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Agricultural Subsides Are Not Responsible for Obesity

By Matt Zeitlin - Jul 30th, 2008 at 5:14 pm

It’s common wisdom (formulated by Michael Pollan) among liberal wonky types that a key to the widening of the American waistline is our agricultural policy, which funnels all sorts of money toward the production of corn, which then reduces the cost of high fructose corn syrup cheap and causes the number of calories we consume to skyrocket. Ezra Klein explained the consensus line:

But if we stopped subsidizing corn (and thus, high fructose corn syrup), sugar, meat, soybeans, and related foods, and put that money instead towards subsidizing fruits and vegetables, towards increasing the accessibility of healthful food, towards making cities more walkable, towards putting calorie information on menus, you could probably make a dent.

Although this sounds about right, agricultural economist Daniel Sumner begs to differ.

From the Freakonomics blog:

The reasoning is that, although farm subsidies programs have made the price of corn and soybeans slightly cheaper for buyers in the U.S., the accompanying trade policies have raised the prices of sugar and dairy products. Furthermore, farm costs comprise such a small fraction of the retail price, the small farm price effects have tiny retail price impacts. Finally, in rich countries such as the U.S., buyers respond little to any food price declines or increases.

We might also note that Australia, which has no farm subsidies, just passed the U.S. as the fattest nation.

Sumner and his colleagues Julian Alston and Stephen Vosti have a longer piece in Agricultural and Resource Economics where they further explain their reasoning. If you assume that the United States eliminate its subsidies and tariffs for agricultural products, the effect on the actual price of food would be modest, either up or down. In fact, only wheat and corn products would see their prices go up, and then only by a modest 1.5 and .26 percent, respectively. Alston and Vosti estimate that beef prices would go down about 3 percent, while dairy and poultry would stay about the same. The biggest effect would actually be on the price of sugar–which is artificially high due to tariffs–and it would go down about 15 percent, which would then cause a modest price drop in all foods that use sugar. And while vegetables and fruits could get cheaper, and demand for them thus encouraged, this would also mean that potatoes would become cheaper. And considering that 60 percent of potatoes are consumed as chips, “the nutritional consequences may not be desirable.”

This all doesn’t mean that agricultural subsides are good. In fact, Sumner has a paper looking at all the stated rationales for the current agricultural policy. He rejects all but one: “[W]e have farm programs because we have had them for 75 years and people are afraid of even thinking about a world without subsidies.”

And that’s not a very good justification for any policy.

Tags: economics, food, health, obesity