Sunday, September 04, 2011

yes, farm subsides can't explain obesity

This npr story illustrates another of my typical rants, and on the list of "everything that I rant about, probably most economists rant about too."

The issue is whether farm subsides affect obesity (like Michael Pollan and even some economists insist). It illustrates a mistake that even economists make, of confusing an effect that directionally exists with one that has what we call economic significance.

The problem with blaming farm subsides on obesity (and on the national debt as has also become popular) is that farm subsides only add up to about $20 billion a year, which is a lot of money but tiny compared to the size of the debt and tiny compared to the size of the global food market. Americans spend over a trillion dollars on food each year. Those $20 billion are unlikely to have any significant effect.

Especially since most of the time pundits are complaining that food prices of staple grains are too high due to ethanol (also not true), we now have similar pundits complaining that food prices are too low due to subsides. Both can't be true.

Anyway, kudos for npr for being the first news story I've heard to get this right.

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