]It's the whole hog, which means that any added cost
- [00:48:54.515]for raising that hog has to be recaptured
- [00:48:58.455]from the particularly cuts of the hog
- [00:49:01.870]for which there may be some interest,
- [00:49:04.289]some activist interest or other interest,
- [00:49:06.590]and that's what that paper does.
- [00:49:09.910]And we show that you penalize consumers and producers
- [00:49:13.610]but it can still be optimal for the marketing firm.
- [00:49:16.869]It's not optimal for the system as a whole.
- [00:49:20.087]That's independent of whether the antibiotic debate
- [00:49:24.028]is good, bad, or indifferent, what the costs are here.
- [00:49:32.469]So the model that I'm not going to sketch out here,
- [00:49:36.410]but I have one, Dinos and I were talking about it,
- [00:49:38.849]and I may grab one of his models, I'm not sure.
- [00:49:41.050]But the idea here is I've got to have
- [00:49:43.670]a productivity-enhancing innovation
- [00:49:45.450]that lowers the cost of production.
- [00:49:46.710]That's I'm thinking about, and then
- [00:49:50.370]if it's adopted, the demand for the product falls,
- [00:49:53.522]I'm thinking about not because consumers respond,
- [00:49:57.002]but because of some intermediate buyer responds optimally.
- [00:50:01.482]And if you think of a single item,
- [00:50:05.312]that's the same product before and after,
- [00:50:07.172]so it's a pork chop before and after,
- [00:50:08.852]it's an egg before and after.
- [00:50:11.472]So here's the picture, this is
- [00:50:13.192]the standard picture for us right?
- [00:50:15.372]We've got a demand curve, we shift out the supply curve
- [00:50:17.852]there's lots of winners.
- [00:50:19.337]If you said at the same time the supply curve
- [00:50:21.416]shifts out, the demand curve shifts back,
- [00:50:23.257]it gets more complicated.
- [00:50:24.997]And then if you say that demand curve's shifting back,
- [00:50:27.890]and check my counting of boxes if you want
- [00:50:31.610]while I'm talking, I'm not going to go through the letters,
- [00:50:34.251]some graduate student here should check that
- [00:50:36.760]because there's probably a mistake there somewhere.
- [00:50:38.910]I'll know it's a typo if there is.
- [00:50:44.330]So you shift back the demand for the product
- [00:50:47.552]because you shifted the supply curve out,
- [00:50:50.053]because it changed something about this product
- [00:50:52.053]that I'm not reflecting, so I don't have a market
- [00:50:54.493]with two products, I have some buyers deciding
- [00:50:57.172]to withdrawl from this product because they don't like
- [00:51:00.162]the technology that's used to shift the supply curve out.
- [00:51:04.131]I'm going to talk about an example in a minute
- [00:51:06.971]where it's actually the other way.
- [00:51:11.396]Consumers that drop out lose some
- [00:51:13.596]consumer surplus they would've gotten.
- [00:51:16.196]Consumers that stay in this market that don't really
- [00:51:18.676]care about this innovation
- [00:51:22.485]one way or another, they can gain,
- [00:51:24.605]but that's not the end of the story.
- [00:51:26.376]What I really want to talk about is if I'm imposing
- [00:51:31.195]some cost, some fixed cost, on the system.
- [00:51:34.633]Imagine a technology where to scale up
- [00:51:39.154]this technology you have some fixed cost.
- [00:51:41.754]If the market shrinks from this technology,
- [00:51:44.054]you don't adopt, and some people can think
- [00:51:46.274]of GMOs in that context.
- [00:51:47.874]You're not going to adopt GMOs
- [00:51:49.864]in Europe if the market's small.
- [00:51:52.268]You can think of animal agricultural examples
- [00:51:54.488]in the same sort of a way.
- [00:51:56.938]So for example, innovations with respect
- [00:52:00.388]to housing of hens, this furnished colonies,
- [00:52:03.528]are not being adopted because they don't
- [00:52:06.107]meet these criterion, even though my colleagues
- [00:52:09.568]in animal science say that's a real innovation, both in
- [00:52:12.327]the animal welfare side and in the productivity side.
- [00:52:15.907]The costs are far lower than cage-free,
- [00:52:18.068]but if you did that you would lose some sales here.
- [00:52:22.008]Some people don't care.
- [00:52:23.128]Some people think it's fine, but they lose.
- [00:52:26.848]You know I don't have my clock up here, so I...
- [00:52:29.407][Dr. Lilyan Fulginiti] It's 3:58.
- [00:52:31.566]Ok, so the case I really want to talk about,
- [00:52:35.486]it's an old one but it's a new version of the old case.
- [00:52:38.882]And that's the case of beef carcasses
- [00:52:41.122]that are trimmed where the separation of the fat
- [00:52:44.632]from the lean is done with a centrifuge,
- [00:52:47.902]and that sounds fairly neutral.
- [00:52:50.323]If you've been through a packing plant recently
- [00:52:52.022]you notice they're really moving fast,
- [00:52:54.583]and they have great hunks of
- [00:52:58.953]mostly meat and little bit of fat, and they go off one line.
- [00:53:02.262]And then they have some pieces,
- [00:53:04.303]I'm talking about finished cattle,
- [00:53:07.122]pieces where there's mostly fat but still
- [00:53:10.763]quite a bit of lean there, and they go off on a line.
- [00:53:15.481]Up until March of 2012, they went into a line
- [00:53:20.422]where they went into a centrifuge,
- [00:53:22.391]they were spun very quickly that separated
- [00:53:25.486]the fat from the lean, and then it was flash frozen
- [00:53:29.176]and some other stuff goes on,
- [00:53:30.906]but basically takes about two or 3% of the lean
- [00:53:33.997]off this carcass that would've otherwise,
- [00:53:37.086]they don't make steaks and roasts out of it,
- [00:53:39.427]it goes in the ground beef, but it would've
- [00:53:41.532]otherwise been lost to the system.
- [00:53:46.552]Cargill figured 850 million pounds a year,
- [00:53:49.668]some number according to The Wall Street Journal.
- [00:53:53.668]That's spin process, there's also a pH process.
- [00:53:57.012]Cargill raised the pH.
- [00:53:59.212]The other major company lowered
- [00:54:00.592]the pH or vice versa I think.
- [00:54:03.712]Then in March and early April 2012,
- [00:54:07.212]Diane Sawyer had 11 segments over a month long period,
- [00:54:12.052]night after night, saying the word "pink slime"
- [00:54:15.600]just over and over, that word, and then she put up,
- [00:54:19.080]that didn't do much for the first week, so then
- [00:54:21.741]she started putting up a boycott list of supermarkets,
- [00:54:25.801]saying, "Your supermarket sells pink slime
- [00:54:28.320]"and you don't even know it,"
- [00:54:30.760]and listed the supermarkets by name.
- [00:54:33.566]And at that point they peeled off one by one.
- [00:54:36.366]I can't remember which one was first,
- [00:54:38.227]Kroger or Safeway, but they all peeled off.
- [00:54:40.486]Every one of them said, "This product's absolutely safe.
- [00:54:43.677]"We've never had a problem, it's healthy,
- [00:54:45.238]"it's all beef, there's nothing wrong with it,
- [00:54:47.318]"and we're not going to use it anymore."
- [00:54:49.557]That's what every one of them said,
- [00:54:51.844]or something to that effect.
- [00:54:55.104]The result was
- [00:54:57.944]Cargill saw an 80% drop,
- [00:55:00.064]that was really industry wide,
- [00:55:02.819]there's data that I've seen that's proprietary
- [00:55:05.679]that documents all these things as well.
- [00:55:09.358]Some agricultural economists looked
- [00:55:10.879]at some broader industry effects.
- [00:55:13.219]It's really not big enough that you see it
- [00:55:15.338]in the price of cattle, but there's too many
- [00:55:16.819]things going on with the price of cattle
- [00:55:18.398]that you'd see something like this.
- [00:55:21.118]But you lose this lean trim from the food supply
- [00:55:24.059]and that's the other side of it.
- [00:55:26.019]If there were time I'd talk about food waste.
- [00:55:29.409]I mean at the same time we're talking about food waste.
- [00:55:32.097]We're moving this meat out of the food stream.
- [00:55:36.377]Interesting groups like Consumer Federation
- [00:55:39.718]which are not normally a lobby group
- [00:55:41.399]for conventional agriculture, were saying,
- [00:55:44.989]"Hey, this stuff is safe.
- [00:55:46.536]"This is the hamburger that there's never
- [00:55:49.136]"been an E. Coli outbreak from.
- [00:55:50.936]"It's the only one, as a matter of fact."
- [00:55:54.596]USDA said, "Yeah, we support the stuff,"
- [00:55:56.935]and then they pulled out by the fall of 2012.
- [00:56:01.625]This was interesting, the New York Times
- [00:56:03.274]did a taste test on this stuff.
- [00:56:05.634]Most people thought it was actually better
- [00:56:07.634]when the hamburger had been mixed with
- [00:56:08.894]this centrifuge processed stuff.
- [00:56:14.133]I like the line, "No one found the burgers slimy."
- [00:56:17.105](chuckling)
- [00:56:19.665]But the stuff is off the market. We lost that market.
- [00:56:23.932]And so there's a case where it wasn't a particular
- [00:56:26.832]activist group, it was an activist journalist, and it wasn't
- [00:56:30.333]her personally, there were a couple of other journalists,
- [00:56:32.641]who just decided to make an issue.
- [00:56:34.781]This product had been on the market for 20 years
- [00:56:37.081]so it's not like it, there was no news,
- [00:56:38.741]it was nothing news, but they choose that.
- [00:56:43.492]I want to finish talking about local,
- [00:56:45.690]and since Chris is here particularly,
- [00:56:47.731]I have to talk about a place where local
- [00:56:49.511]really matters, and that's in wine.
- [00:56:54.751]The point I want to make is there's a very
- [00:56:56.367]clear place where the market speaks.
- [00:56:59.207]So supermarkets who could have advertised for years,
- [00:57:03.587]"Hey we don't use this pink slime stuff,"
- [00:57:05.687]they wouldn't have called it that,
- [00:57:06.885]"We don't use this centrifuge processed
- [00:57:08.785]"beef in our hamburger,
- [00:57:10.385]"that's a competitive advantage for us."
- [00:57:12.285]Nobody advertised that, because nobody cared,
- [00:57:14.425]because it wasn't an issue.
- [00:57:17.245]Similarly with wine, it really is an issue.
- [00:57:20.145]Do those grapes come from this part
- [00:57:21.765]of Sonoma county or that part of Sonoma county?
- [00:57:24.565]And consumers pay a lot.
- [00:57:26.385]And there's a huge emphasis with a private market,
- [00:57:30.385]with government action to define things,
- [00:57:33.685]you know, to define what a mountain means
- [00:57:36.805]as an Appalachian is government action,
- [00:57:39.405]but the private market takes it from there
- [00:57:42.345]and people really care.
- [00:57:45.255]And these are some data that come
- [00:57:46.535]from a paper that Chris and I and Travis Lybbert
- [00:57:49.795]published just this year that show,
- [00:57:52.125]these are all places that you can grow wine grapes,
- [00:57:54.285]not where the wine is made,
- [00:57:55.395]but where the wine grapes come from,
- [00:57:57.340]and people pay more for wine grapes.
- [00:57:59.240]This is how much extra they're paying in dollars per bottle.
- [00:58:03.500]This is wine that,
- [00:58:06.601]this wine in particularly is stuff that
- [00:58:08.751]most of us wish we could afford to drink.
- [00:58:11.495]Other than Dick Perrin, who drinks it like Kool-Aid for him,
- [00:58:14.764]but most of the rest of us wish we could afford that stuff.
- [00:58:19.460]I want to talk about country of origin labeling
- [00:58:22.107]just for a couple of minutes, because there's a case
- [00:58:24.387]where nobody had an interest.
- [00:58:27.517]We were bringing in animals from Mexico and Canada for years
- [00:58:33.007]with respect to Canada, approximately forever.
- [00:58:36.493]The border was porous, certainly since NAFTA,
- [00:58:38.600]the border for us was completely porous.
- [00:58:41.140]Lots of veterinary inspections at the border,
- [00:58:43.760]but nothing else, and then
- [00:58:49.590]we passed a law, in this case it was a regulation,.
- [00:58:52.710]So here's a case where the private market signals,
- [00:58:55.110]even the NGOs had no interest,
- [00:58:58.270]we passed a law to keep
- [00:59:00.150]those animals only labeled.
- [00:59:03.410]But the interesting thing about the labeling,
- [00:59:05.881]and this happens in a lot of these situations,
- [00:59:08.541]labeling requires you have to keep things straight,
- [00:59:11.521]which means you have to segregate, and it turns out
- [00:59:14.020]here's a case where segregation was expensive.
- [00:59:16.280]And it's expensive because
- [00:59:17.441]the slaughterhouse moves pretty quickly.
- [00:59:19.661]This is not Switzerland.
- [00:59:21.700]So the slaughterhouse is moving quickly,
- [00:59:24.160]the animals you can't keep track of them unless
- [00:59:26.441]you do them on a different day and on a different time,
- [00:59:30.081]and that's what they actually ended up doing.
- [00:59:33.421]Mexico and Canada
- [00:59:37.040]claimed $3 billion annual loses.
- [00:59:40.200]They won WTO case after WTO case.
- [00:59:43.440]Disclosure: I was Canada's COOL economist.
- [00:59:46.840]My former student, Sebastien Pouliot,
- [00:59:49.560]who's a Canadian, ended up being Mexico's economist
- [00:59:52.660]at the end of this thing, which was sort of fun.
- [00:59:57.710]And he and I published a couple of papers
- [00:59:59.130]on this stuff earlier.
- [01:00:01.710]The bottom line was you had some labeling rules
- [01:00:05.050]that added costs for reports,
- [01:00:07.290]and if you go back to the baby pig,
- [01:00:09.890]which is the way a lot of these animals came across,
- [01:00:12.670]a penny or two more on a pork chop
- [01:00:14.930]ends up being a lot of money for the baby pig
- [01:00:18.050]in percentage terms on that pig.
- [01:00:20.790]And so what that did was either the Canadian pigs cost more,
- [01:00:24.510]well that's not going to happen,
- [01:00:26.090]they can't cost more because otherwise they won't sell any,
- [01:00:28.463]so they got a lower price for the Canadian pigs
- [01:00:31.504]to be competitive with the U.S. pigs
- [01:00:33.544]or they didn't come at all.
- [01:00:34.984]And if fact, the data is remarkable how strong that is.
- [01:00:39.464]There's some economic reasoning here
- [01:00:40.844]I'm not going to step through, that's basically arbitrage.
- [01:00:44.044]It says if you're going to compete in the U.S. market
- [01:00:46.564]with a Canadian product and the buyer has higher costs
- [01:00:51.444]if they use your product that's only three or 4% Canadian,
- [01:00:55.482]then you have to make it worth their while,
- [01:00:57.942]which means you're going to take a lower price.
- [01:01:00.682]And that's what that picture says.
- [01:01:05.810]Sebastien and I and Ted Schroeder and Glynn Tonsor
- [01:01:08.450]and others have found similar things.
- [01:01:10.770]This was finally the U.S., after losing the WTO case
- [01:01:15.290]over and over again, the U.S. was going to withdraw this,
- [01:01:19.587]and in fact it's the only recent case I know of
- [01:01:21.927]where the U.S. Congress actually did vote to eliminate this.
- [01:01:26.048]The mystery meat there, by the way, is a baby pig
- [01:01:28.998]that as born in Canada, so that's the reference.
- [01:01:35.144]It's that calf right there. That's a Manitoba calf.
- [01:01:37.769]As I like to say, the reason consumers in America
- [01:01:39.809]don't really care about this is they're not real clear
- [01:01:42.509]whether it's Minnesota that's a state or Manitoba.
- [01:01:45.309](laughter)
- [01:01:47.769]You know, I bet you if I asked my class in Davis
- [01:01:50.269]they wouldn't know which one of those is a state.
- [01:01:52.749]One of them, they're pretty sure,
- [01:01:54.129]but they're not really sure.
- [01:01:55.369]And so this is now gone.
- [01:01:56.749]The U.S. Congress actually voted
- [01:01:58.209]overwhelmingly to repeal COOL.
- [01:02:00.809]Most of you didn't know it went on,
- [01:02:02.589]most of you didn't know it came off.
- [01:02:05.469]Certainly consumers didn't notice them either way.
- [01:02:09.259]Most consumers didn't notice anyway.
- [01:02:13.194]That's President Obama being cool,
- [01:02:15.674]and the administration by the way,
- [01:02:17.974]supported the repeal.
- [01:02:19.814]They defended this at the WTO because
- [01:02:23.314]that's what the administration would do.
- [01:02:25.756]They weren't aggressive about it,
- [01:02:27.135]but they supported eliminating this.
- [01:02:30.295]And the reason this matters is,
- [01:02:32.695]the reason all of these things matter is
- [01:02:34.295]because at least the nutritionists I talked with,
- [01:02:37.415]there's a Christine Stewart at Davis
- [01:02:39.975]who I spend some time with,
- [01:02:41.756]who has convinced me that
- [01:02:42.975]particularly for children and mothers,
- [01:02:45.936]particularly pregnant women and babies especially,
- [01:02:49.535]it is possible, but difficult,
- [01:02:52.845]to get the right nutrition
- [01:02:55.045]without using some kind of meat products.
- [01:02:57.863]It could be fish, it could be eggs, could be milk.
- [01:03:00.242]But there's enough micronutrients and minerals and
- [01:03:03.203]other things that you can get as a vegan, but it's just hard
- [01:03:07.183]and it's probably not going to happen among the very poor.
- [01:03:12.424]Particularly eggs are really cheap.
- [01:03:14.303]Beef is much more expensive.
- [01:03:15.624]It's probably not thing that's in most of these.
- [01:03:18.933]You know there's certain nations,
- [01:03:20.183]East Africa, that's going to be beef,
- [01:03:21.883]but in lots of the world it's...
- [01:03:24.473]And in India it's going to be dairy products,
- [01:03:26.303]but it probably won't be beef, among some populations.
- [01:03:31.803]And there's still enough hunger
- [01:03:33.198]in the world that this matters.
- [01:03:34.758]Now we know, as a matter of fact, that
- [01:03:39.248]when you do public relations surveys,
- [01:03:42.653]when the NGOs do surveys in the United States,
- [01:03:45.553]approximately nobody cares about world hunger.
- [01:03:49.183]It is the lowest of ten.
- [01:03:50.873]If they say, "What do you care about?"
- [01:03:53.033]It's not just price of food and safety,
- [01:03:54.883]everything else ranks above world hunger,
- [01:03:57.793]and they ask about that in context of policy issues
- [01:04:01.193]and agriculture and they say,
- [01:04:03.273]"Oh that's just agribusiness trying to,
- [01:04:06.853]"as an excuse for bad things they want to do to us
- [01:04:09.673]"they talk about world hunger, but that's not an issue."
- [01:04:12.673]That's what respondents say
- [01:04:15.533]on these focus group kinds of things,
- [01:04:18.735]which for the animal industry and agriculture in general
- [01:04:23.516]that tries to sell that as the reason
- [01:04:26.309]they should be treated better,
- [01:04:28.169]that's sort of sobering news, but it's consistent.
- [01:04:31.349]Every public relations or group that I look at
- [01:04:34.349]that does that kind of work, that's what they say.
- [01:04:37.289]And here's this path of animal protein
- [01:04:40.169]consumption that we're aware of.
- [01:04:42.429]If we raise the cost of that stuff
- [01:04:44.889]with higher standards or different standards,
- [01:04:47.909]all of which raises costs, we're going to
- [01:04:49.789]have a hard time being on this path
- [01:04:52.329]that at least, so far, most people seem to want on.
- [01:04:56.449]And I'm not going to say anything about food waste here
- [01:04:58.769]except, here's the rich countries over here,
- [01:05:02.546]wasting a little bit at harvest, much less in this process,
- [01:05:05.847]the post-harvest is where the poor people waste their food.
- [01:05:09.086]Food waste in general is about the same all over the world,
- [01:05:12.776]but it's really out here where we waste our food.
- [01:05:16.056]And that's the part that I guess the pink slime
- [01:05:20.256]is somewhere in this side.
- [01:05:22.036]I don't know if you want to call it waste
- [01:05:23.274]when you take stuff that would've otherwise
- [01:05:24.934]been in the human food steam and ship it off,
- [01:05:27.354]but that's where it would be.
- [01:05:32.919]The last thing I want to talk about, just for a second,
- [01:05:36.314]is the broader economic consequences here.
- [01:05:38.474]And I was influenced by a book by Phelps
- [01:05:43.074]where he talks about a general pulling away from innovation.
- [01:05:47.474]He uses Europe as an example, more than the United States,
- [01:05:51.414]but the idea that we're sort of satisfied
- [01:05:54.962]or innovation by its very nature is a bad thing.
- [01:06:00.192]And I think we are there in the food system.
- [01:06:03.120]And that's true for all of us, I mean,
- [01:06:05.620]when we go to the market at my house,
- [01:06:09.219]we're going to look for some heirloom tomatoes
- [01:06:11.040]on the days we feel like we can afford them,
- [01:06:14.037]not the latest variety coming out of my friends at Davis,
- [01:06:17.895]though I will tell you they are now trying to breed tomatoes
- [01:06:21.113]to put flavor back in because they bred them
- [01:06:23.890]for a long time to take them out,
- [01:06:25.230]not the process they do.
- [01:06:27.191]Actually the best tomatoes in Davis
- [01:06:28.570]are the ones that go into the ketchup in processing
- [01:06:30.771]because they're picked really ripe
- [01:06:32.790]and particularly if you get them as road kill
- [01:06:35.110]along the road in the summer time.
- [01:06:37.428]They spill off the backs of the trucks.
- [01:06:41.868]You don't think so, see you're laughing
- [01:06:43.503]at me, but they are good.
- [01:06:46.642]But this idea that this flourishing doesn't happen
- [01:06:51.493]if you don't have innovation,
- [01:06:53.038]that that's what caused the world to grow.
- [01:06:55.778]And economies that are stagnant,
- [01:06:58.438]and some of them have the threat
- [01:07:01.338]to be stagnant at really low incomes,
- [01:07:03.818]and that's the scary part.
- [01:07:05.538]You know if Italians want to live on $20,000 per person
- [01:07:09.618]per year rather than 30, you know, fine.
- [01:07:13.518]That doesn't seem like it's much of a cost
- [01:07:16.818]to the globe as a whole.
- [01:07:18.477]If their standards impose on, say, Ethiopia
- [01:07:22.337]or Kenya, standards of $1,000 per person per year
- [01:07:27.118]because they don't have the opportunity to expand,
- [01:07:29.498]that becomes much more serious
- [01:07:32.783]and that's where it's bad news for the rest of people,
- [01:07:36.313]and I think that's where I stop.
- [01:07:41.653]Thank you.
- [01:07:43.449](applause)
- [01:07:50.264]We'll open up for questions.
- [01:07:56.174]I have one, how many of you
- [01:07:57.505]knew that we had a law
- [01:07:59.873]or seven years that it said
- [01:08:04.128]where the baby pig was born
- [01:08:06.428]on the package of pork chops?
- [01:08:09.768]How many of you knew that that didn't apply to sausage?
- [01:08:16.317]How many of you knew it ended?
- [01:08:18.208]I presume the same ones that saw it.
- [01:08:20.721]When I do that survey with my students
- [01:08:22.841]and colleagues in California, I raise my hand,
- [01:08:26.301]and Colin Carter, who's from Canada,
- [01:08:29.061]he raises his hand, and that's it.
- [01:08:32.716]Occasionally you'll see surveys, and in fact
- [01:08:34.861]the U.S. government had a survey that said 96%
- [01:08:39.161]of all Americans want country of origin labeling.
- [01:08:42.493]And I've done the survey in my classes where I haven't
- [01:08:45.538]found a single thing people don't want on a label.
- [01:08:48.258](laughter)
- [01:08:50.538]Jayson Lusk did a survey where he found
- [01:08:52.018]the most important thing people wanted on their label.
- [01:08:54.278]They wanted to know if the product had DNA.
- [01:08:56.598]Was it produced using DNA?
- [01:08:58.378]That was the number one thing.
- [01:09:01.285]So the answer was sure,
- [01:09:03.675]97% say they want something on it,
- [01:09:06.105]they want everything on their label.
- [01:09:10.175]Ok, so that's my one question.
- [01:09:14.110]So what do you see...
- [01:09:17.251]Do you see any opportunities to combat this anti...
- [01:09:21.510]These concerns that you have with anti-innovation tendencies
- [01:09:25.272]or do you see it as a hopeless case,
- [01:09:27.812]or where do you see this coming?
- [01:09:30.462]First of all, I think the biggest issue is with
- [01:09:35.307]in a sense the CEOs of the intermediate firms.
- [01:09:41.580]I think it is a part of, certainly experts
- [01:09:45.591]can't do much about it because people
- [01:09:47.090]don't trust the experts
- [01:09:49.936]as the bearer of the message.
- [01:09:55.266]I do think there's an opportunity
- [01:09:58.323]to emphasize the point that
- [01:10:03.483]that there's lot of motivations
- [01:10:05.373]other than profit, so if that is...
- [01:10:10.271]Green Peace may not be interested in profit
- [01:10:13.126]but they're interested in something,
- [01:10:15.546]and they may be wonderful people but their interests
- [01:10:18.786]aren't the same as the population as a whole.
- [01:10:21.606]They have their own personal interests.
- [01:10:24.226]And the same with The Humane Society of the United States
- [01:10:26.587]and other NGOS, and the more one can do
- [01:10:29.426]to try to get people to appreciate in a sense,
- [01:10:32.686]private interests of private...
- [01:10:35.657]McDonald's is a private company,
- [01:10:37.937]Humane Society is a private organization,
- [01:10:40.277]they both have their interests, neither of which is
- [01:10:43.121]I presume, the overall welfare of all humanity.
- [01:10:46.942]You know that's not their interest,
- [01:10:48.742]and if you want to do economics
- [01:10:50.082]to maximize welfare of society as a whole,
- [01:10:54.125]it's going to come through some other action.
- [01:10:56.525]If there are public goods and externalities,
- [01:10:59.025]you don't deal with it by having the CEO
- [01:11:03.415]have a protester outside his office.
- [01:11:06.085]Just like, we recently, the chancellor at my university
- [01:11:09.324]has been living with undergraduates almost literally
- [01:11:13.105]camped in her office, the undergraduates and their dogs,
- [01:11:16.465]camped in her office for the last month.
- [01:11:20.300]And they just left just recently,
- [01:11:22.900]and she will make decisions in response to that
- [01:11:26.439]that are not optimal for the community as a whole,
- [01:11:29.493]I would argue, even though they're well-meaning people
- [01:11:32.076]and they have certain things in mind,
- [01:11:34.526]and they may be right about some specific issue.
- [01:11:40.381]She's not going to respond well to that, just like
- [01:11:43.636]there was a couple of days ago, the CEO of Bunge,
- [01:11:47.426]which is a grain trading company, was talking about
- [01:11:51.076]having his office in Paris, I guess it was
- [01:11:54.836]when he was running the European division,
- [01:11:58.576]I think it was Green Peace he said,
- [01:12:00.096]was outside his office protesting.
- [01:12:03.365]And all he wanted them to do was go away.
- [01:12:06.493]He did not want that protest associated
- [01:12:08.552]with the name of that company because
- [01:12:11.213]not that anybody had ever heard of that company,
- [01:12:14.153]real people out in the real world never hear of Bunge,
- [01:12:17.877]but those of us that know something about grain
- [01:12:20.278]of course know that they're selling grain to lots of firms,
- [01:12:22.918]and what he didn't want is the firms just one step down
- [01:12:25.938]from him with branded products in the food chain
- [01:12:28.857]to say, "Oh you're that company that people,
- [01:12:31.098]"I don't know what they're protesting,
- [01:12:32.858]"but they're picketing in front of your offices.
- [01:12:35.097]"I don't want that."
- [01:12:36.318]And he's not going to make sort of social welfare
- [01:12:39.218]optimizing decisions based on that.
- [01:12:43.438]How you stop that kind of,
- [01:12:46.748]if I was negative about it
- [01:12:48.348]I'd call it hostage taking or something,
- [01:12:50.239]but it is that kind of blackmail exercise.
- [01:12:54.479]And it's well done and effective I think,
- [01:12:59.389]so it's smart, effective, committed people
- [01:13:03.309]who I presume believe their cause, whatever their cause is,
- [01:13:06.849]just like somebody at Bunge or McDonald's believes
- [01:13:09.339]their cause too which they honestly believe capitalism
- [01:13:12.289]works and they're going to make the world a better place
- [01:13:14.489]through buying and selling. Yeah.
- [01:13:16.587][girl in audience] This is kind of related
- [01:13:17.630]to the question I have, which is,
- [01:13:19.379]how much do you think this affected
- [01:13:21.879]these NGOs that are trying to promote
- [01:13:24.060]different standards or trying to promote their agenda?
- [01:13:26.300]Is it partly in response to agribusiness,
- [01:13:30.270]which has been trying to promote its agenda?
- [01:13:34.489]And neither of them really have
- [01:13:36.440]the consumers interests' at heart,
- [01:13:40.820]and so there's sort of these conflicting forces,
- [01:13:45.559]but they may in some way compensate.
- [01:13:49.800]That's certainly, yeah, maybe.
- [01:13:52.731]You know the thing about the business side is there we...
- [01:13:57.387]If you don't...
- [01:14:00.206]It depends a little bit on how much market
- [01:14:01.887]power we're talking about here,
- [01:14:03.518]but if there are some competitive pressures
- [01:14:05.358]in the system, we know that there is
- [01:14:07.999]within that system,
- [01:14:09.678]lots of competitive pressure
- [01:14:13.568]to serve those consumers.
- [01:14:16.558]So we know for example that McDonald's
- [01:14:19.938]for a while thought they were going to
- [01:14:21.778]be Chipotle or something and sell lots of salads
- [01:14:25.319]and various healthy things, and that's just not them.
- [01:14:28.839]And how did they find that out?
- [01:14:30.639]They lost a bundle of money.
- [01:14:32.528]And Chipotle, for example,
- [01:14:35.077]thought they could cut corners on food safety
- [01:14:38.697]and make up for it with other claims about their image
- [01:14:42.877]and they discovered that they lost a bundle of money.
- [01:14:46.077]And so at least there you've got consumers,
- [01:14:48.684]consumers have that power on the private seller.
- [01:14:55.963]And this is I think where you're really going,
- [01:14:57.618]what firms don't have, whether it's an individual farm
- [01:15:00.898]or it's McDonald's, they don't have in their interest
- [01:15:04.768]a direct interest to take in to account
- [01:15:07.908]broader public goods or externalities,
- [01:15:10.488]so if my hog farm really is releasing
- [01:15:15.395]some manure that's polluting the stream
- [01:15:17.264]that's going off and screwing up the Mississippi River,
- [01:15:21.113]I don't have a private incentive to deal with that.
- [01:15:23.749]Or if I'm pumping groundwater in California,
- [01:15:27.434]me and everybody else, but I don't own the groundwater
- [01:15:30.414]and if I don't pump it somebody else will,
- [01:15:33.714]then I'm not going to account for the value of that,
- [01:15:37.224]the public good of that water.
- [01:15:38.694]So there I think you do have a strong point which is why
- [01:15:41.911]we have this mechanism of,
- [01:15:45.251]charitably speaking, that's why there are
- [01:15:46.960]things called governments.
- [01:15:48.321]That's the whole purpose of government,
- [01:15:50.341]other than the eco people that want--
- [01:15:53.678][girl in audience] That's part of it, and the other--
- [01:15:55.808]So then I put in that system, so there's
- [01:15:59.316]a regulatory system, but we know that's not perfect.
- [01:16:02.537]And so one model, and what I think really smart
- [01:16:06.987]people have done is they've said,
- [01:16:09.526]"Gee, we could go to the state legislature
- [01:16:12.246]"and lobby them to change the standards
- [01:16:15.166]"for eggs because we think people really,
- [01:16:18.546]"consumers don't quite know it,
- [01:16:20.287]"but we know it would be nicer for chickens
- [01:16:22.967]"to be in a different housing situation,
- [01:16:25.286]"and that would be better for society.
- [01:16:27.647]"But if we go this regulatory route,
- [01:16:32.237]"it's harder,
- [01:16:33.527]"and if we put the pressure somewhere else
- [01:16:36.188]"we can achieve that goal."
- [01:16:38.329]And maybe they think it's good for society as a whole,
- [01:16:41.468]they may well think that, but there's no reason
- [01:16:43.549]to think they will get that right,
- [01:16:45.748]and in fact, the guy in the egg business may think
- [01:16:49.129]he knows what's best for society as a whole too.
- [01:16:52.568]So that's the reason I'm talking about private standards
- [01:16:56.288]rather than public standards.
- [01:16:59.068]And this is separate from the, you know,
- [01:17:00.908]there's all these complications about,
- [01:17:02.689]there are firms, I mean I deal with firms all the time
- [01:17:04.978]that say, "Gee I wish we were more regulated."
- [01:17:07.494]And it's often when there's a plethora
- [01:17:11.034]of private standards, they'd say,
- [01:17:13.270]"Gee we can live with standards
- [01:17:14.869]"but we have a hard time living with 37 of them.
- [01:17:17.489]"Just give us one and we'll do it."
- [01:17:19.470]And this California egg thing,
- [01:17:21.714]they're margins are actually higher
- [01:17:24.045]given that they have this regulated standard than before.
- [01:17:29.894]As long as all their competitors have to
- [01:17:32.243]meet the same standard
- [01:17:33.742]and that's the other thing.
- [01:17:35.992][female in audience] So in this case
- [01:17:37.272]of the California eggs, what about egg substitutes?
- [01:17:40.022]Are they regulated too? No.
- [01:17:41.722]And neither are liquid eggs, so it's only shell eggs.
- [01:17:45.261]And you will see some shift, and I haven't seen
- [01:17:48.102]the data yet, per capita egg consumption
- [01:17:51.742]has gone down a bit, but with price.
- [01:17:54.622]And I think we'll see, I haven't done these estimates yet,
- [01:17:58.182]but I think we'll see more...
- [01:18:01.322]The elasticity demand for eggs,
- [01:18:02.992]how responsive egg consumption is to prices,
- [01:18:06.492]the answer is not very much.
- [01:18:08.278]Eggs have been really cheap,
- [01:18:10.018]and if they go up a little bit,
- [01:18:11.197]and when you see the egg price spike
- [01:18:12.677]one reason it spikes so much is
- [01:18:14.267]people don't cut back on consumption
- [01:18:16.254]unless the price really goes crazy.
- [01:18:18.194]But most of those are temporary kinds of things.
- [01:18:21.554]What we've now seen in California
- [01:18:22.914]is a permanent, long-term, it's always going to be
- [01:18:25.734]more expensive for eggs, and you can...
- [01:18:30.474]McDonald's doesn't have to buy eggs
- [01:18:32.354]they crack in the back of the store,
- [01:18:33.722]they can buy the liquid product
- [01:18:35.222]for which this doesn't apply.
- [01:18:37.382]And there I think we're going to see
- [01:18:40.050]when we have enough data to really get at,
- [01:18:42.770]I've got, Ken Copley and I have a project now
- [01:18:45.030]where we've gathered all this price data now
- [01:18:48.110]and we're going to put it together
- [01:18:50.151]with some farming data, but the quantity data
- [01:18:52.491]is aggregate and it's a little hard.
- [01:18:54.450]So we're going to have to do sort of a
- [01:18:55.770]difference indifference and treat it
- [01:18:57.030]like an experiment in California,
- [01:18:59.051]take the consumption in other places and compare it.
- [01:19:04.901]And we've got city data to do that with.
- [01:19:09.810]Yes sir.
- [01:19:12.078]An interesting perspective
- [01:19:13.338]is you talk about all these private market actions
- [01:19:16.097]and private market regulations.
- [01:19:18.277]Have you done any analysis or any insight on
- [01:19:21.398]sort of the comparative cost of pursuing
- [01:19:23.958]a legislative policy agenda versus a regulatory agenda
- [01:19:27.998]versus a direct-to-the-voter ballot
- [01:19:31.928]versus a corporate strategy?
- [01:19:36.758]That's a very good question.
- [01:19:37.997]So, I'm supposed to stand over here.
- [01:19:40.267](laughter)
- [01:19:44.767]I like more to be on the radio actually.
- [01:19:52.033]I don't know what the cost for the individual,
- [01:19:54.291]so let's take The Humane Society of the United States,
- [01:19:57.411]which paid about five or six million dollars
- [01:20:00.251]to get their proposition passed.
- [01:20:02.751]The egg farmers spent about the same.
- [01:20:06.171]When it came to a voter proposition
- [01:20:09.471]we had on GMO labeling,
- [01:20:12.996]the pro-GMO labeling groups
- [01:20:16.516]spent four or five million dollars on that,
- [01:20:19.756]and the grocery manufacturers and several other groups
- [01:20:23.796]in a coalition of industry people spent 20 million,
- [01:20:30.376]partly because they didn't want it,
- [01:20:32.251]not just for California but nationwide.
- [01:20:34.691]And that was a case where they just,
- [01:20:37.977]they had a tougher sell of course,
- [01:20:39.957]because they were trying to defend something
- [01:20:42.357]spelled GMO which is sort of starting from a hole,
- [01:20:45.877]dealing with the general public.
- [01:20:47.937]But they were able to sell that
- [01:20:50.337]by spending a lot of money.
- [01:20:54.568]The Vermont issue, there's of course
- [01:20:56.882]quite a different place, where you could
- [01:20:58.542]achieve something that looks like it'll be a national
- [01:21:00.742]regulation with 320,000 voters.
- [01:21:06.712]So it's a pretty remarkable thing.
- [01:21:11.339]I do know that on the animal welfare things,
- [01:21:14.974]they have decided not to attempt
- [01:21:17.374]to deal with state legislatures.
- [01:21:24.294]And I think I've been influenced
- [01:21:25.359]by my animal science friends and welfare specialists
- [01:21:27.939]and others, I think it's mostly because
- [01:21:30.999]the facts are really not on the side
- [01:21:32.899]of the animal welfare activists.
- [01:21:35.879]They're certainly on the side of people
- [01:21:37.499]who care about animals, but I think the activists
- [01:21:39.879]in that industry, this activist-animal welfare industry,
- [01:21:44.259]have a different agenda.
- [01:21:47.799]It's not really an animal welfare, it's not that
- [01:21:50.279]they want happy chickens laying eggs for people,
- [01:21:54.379]that's not their long-term plan.
- [01:21:57.517]Animal agriculture, anything like the animal agriculture
- [01:22:01.017]that we have in the United States
- [01:22:02.177]is something that they are fundamentally opposed to,
- [01:22:05.191]so they have, I think, quite a wise
- [01:22:08.231]long-term strategy, and I complement them on that strategy.
- [01:22:11.731]And it has to do with a lot of dishonesty along the way
- [01:22:14.850]and I think they can justify that to themselves
- [01:22:17.451]given to where they want to get.
- [01:22:21.051]And I think they decided that having
- [01:22:24.431]hearings and debate, even in a legislature
- [01:22:27.390]like the state of California, they weren't going to win that
- [01:22:31.030]and so they could go around that go to voters in California
- [01:22:35.320]and that was their strategy.
- [01:22:37.357]And then they could parley that in to these
- [01:22:40.437]private standards, which they were quite,
- [01:22:42.957]I read the email memos from one executive
- [01:22:47.558]at Kroger's to the other saying,
- [01:22:50.777]"Gee I can't have one more meeting
- [01:22:52.837]"with those PETA people. Fix this."
- [01:22:57.837]That's the kind of...
- [01:23:00.479]So I think that pressure's been very effective for them.
- [01:23:05.664]Yes.
- [01:23:06.655]You say you talk to animal scientists
- [01:23:08.800]and are influenced by them.
- [01:23:10.721]Do you ever talk to philosophers?
- [01:23:12.421]You know it's interesting--
- [01:23:14.641]Well let me follow up.
- [01:23:16.401]You know, philosophers know this is all
- [01:23:19.889]economically defensive, and I'm Americano,
- [01:23:23.709]and I support what you're saying,
- [01:23:26.729]but is it morally defensible?
- [01:23:29.464]Excellent point.
- [01:23:30.845]There is certainly, well, let me say,
- [01:23:33.585]there were a couple of philosophy people
- [01:23:35.044]involved in this big project.
- [01:23:36.465]Paul Thompson, who I didn't mention,
- [01:23:38.025]but the people, the literature that
- [01:23:42.844]I think is really an important philosophical literature
- [01:23:46.704]that Australian guy, what's his name?
- [01:23:49.125]Singer. Yeah, Singer.
- [01:23:51.385]Who was at Princeton for years and years,
- [01:23:53.905]I think he still is, makes the point that,
- [01:23:59.605]I don't know quite exactly where you draw the line,
- [01:24:01.862]but beings have a moral standing
- [01:24:04.421]and the idea that you would
- [01:24:08.566]ascribe more moral standing
- [01:24:11.184]to people that look like you and me
- [01:24:13.084]rather than people that look different,
- [01:24:15.444]they're four-legged for example,
- [01:24:17.644]is really indefensible in the long run.
- [01:24:20.044]And certainly the history of, I think the moral history
- [01:24:23.144]of mankind is one his side, so if you went
- [01:24:27.343]back 3,000 or 4,000 years,
- [01:24:30.361]if somebody wasn't a member of my immediate family
- [01:24:34.401]they had no moral standing, and if I wanted to
- [01:24:36.751]rape and pillage and destroy their village,
- [01:24:40.438]there was nothing moral to stop me from doing that.
- [01:24:43.318]And I think we've evolved in slavery and everything else
- [01:24:46.439]as we go along, I think human beings have
- [01:24:50.136]the moral attitude we've had.
- [01:24:52.776]So if you were to tell me that a hundred years from now
- [01:24:56.117]we would not have animal agriculture
- [01:24:58.177]and we would've moved ourselves
- [01:25:00.217]to a completely different setting with respect to animals,
- [01:25:03.237]you may well be right, I don't know.
- [01:25:05.856]What I don't know what Singer's
- [01:25:07.587]explaining is that what you and I
- [01:25:10.767]consider a species.
- [01:25:13.457]We are not going to kill handicapped people
- [01:25:16.847]that look like you and I, but we are very comfortable,
- [01:25:20.930]and in fact Singer really relies on Jeremy Bentham
- [01:25:24.760]the utilitarian and nobody--
- [01:25:28.610]And the arguments that these aren't sentient beings
- [01:25:33.055]and all that, nobody accepts that at all.
- [01:25:36.473]And so it really does hinge on
- [01:25:39.093]some of the animals are more equal than others.
- [01:25:45.343]I don't have a problem recognizing that
- [01:25:48.093]as a very strong moral position.
- [01:25:51.913]It's one that hasn't been sucdessful yet
- [01:25:53.933]with the mass market obviously,
- [01:25:56.013]but we may well get there.
- [01:25:57.673]The whole point then
- [01:25:59.033]with this economist, well maybe we self select.
- [01:26:02.112]We also select the kind of group
- [01:26:04.021]of people we hang around with,
- [01:26:06.541]and of course, particularly here in Nebraska,
- [01:26:09.661]if you hang around with animal scientists
- [01:26:12.107]you're not going to talk about the moral defense
- [01:26:15.578]of killing cows, and so we may want to go
- [01:26:20.147]beyond our circle of comfort, in order to--
- [01:26:24.032]Let me be clear about this egg issue.
- [01:26:27.332]Where the animal scientists,
- [01:26:28.932]these animal behaviorists is what they really are,
- [01:26:31.872]because they don't actually use the word animal welfare,
- [01:26:34.192]they talk about animal behaviors,
- [01:26:35.892]and so they're the ones that want to emphasize
- [01:26:38.092]natural behaviors for these hens.
- [01:26:41.192]And so they find the California standards for example
- [01:26:44.823]really repulsive because there's a bunch of people
- [01:26:47.483]in California who think there's a significant improvement
- [01:26:50.383]and it's more space than just this barren cage,
- [01:26:54.203]and their point is that cage-free,
- [01:26:59.018]and they don't make utility comparisons across these animals
- [01:27:02.744]that sort of anthropomorphies them, they don't do.
- [01:27:06.585]It reminds me, I remember when my father,
- [01:27:08.804]who grew up in west Texas on a cattle ranch
- [01:27:11.324]visited my brother who was in law school at NYU at the time.
- [01:27:14.464]He's in Manhattan, and I remember this very distinctly,
- [01:27:17.364]he looks up and he says,
- [01:27:18.524]"How do they live in those little cages?"
- [01:27:20.764]That was his attitude about people living in Manhattan.
- [01:27:23.404]It's just seemed morally repugnant to him
- [01:27:25.624]to put people in those cages,
- [01:27:27.544]but what these animal scientists want to do
- [01:27:31.624]is improve what they think are the natural
- [01:27:36.144]ability to perform natural behavior for these hens.
- [01:27:39.084]And so they were really pushing for these furnished colonies
- [01:27:42.281]which are in fact the standard in Europe.
- [01:27:44.702]So small cages are not acceptable in Europe,
- [01:27:48.481]the furnished colonies are, but they don't require cage-free
- [01:27:52.582]and so that was where the animal scientists come down,
- [01:27:54.802]the animal welfare behaviorists come down.
- [01:27:59.282]And they have lots of,
- [01:28:01.014]they're actually not that much more expensive.
- [01:28:03.194]I have a friend who has a couple million hens I guess
- [01:28:06.855]in Merced California, and they went
- [01:28:10.474]to what they call comfort coupe.
- [01:28:12.254]They set up a brand, they put video cameras like this one
- [01:28:16.054]in all their hen houses, and they showed how the hens
- [01:28:18.977]could move around and they could scratch
- [01:28:20.578]and they could go in the little flap,
- [01:28:22.718]because hens actually like a little privacy
- [01:28:24.937]when they lay an egg, and so they go behind
- [01:28:26.977]the little flap and they lay their egg.
- [01:28:29.678]And they charge about 20 cents a dozen more.
- [01:28:34.038]Cage-free, 50,000 birds living
- [01:28:36.398]in their own manure, was a dollar more.
- [01:28:39.777]They tried to charge 20 cents more
- [01:28:41.678]and they got no sales.
- [01:28:43.398]They couldn't convince people
- [01:28:46.858]for some reason, they didn't advertise,
- [01:28:50.086]I don't know what they did wrong
- [01:28:51.866]but it didn't work for them.
- [01:28:54.631]So the animal scientists are quite frustrated.
- [01:28:58.771]They didn't like the little cages, most of them,
- [01:29:01.411]the behavioral types, recognizing that
- [01:29:04.681]that made eggs cheap, they still didn't like it.
- [01:29:08.535]But the jumping to the cage-free
- [01:29:10.284]I think leaves them really quite frustrated.
- [01:29:12.583]We'll take Dinos and then Dan is going to stay
- [01:29:14.823]around here and whoever wants to talk to him.
- [01:29:17.603]Dinos go ahead.
- [01:29:18.963]Dan thank you for this fascinating
- [01:29:21.343]presentation and great discussion.
- [01:29:23.483]Many of the issues that you're touching on
- [01:29:26.164]now there are ethical issues that we cannot,
- [01:29:30.100]we cannot address, but you talk about misinformation,
- [01:29:33.162]you talk about lies.
- [01:29:34.822]What is the role of academics?
- [01:29:36.462]What is our role in all this?
- [01:29:38.002]What's concerning is that we are passive observers
- [01:29:40.562]that this is what the firms do, this is how they
- [01:29:43.442]influence the generalists about pink slime,
- [01:29:45.782]is there a role for us?
- [01:29:46.942]And if so, what is it?
- [01:29:48.427]Yeah, our first role has to be to understand it.
- [01:29:52.527]That's what we do as academics,
- [01:29:54.927]just try to understand things,
- [01:29:56.227]and explain it to other people.
- [01:29:58.727]First ourselves, in our academic journals,
- [01:30:00.667]and then more broadly to decision makers
- [01:30:04.827]who have a role here.
- [01:30:06.307]I'm not much of an advocate for most things,
- [01:30:10.047]a few things, trade I think,
- [01:30:14.357]so I do think we do have a role
- [01:30:16.117]to first understand it and then spread
- [01:30:18.177]what we understand to reduce the amount of misinformation.
- [01:30:23.047]So when Nina and I figured out that there was
- [01:30:26.334]a whole bunch of misinformation about water in beef,
- [01:30:30.494]I put out as much stuff as I could.
- [01:30:34.645]And when it came to a proposition
- [01:30:36.516]for voters in California, I'm a guy in California,
- [01:30:38.776]I run an agricultural issues center,
- [01:30:40.776]that's an agricultural issue, what can I do?
- [01:30:43.355]I probably don't do as much of that as I should.
- [01:30:50.856]Now I have colleagues who I think optimally
- [01:30:54.041]choose not to do anything associated with public affairs.
- [01:31:00.121]Maybe they'd do more damage than good if they did.
- [01:31:03.251]That is to say, they don't like it, they don't want
- [01:31:07.416]to engage the public and they focus on their conceptual work
- [01:31:11.156]and maybe pure theory that then moves through the system.
- [01:31:16.056]And I think, I'm a great believer in the Lane Grant mission
- [01:31:19.700]all the way through and I think we've generally
- [01:31:22.280]had quite a positive influence on society
- [01:31:25.800]in taking the sort of things that we do all the way from
- [01:31:30.325]theoretical research in ethics, for example,
- [01:31:33.500]all the way down to public policy.
- [01:31:37.920]I don't know that we have a big role
- [01:31:39.930]to be advocates in the public policy sphere.
- [01:31:42.760]Certainly as private citizens we can do that,
- [01:31:45.520]but I've found, and I probably shouldn't say this out loud
- [01:31:49.740]because it's not very popular, but I've found,
- [01:31:52.563]for example when I was a COOL economist,
- [01:31:57.858]I had influence
- [01:31:59.519]unlike any academic paper that I would write.
- [01:32:02.418]Sebastien and I will write three or four
- [01:32:04.579]COOL econometric papers about country of origin labeling
- [01:32:08.048]and they'll have some influence maybe,
- [01:32:11.406]but I was in Geneva with a set
- [01:32:15.653]of USDA economists on one side
- [01:32:18.313]and Sebastien and I on the other, debating
- [01:32:22.903]actually simulation model and econometrics issues
- [01:32:26.888]in front of a panel of lawyers basically
- [01:32:30.408]trying to explain to them
- [01:32:32.408]what were really technical disagreements.
- [01:32:35.268]Fortunately in our case, we were right
- [01:32:36.728]and they were wrong,
- [01:32:38.468]but I actually think we were right and they were wrong.
- [01:32:41.908]But that was a way to influence things,
- [01:32:46.868]and I felt like we really had an influence.
- [01:32:51.068]And Sebastien's worked with the Mexicans, for example.
- [01:32:53.388]I think he actually had an influence in policy
- [01:32:56.088]even though he's still a young guy.
- [01:33:01.438]Now do we have a responsibility to do that?
- [01:33:03.556]I don't know, but it's a lot of fun
- [01:33:05.556]and you can actually have an influence in that context.
- [01:33:09.218]Ok, well thank you very much.
- [01:33:11.763](applause)
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