Thursday, May 26, 2011

Jude Capper on Sustainable Beef

From a recent interview with food sustainability expert Dr. Jude Capper:

What is the environmental impact of beef grown on grass compared to conventional beef?
Dr. Capper – "Cows grow more slowly when grass is all they eat. If all of the beef in the U.S. were grass-fed we would need an additional 64.6 million cows in order to match the amount of beef produced in 2010. That would require an additional 131 million acres of land, which is about 75% of the state of Texas. That many cows would need an additional 1,700-billion liters of water, which amounts to the annual consumption of 46.3-million U.S. households. These cows would generate an additional 135 million tons of carbon which would be like adding 26.6 million cars to the road every year. So, in terms of land, energy, water, and carbon, grass-fed beef has a much larger environmental impact than conventional beef production."
Is it more natural for a cow to eat grass instead of corn?
Dr. Capper – "Cows probably did not eat corn 500 years ago. But does it matter if it's natural as long as it improves environmental impact, food safety, and beef affordability?  Almost nothing we do today is 'natural' compared to 500 years ago. We have cars and airplanes. We have treatments for cancer and heart disease. Why is it that in every other business sector we celebrate increased efficiency and productivity thanks to new technology while when it comes to food some want it done the old-fashioned way?"

Read the entire interview:

Tuesday, May 24, 2011

Do we get more energy out of ethanol than it takes to make it?

"Overall then, ethanol has made the transition from an energy sink, to a moderate net energy gain
in the 1990s, to a substantial net energy gain in the present."


2008 Energy Balance for the Corn-Ethanol Industry. USDA

Has genetically modified Bt corn had a negative impact on Monarch butterflies?

"There is no significant risk to monarch butterflies from environmental exposure to Bt corn, according to research conducted by a group of scientists coordinated by the Agricultural Research Service (ARS), U.S. Department of Agriculture. This research was published in the Proceedings of the National Academy of Sciences (PNAS)."  Link


References:

Proceedings of the National Academy of Sciences:
 
Monarch larvae sensitivity to Bacillus thuringiensis-purified proteins and pollen.
Richard L. Hellmich, Corn Insects and Crop Genetics Unit, Agricultural Research Service-U.S. Department of Agriculture, Ames, Iowa; (515) 294-9343, fax (515) 294-2268, e-mail rlhellmi@iastate.edu.
http://www.pnas.org/cgi/content/full/211297698v1

Impact of Bt corn pollen on monarch butterfly populations: A risk assessment.
Mark K. Sears, Department of Environmental Biology, University of Guelph, Ontario, Canada; (519) 824-4120 ext. 3921, fax (519) 837-0442, e-mail msears@evb.uoguelph.ca.
http://www.pnas.org/cgi/content/full/211329998v1

Corn pollen deposition on milkweeds in and near cornfields.
John M. Pleasants, Department of Zoology and Genetics, Iowa State University, Ames; (515) 294-7204, fax (515) 294-8457, e-mail jpleasan@iastate.edu.
http://www.pnas.org/cgi/content/full/211287498v1
Assessing the impact of Cry1Ab-expressing corn pollen on monarch butterfly larvae in field studies.
Diane E. Stanley-Horn, Department of Environmental Biology, University of Guelph, Ontario, Canada; (519) 824-4120 ext. 4847, fax (519) 837-0442, e-mail destanle@uoguelph.ca.
http://www.pnas.org/cgi/content/full/211277798v1

Temporal and spatial overlap between monarch larvae and corn pollen.
Karen S. Oberhauser; Department of Ecology, Evolution and Behavior, University of Minnesota, St. Paul, Minnesota (612) 624-8706, fax (612) 624-6777, e-mail oberh001@tc.umn.edu.
http://www.pnas.org/cgi/content/full/211234298v1

Effects of exposure to event 176 Bacillus thuringiensis corn pollen on monarch and black swallowtail caterpillars under field conditions.
M. R. Berenbaum, Department of Entomology, University of Illinois at Urbana-Champaign, Urbana, Illionois; (217) 333-7784, fax (217) 244-3499, e-mail maybe@uiuc.edu.
http://www.pnas.org/cgi/content/full/171315698v1



Rent Seeking

Rent seeking is the act of seeking special privileges or protections from the government. These can come in the form subsidies or regulations that harm competitors but benefit special interests. A good description of rent seeking is given in the Fall 2004 article 'Public Choice Revolution' in the journal Regulation:

"Interest groups will engage in what public choice theorists call “rent seeking,” i.e., the search for redistributive benefits at the expense of others. The larger the state and the more benefits it can confer, the more rent-seeking will occur. The entire federal budget..can be viewed as a gigantic rent up for grabs for those who can exert the most political muscle. Rent seeking does not produce a pure transfer; when individuals or groups compete for some advantage from the state (e.g., a subsidy, a monopoly), they will all use real resources (e.g., ink, paper, travel, meals, time) in trying to grab it. As a result, part of the expected rent will be dissipated, creating a net social loss."

Many times, regulations that are cloaked with the impression of protecting the environment often turn out to provide special privileges to big business. Monsanto enjoys the protections of barriers to entry in the biotechnology sector.  Again from the journal Regulation:

'In the end, EPA and the USDA regulatory policies place federal bureaucrats in the middle of virtually all field trials of gene-spliced plants, spelling disaster for small businesses and academic institutions whose scientists lack the resources to comply with burdensome, expensive, unnecessary regulation. The cost of field-testing gene-spliced plants is as much as 20-fold higher than for virtually identical plants crafted with older, less precise genetic techniques.' -Regulation, Summer 2003

An application of rent seeking behavior can also be found looking back at the political climate prior to the failed vote on the proposed Markey-Waxman climate change bill (from the Washington Post):

"But as the legislation’s chances improve, corporations, environmentalists and other interest groups have worked to put their imprint on the bill. The Center for Public Integrity said its review of Senate disclosure records showed that more than 880 businesses and interest groups have registered to lobby on climate change in the first quarter of 2009 — up more than 14 percent over the same time last year."

References:

The Washington Post June 5, 2009.
High-Stakes Quest for Permission to Pollute
Interest Groups Press Congress for Cap-and-Trade Allowances in Climate-Change Legislation

Henry Miller and Gregory Conko. 'Bootleggers and Biotechs.' Regulation. Summer 2003

Public Choice Revolution. Regulation, Fall 2004.

Ten Facts Related to the Economics of Modern Food Production

Dairy & Livestock Production

#1 The carbon footprint for a gallon of milk produced in 2007 was only 37 percent of that produced in 1944. For every 1 million cows, the reduction in global warming potential from rBST supplemented cows is equivalent to removing 400K cars from the roadways or planting 300 million trees. (Capper, 2009)

#2 Transportation accounts for at least 26% of total anthropogenic GHG emissions compared to roughly 5.8% for all of agriculture & less than 3% associated with livestock production in the U.S. (Stackhouse, 2009)

#3 The use of grain and pharmaceutical technology in beef production has resulted in a nearly 40 percent reduction in greenhouse gases (GHGs) per pound of beef compared to grass feeding. (Avery, 2007)

#4 Bans on feed grade sub- therapeutic antibiotics in European countries lead to increased reliance on therapeutic antibiotics important to human health. (Hayes & Jensen, 2003)

Crop Production

#5 Biotechnology improves insect biodiversity, crop plant diversity, and has lower levels of carcinogens than conventional and organic corn. (Munkvold,1999;Dowd,2000; Miller &Conko,2006 ; McCreedy et al 2007, Smith et al ,1992)

#6 The use of biotech Roundup resistant crops has led to reduced herbicide use and allowed roundup to replace other herbicides that were up to 17 times more toxic. (USDA,2000)

#7 Total decreases in carbon dioxide as a result of using biotech crops was equivalent to removing 6 million cars from the road in 2007. (that’s a lot more than the # of hybrid cars sold in 2007) (Brookes & Barfoot, 2009)

Modern Agriculture in General

#8 Rather than having a negative impact on climate change, intensive agriculture has actually has a mitigating effect on climate change with a reduction of 68 kgC (249 kgCO2e) emissions relative to 1961 technology. ( Burneya et al , 2010)

#9 Small farms actually benefit more from subsidy programs than large scale farms, despite the relative shares of total subsidies paid. The impacts of subsidies on food choices have not contributed to the obesity epidemic.  (Alston et al, 2007; USDA, 2011)

#10 Local food production can actually be more energy intensive than modern efficient supply chains. On average, fuel use per cwt for local food production is about 2.18 gallons vs. .69 and 1.92 for intermediate and traditional supply chains for beef production. (Sexton, 2009; Weber,2008)

References:

The environmental impact of dairy production: 1944 compared with 2007. Journal of Animal Science,Capper, J. L., Cady, R. A., Bauman, D. E. 2009; 87 (6): 2160 DOI: 10.2527/jas.2009-1781

San Diego Center for Molecular Agriculture: Foods from Genetically Modified Crops

A Meta-Analysis of Effects of Bt Cotton and Maize on Nontarget Invertebrates. Michelle Marvier, Chanel McCreedy, James Regetz, Peter Kareiva Science 8 June 2007: Vol. 316. no. 5830, pp. 1475 – 1477

Comparison of Fumonisin Concentrations in Kernels of Transgenic Bt Maize Hybrids and Nontransgenic Hybrids. Munkvold, G.P. et al . Plant Disease 83, 130-138 1999.

Indirect Reduction of Ear Molds and Associated Mycotoxins in Bacillus thuringiensis Corn Under Controlled and Open Field Conditions: Utility and Limitations. Dowd, J. Economic Entomology. 93 1669-1679 2000.

"Why Spurning Biotech Food Has Become a Liability.'' Miller, Henry I, Conko, Gregory, & Drew L. Kershe. Nature Biotechnology Volume 24 Number 9 September 2006.

Genetically Engineered Crops: Has Adoption Reduced Pesticide Use? Agricultural Outlook ERS/USDA Aug 2000

GM crops: global socio-economic and environmental impacts 1996- 2007. Brookes & Barfoot PG Economics report. 2009

The Environmental Safety and Benefits of Growth Enhancing Pharmaceutical Technologies in Beef Production. By Alex Avery and Dennis Avery, Hudson Institute, Centre for Global Food Issues. 2007

Lessons from the Danish Ban on Feed Grade Antibiotics. Dermot J. Hayes and Helen H. Jenson. Choices 3Q. 2003. American Agricultural Economics Association.

Does Local Production Improve Environmental and Health Outcomes. Steven Sexton. Agricultural and Resource Economics Update, Vol 13 No 2 Nov/Dec 2009. University of California.

Environ. Sci. Technol. 2008, 42, 3508–3513. Weber.


Communal Benefits of Transgenic Corn. Bruce E. Tabashnik Science 8 October 2010:Vol. 330. no. 6001, pp. 189 - 190DOI: 10.1126/science.1196864

Farm Subsidies and Obesity in the United States. Julian M. Alston, Daniel A. Sumner, and Stephen A. Vosti. Agricultural Resource Economics Update V. 11 no. Nov/Dec 007 U.C. Davis

Greenhouse gas mitigation by agricultural intensification Jennifer A. Burneya,Steven J. Davisc, and David B. Lobella.PNAS June 29, 2010 vol. 107 no. 26 12052-12057

Clearing the Air: Livestock's Contribution to Climate ChangeMaurice E. Pitesky*, Kimberly R. Stackhouse† and Frank M. MitloehnerAdvances in Agronomy Volume 103, 2009, Pages 1-40

Comparing the Structure, Size, and Performance of Local and Mainstream FoodSupply ChainsRobert P. King, Michael S. Hand, Gigi DiGiacomo,Kate Clancy, Miguel I. Gómez, Shermain D. Hardesty,Larry Lev, and Edward W. McLaughlin Economic Research Report Number 99 June 2010

The environmental impact of recombinant bovine somatotropin (rbST) use in dairy production Judith L. Capper,* Euridice Castañeda-Gutiérrez,*† Roger A. Cady,‡ and Dale E. Bauman* Proc Natl Acad Sci U S A. 2008 July 15; 105(28): 9668–9673

''Diversity of United States Hybrid Maize Germplasm as Revealed by Restriction Fragment Length Polymorphisms.'' Smith, J.S.C.; Smith, O.S.; Wright, S.; Wall, S.J.; and Walton, M. (1992) Crop Science 32: 598–604
USDA Report- Government Payments and the Farm Sector: Who Benefits and How Much?

http://www.ers.usda.gov/Briefing/FarmPolicy/gov-pay.htm (accessed  May 2011)

USDA Report-Farm Income and Costs: Farms Receiving Government Payments

http://www.ers.usda.gov/Briefing/FarmIncome/govtpaybyfarmtype.htm  (accessed  May 2011)

Price Gouging Laws Cause Marathon to Reduce Supplies




In the event of a natural disaster, when resources may be in desperate need, misguided government policies that prevent prices from reflecting our desperate needs and scarcity created by the disaster can cause problems. In this case, Marathon decided not to send much needed supplies to independent gas stations in response to their respective state's anti-price gouging laws:

Manchin Vs. Marathon
W.Va. governor criticizes oil company's decision to withhold indy gasoline deliveries

Issue Date: CSP Daily News, June 1, 2009


By Greg Lindenberg


"When these declarations are made, they automatically trigger the state's pricing laws," Marathon spokesperson Angelia Graves told CSP Daily News. We take compliance with the laws of West Virginia seriously. Price controls, like this law, negatively impact supply by discouraging additional supply from being brought into the area. During this time, we have continued to fulfill all of our contractual obligations in the state. In fact, we continued to supply over 90% of the normal base. I believe the governor is referring to independent wholesale customers in his statement, customers who choose to operate without supply contracts. As a result, when supply is tight or other situations arise such as states of emergency, independent customers who do not have a contract with us may have to look others places for product." (link)

See also:
The Problem with
Price Gouging Laws
Is optimal pricing during an emergency unethical?
Spring 2011 | Regulation |


"If the virtue argument for price gouging laws fails, we are left with welfare and freedom considerations. Here the case against price gouging laws is substantial. Price controls interfere with the ability of merchants and consumers to settle freely on the prices at which they will trade. Price controls also reduce economic welfare: by limiting price increases in areas harmed by emergencies, the laws discourage conservation of goods and services precisely when they are needed most and discourage extraordinary efforts to bring goods in high demand into the affected area. " link


Do Minimum Wages Cause Unemployment?

In a basic principles of economics class you learn that price floors ( a price set above equilibrium)  result in excess supply, or surpluses.  In the case of labor markets, one example of this would be minimum wages.  In a basic statistics course you learn about the concept of statistical inference and hypothesis testing, and how empirical methods can be used to assess theoretical conclusions from economic theory. What about the empirical evidence related to minimum wages and unemployment? Below is a summary of most of the research in this area.  Note, very few studies [Card (1992b), Card and Krueger (1994), and Katz and Krueger (1992)] empirically challenge the notion that minimum wages have a negative impact on jobs. As discussed in Greg Mankiw's popular economics textbook, most economists agree that while minimum wages benefit those with jobs in terms of higher pay, this must be measured against losses in benefits, training, or losses borne by others that find it more difficult to find jobs or suffer loss of employment.

The following is excerpted from:

50 Years of Research on the Minimum Wage
Joint Economic Committee, Congress of the United States February 15, 1995

http://www.house.gov/jec/cost-gov/regs/minimum/50years.htm

  • The minimum wage reduces employment. Currie and Fallick (1993), Gallasch (1975), Gardner (1981), Peterson (1957), Peterson and Stewart (1969).
  • The minimum wage reduces employment more among teenagers than adults. Adie (1973); Brown, Gilroy and Kohen (1981a, 1981b); Fleisher (1981); Hammermesh (1982); Meyer and Wise (1981, 1983a); Minimum Wage Study Commission (1981); Neumark and Wascher (1992); Ragan (1977); Vandenbrink (1987); Welch (1974, 1978); Welch and Cunningham (1978).
  • The minimum wage reduces employment most among black teenage males. Al-Salam, Quester, and Welch (1981), Iden (1980), Mincer (1976), Moore (1971), Ragan (1977), Williams (1977a, 1977b).
  • The minimum wage helped South African whites at the expense of blacks. Bauer (1959).
  • The minimum wage hurts blacks generally. Behrman, Sickles and Taubman (1983); Linneman (1982).
  • The minimum wage hurts the unskilled. Krumm (1981).
  • The minimum wage hurts low wage workers. Brozen (1962), Cox and Oaxaca (1986), Gordon (1981).
  • The minimum wage hurts low wage workers particularly during cyclical downturns. Kosters and Welch (1972), Welch (1974).
  • The minimum wage increases job turnover. Hall (1982).
  • The minimum wage reduces average earnings of young workers. Meyer and Wise (1983b).
  • The minimum wage drives workers into uncovered jobs, thus lowering wages in those sectors. Brozen (1962), Tauchen (1981), Welch (1974).
  • The minimum wage reduces employment in low-wage industries, such as retailing. Cotterman (1981), Douty (1960), Fleisher (1981), Hammermesh (1981), Peterson (1981).
  • The minimum wage hurts small businesses generally. Kaun (1965).
  • The minimum wage causes employers to cut back on training. Hashimoto (1981, 1982), Leighton and Mincer (1981), Ragan (1981).
  • The minimum wage has long-term effects on skills and lifetime earnings. Brozen (1969), Feldstein (1973).
  • The minimum wage leads employers to cut back on fringe benefits. McKenzie (1980), Wessels (1980).
  • The minimum wage encourages employers to install labor-saving devices. Trapani and Moroney (1981).
  • The minimum wage hurts low-wage regions, such as the South and rural areas. Colberg (1960, 1981), Krumm (1981).
  • The minimum wage increases the number of people on welfare. Brandon (1995), Leffler (1978).
  • The minimum wage hurts the poor generally. Stigler (1946).
  • The minimum wage does little to reduce poverty. Bonilla (1992), Brown (1988), Johnson and Browning (1983), Kohen and Gilroy (1981), Parsons (1980), Smith and Vavrichek (1987).
  • The minimum wage helps upper income families. Bell (1981), Datcher and Loury (1981), Johnson and Browning (1981), Kohen and Gilroy (1981).
  • The minimum wage helps unions. Linneman (1982), Cox and Oaxaca (1982).
  • The minimum wage lowers the capital stock. McCulloch (1981).
  • The minimum wage increases inflationary pressure. Adams (1987), Brozen (1966), Gramlich (1976), Grossman (1983).
  • The minimum wage increases teenage crime rates. Hashimoto (1987), Phillips (1981).
  • The minimum wage encourages employers to hire illegal aliens. Beranek (1982).
  • Few workers are permanently stuck at the minimum wage. Brozen (1969), Smith and Vavrichek (1992).
  • The minimum wage has had a massive impact on unemployment in Puerto Rico. Freeman and Freeman (1991), Rottenberg (1981b).
  • The minimum wage has reduced employment in foreign countries. Canada: Forrest (1982); Chile: Corbo (1981); Costa Rica: Gregory (1981); France: Rosa (1981).
  • Characteristics of minimum wage workers Employment Policies Institute (1994), Haugen and Mellor (1990), Kniesner (1981), Mellor (1987), Mellor and Haugen (1986), Smith and Vavrichek (1987), Van Giezen (1994).

Annotated References

Adams, F. Gerard. 1987. Increasing the Minimum Wage: The Macroeconomic Impacts. Briefing Paper, Economic Policy Institute (July).
Finds that an increase in the minimum wage from $3.35 to $4.65 over three years would increase the unemployment rate by less than 0.1% and the inflation rate by 0.2%.
Adie, Douglas K. 1973. Teen-Age Unemployment and Real Federal Minimum Wages. Journal of Political Economy, vol. 81 (March/April): 435-441.

           Finds that the minimum wage is responsible for a considerable amount of teenage                      unemployment.

Al-Salam, Nabeel; Quester, Aline; and Welch, Finis. 1981. Some Determinants of the Level and Racial Composition of Teenage Employment. In Rottenberg (1981a): 124-154. Notes that in 1954, black teenage males were more likely to be employed than white teenage males. Since that time, the proportion of black teenage males employed has fallen sharply, while employment for white teenage males has risen. Expansion of coverage of the minimum wage appears to be a major factor in this trend. Further notes that more than half of all teenagers would earn more in the absence of a minimum wage. Bauer, P.T. 1959. Regulated Wages in Under-developed Countries. In The Public Stake in Union Power, ed. Philip D. Bradley. Charlottesville, VA: University of Virginia Press, 324-349. Argues that the negative effects of minimum wage laws in LDCs is even greater than in industrialized countries, because there is greater diversity of supply and demand for labor in LDCs. Also points out that in South Africa minimum wages helped whites at the expense of blacks. Behrman, Jere R.; Sickles, Robin C.; and Taubman, Paul. 1983. The Impact of Minimum Wages on the Distributions of Earnings for Major Race-Sex Groups: A Dynamic Analysis. American Economic Review, vol. 73 (September): 766-778. Finds that the minimum wage has helped white males and females while hurting black males and females. Bell, Carolyn Shaw. 1981. Minimum Wages and Personal Income. In Rottenberg (1981a): 429-458. Finds that increases in the minimum wage would benefit few families with incomes below the poverty level. Much of the benefit would accrue to upper income families with secondary earners, such as wives and children. Beranek, William. 1982. The Illegal Alien Work Force, Demand for Unskilled Labor, and the Minimum Wage. Journal of Labor Research, vol. 3 (Winter): 89-99. Finds that the minimum wage increases the employment demand for illegal aliens, who are less likely than legal residents to report violations of the labor laws. Betsey, Charles L., and Dunson, Bruce H. 1981. Federal Minimum Wage Laws and the Employment of Minority Youth. American Economic Review, vol. 71 (May): 379-384. Argues that employment losses from higher minimum wages have been overstated and that much of the higher unemployment among minority youth has been due to cyclical factors. Bonilla, Carlos E. 1992. Higher Wages, Greater Poverty. Washington: Employment Policies Institute. Finds that the 1991 increase in the federal minimum wage actually reduced the income of some single parents, after welfare and taxes are taken into account. Brandon, Peter D. 1995. Jobs Taken by Mothers Moving from Welfare to Work and the Effects of Minimum Wages on this Transition. Washington: Employment Policies Institute Foundation. Finds a decrease in work by women on welfare in states raising their minimum wages and an increase in time on welfare in such states. Brown, Charles. 1988. Minimum Wage Laws: Are They Overrated? Journal of Economic Perspectives, vol. 2 (Summer): 133-145. Finds that they employment impact of the minimum wage and its impact on reducing poverty are both less than generally believed. Brown, Charles; Gilroy, Curtis; and Kohen, Andrew. 1981a. Effects of the Minimum Wage on Youth Employment and Unemployment. In Minimum Wage Study Commission (1981), vol. 5, pp. 1-26. Finds that a 10% increase in the minimum wage will reduce teenage employment by 1% to 3%. Brown, Charles; Gilroy, Curtis; and Kohen, Andrew. 1981b. Time-Series Evidence of the Effect of the Minimum Wage on Teenage Employment and Unemployment. In Minimum Wage Study Commission (1981), vol. 5, pp. 103-127. Finds that a 10% increase in the minimum wage will reduce teenage employment by 1%. Brown, Charles; Gilroy, Curtis; and Kohen, Andrew. 1982. The Effect of the Minimum Wage on Employment and Unemployment. Journal of Economic Literature, vol. 20 (June): 487-528. Summarizes a large volume of research on the minimum wage. Brozen, Yale. 1962. Minimum Wage Rates and Household Workers. Journal of Law and Economics, vol. 5 (October): 103-109. Found that increases in the minimum wage drove low-wage workers into uncovered occupations, such as household work. Predicts that broadening of coverage to such occupations will increase structural unemployment. Brozen, Yale. 1966. Wage Rates, Minimum Wage Laws, and Unemploy-ment. New Individualist Re- view, vol. 4 (Spring): 24-33. Points out a contradiction between the Johnson Administration's desire to hold wage increases to the rate of productivity growth, in order to reduce inflationary pressures, and its support for a higher minimum wage. Brozen, Yale. 1969. The Effect of Statutory Minimum Wage Increases on Teen-age Employment. Journal of Law and Economics, vol. 12 (April): 109-122. Finds that increases in the minimum wage only speed up wage increases that would have occurred over time. However, in the interval between an increase and the time when productivity catches up to it results in higher unemployment and business failures. In the case of teenagers, many who are barred from jobs suffer long-term effects from the failure to gain job skills, thus injuring them permanently. Card, David. 1992a. Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage. Industrial and Labor Relations Review, vol. 46 (October): 22-37. Finds no evidence that the April, 1990 increase in the minimum wage reduced teenage employment, but does find evidence that it led to higher wages. Card, David. 1992b. Do Minimum Wages Reduce Employment? A Case Study of California, 1987-89. Industrial and Labor Relations Review, vol. 46 (October): 38-54. Finds no evidence that an increase in the California state minimum wage in July, 1988 led to any loss in teenage employment, but does find evidence of higher wages. Card, David, and Krueger, Alan B. 1994. Minimum Wages and Employ-ment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania. American Economic Review, vol. 84 (September): 772-793. Finds no evidence of reduced employment from an increase in the New Jersey state minimum wage in April, 1992. Colberg, Marshall R. 1960. Minimum Wage Effects on Florida's Economic Development. Journal of Law and Economics, vol. 3 (October): 106-117. Finds that after an increase in the minimum wage unemployment increased most in the areas where wages were lowest and least in areas where wages were highest beforehand. Colberg, Marshall. 1981. Minimum Wages and the Distribution of Economic Activity. In Rottenberg (1981a): 247-263. Examines votes on the minimum wage and finds heavy support for it in high wage states of the North and opposition from low wage states in the South. This suggests that the North was attempting to reduce the South's competitive advantage in wages. Corbo, Vittorio. 1981. The Impact of Minimum Wages on Industrial Employment in Chile. In Rottenberg (1981a): 340-356. Finds substantial job losses from the minimum wage in Chile. Cotterill, Philip. 1981. Differential Legal Minimum Wages. In Rottenberg (1981a): 296-316. Favors differential minimum wages to reduce the impact of the minimum wage. Cotterman, Robert F. 1981. The Effects of Federal Minimum Wages on the Industrial Distribution of Teenage Employment. In Rottenberg (1981a): 42-60. Finds that minimum wages have altered the distribution of teenage employment. Teenagers are less likely to be employed in low wage industries, such as retailing, and increase employment in high wage industries, such as manufacturing. Cox, James C., and Oaxaca, Ronald L. 1981. The Determinants of Minimum Wage Levels and Coverage in State Minimum Wage Laws. In Rottenberg (1981a): 403-428. Finds that union support for the minimum wage is significant politically. Cox, James C., and Oaxaca, Ronald L. 1982. The Political Economy of Minimum Wage Legislation. Economic Inquiry, vol. 20 (October): 533-555. Explains why unions support minimum wages. Cox, James C., and Oaxaca, Ronald L. 1986. Minimum Wage Effects With Output Stabilization. Economic Inquiry, vol. 24 (July): 443-453. Finds that the minimum wage causes unskilled wages to be 15.7% higher than they otherwise would be, and that this causes employment to be 11.2% lower than it otherwise would be. Cunningham, James. 1981. The Impact of Minimum Wages on Youth Employment, Hours of Work, and School Attendance: Cross-sectional Evidence from the 1960 and 1970 Censuses. In Rottenberg (1981a): 88-123. Finds that minimum wages discourage part-time work and lowers school attendance. Currie, Janet, and Fallick, Bruce. 1993. A Note on the New Minimum Wage Research. National Bureau of Economic Research Working Paper No. 4348 (April). Finds that employed individuals affected by the increases in the minimum wage in 1979 and 1980 were 3% to 4% less likely to be employed a year later. Since the methodology employed is similar to that in Card (1992a and 1992b), it casts doubt on any generalization of his conclusions. Datcher, Linda P., and Loury, Glenn C. 1981. The Effect of Minimum Wage Legislation on the Distribution of Family Earnings Among Blacks and Whites. In Minimum Wage Study Commission (1981), vol. 7, pp. 125-146. Finds that an increase in the minimum wage increases white family incomes more than black family incomes. Also, middle- and high-income families benefit more than low-income families. Douty, H.M. 1960. Some Effects of the $1.00 Minimum Wage in the United States. Economica, vol. 27 (May): 137-147. Finds that the increase in the minimum wage from 75 cents to $1.00 in 1956 did lead to an increase in pay for many workers, but at the cost of jobs. Long-term employment losses by industry ranged from 3.2% to 15%. Ehrenberg, Ronald G., and Schumann, Paul L. 1981. The Overtime Pay Provisions of the Fair Labor Standards Act. In Rottenberg (1981a): 264-295. Opposes restrictions on mandatory overtime. Employment Policies Institute. 1994. The Low-Wage Workforce. Washington: Employment Policies Institute. Presents data on characteristics of workers earning the minimum wage. Feldstein, Martin. 1973. The Economics of the New Unemployment. The Public Interest (Fall): 14-15. Argues that the minimum wage prevents many young people from accepting jobs that would provide them with on-the-job training, thus contributing to long-term unemploy- ment. Fleisher, Belton M. 1981. Minimum Wage Regulation in Retail Trade. Washington: American Enterprise Institute. Extension of the minimum wage to retail trade lowered employment in that industry by as much as 500,000, with the main impact on teenagers. Also finds that higher minimum wages led to a scale-back of fringe benefits and training. Forrest, David. 1982. Minimum Wages and Youth Unemployment: Will Britain Learn from Canada? Journal of Economic Affairs, vol. 2 (July): 247-250. Estimates that 40% of the increase in teenage unemployment in Canada since the 1950s is due to higher minimum wages. Freeman, Alida Castillo, and Freeman, Richard B. 1991. Minimum Wages in Puerto Rico: Textbook Case of a Wage Floor? National Bureau of Economic Research Working Paper No. 3759 (June). Finds that the minimum wage has had a massive impact on the labor market in Puerto Rico. Gallasch, H.F., Jr. 1975. Minimum Wages and the Farm Labor Market. Southern Economic Journal, vol. 41 (January): 480-491. Finds that the 1967 extension of the minimum wage to the farm labor market, which had previously been uncovered, led to an increase in wages and a reduction in employment. Gardner, Bruce. 1981. What Have Minimum Wages Done in Agriculture? In Rottenberg (1981a): 210-232. Finds that extension of the minimum wage to farm workers has increased wages but reduced employment. Gordon, Kenneth. 1981. The Impact of Minimum Wages on Private Household Workers. In Rottenberg (1981a): 191-209. Finds that the minimum wage has led to a dramatic reduction in household workers. Also notes that the policy of enforcement of labor laws by complaint converts the minimum wage from an instrument of public policy to a tool of private disputes. Gramlich, Edward M. 1976. Impact of Minimum Wages on Other Wages, Employment, and Family Incomes. Brookings Papers on Economic Activity (No. 2): 409-461. Finds that raising the minimum wage above 40 to 50 percent of median wages leads to increased compliance costs, higher unemployment, workers forced to leave full-time work for part-time work, more benefits for high-income families, and inflationary effects on prices. Gregory, Peter. 1981. Legal Minimum Wages as an Instrument of Social Policy in Less Developed Countries, with Special Reference to Costa Rica. In Rottenberg (1981a): 377-402. Finds that the minimum wage has been ineffective in reducing income inequality. Grossman, Jean B. 1983. The Impact of the Minimum Wage on Other Wages. Journal of Human Resources, vol. 18 (Summer): 359-378. Finds that an increase in the minimum wage increases wages of those above the minimum wage for two reasons. First, workers above the minimum will want to restore their relative wage position, and second there will be increased demand for workers above the minimum to do the work previously done by those below the minimum. Grossman, Jonathan. 1978. Fair Labor Standards Act of 1938: Maximum Struggle for a Minimum Wage. Monthly Labor Review, vol. 101 (June): 22-30. Reviews the legislative history of passage of the first federal minimum wage law. Notes the limited coverage of the initial legislation. Hall, Robert E. 1982. The Minimum Wage and Job Turnover in Markets for Young Workers. In The Youth Labor Market Problem: Its Nature, Causes, and Consequences, ed. Richard B. Freeman and David A. Wise, pp. 475-497. Chicago: University of Chicago Press. Finds that the higher unemployment among youth resulting from the minimum wage is primarily due to higher job turnover. Hammermesh, Daniel S. 1981. Employment Demand, the Minimum Wage and Labor Costs. In Minimum Wage Study Commission (1981), vol. 5, pp. 27-84. Finds that a 10% increase in the minimum wage will reduce teenage employment by 1.2% overall, with smaller declines in services and retail trade and a higher impact in manufacturing. Hammermesh, Daniel S. 1982. Minimum Wages and the Demand for Labor. Economic Inquiry, vol. 20 (July): 365-380. Finds that a minimum wage reduces teenage employment. Hashimoto, Masanori. 1981. Minimum Wages and On-the-Job Training. Washington: American Enterprise Institute. Finds that minimum wage laws lead to a curtailment of training by employers. Hashimoto, Masanori. 1982. Minimum Wage Effects on Training on the Job. American Economic Review, vol. 72 (December): 1070-1087. Finds that minimum wages reduce training, first because workers lose job opportunities, and hence on the job training, and second because employers will no longer be able to afford to give such training. Hashimoto, Masanori. 1987. The Minimum Wage Law and Youth Crimes: Time-Series Evidence. Journal of Law and Economics, vol. 30 (October): 443-464. Suggests that increases in the minimum wage may be responsible for increases in teenage crime rates. Haugen, Steven E., and Mellor, Earl F. 1990. Estimating the Number of Minimum Wage Workers. Monthly Labor Review, vol. 113 (January): 70-74. Estimates that two-fifths of workers reporting wage rates at or below the minimum wage in 1988 had supplements raising their wage rates above the minimum. However, some 1.5 million salaried workers may also make the minimum wage or less on an hourly rate. Holcombe, Randall G., and Metcalf, John G. 1977. The Appeal of Minimum Wage Laws: A Dynamic Analysis. Public Choice, vol. 29 (Spring): 139-141. Explains the popularity of minimum wage laws even among those who lose their jobs as a result as stemming from the high turnover in the low-wage market. Although a worker may initially lose his job because of an increase in the minimum wage, he will expect to get other jobs in the future that will pay more. Iden, George. 1980. The Labor Force Experience of Black Youth: A Review. Monthly Labor Review, vol. 103 (August): 10-16. Concedes that the minimum wage has had a significant negative effect on teenage employment, especially for blacks. Johnson, William R., and Browning, Edgar K. 1981. Minimum Wages and the Distribution of Income. In Minimum Wage Study Commission (1981), vol. 7, pp. 31-58. Finds that much of the benefits of a higher minimum wage accrue to high-income families and that many low-income families benefit at the expense of other low-income families. Johnson, William R., and Browning, Edgar K. 1983. The Distributional and Efficiency Effects of Increasing the Minimum Wage: A Simulation. American Economic Review, vol. 73 (March): 204-211. Finds that a 22% increase in the minimum wage in 1976 would have increased the incomes of the lowest 10% of households by just $200 million. Katz, Lawrence F., and Krueger, Alan B. 1992. The Effect of the Minimum Wage on the Fast-Food Industry. Industrial and Labor Relations Review, vol. 46 (October): 6-21. Finds evidence that an increase in the minimum wage led to an increase in employment in Texas. Kaun, David E. 1965. Minimum Wages, Factor Substitution and the Marginal Producer. Quarterly Journal of Economics, vol. 79 (August): 478-486. The minimum wage hurts small businesses. Keech, William R. 1977. More on the Vote Winning and Vote Losing Qualities of Minimum Wage Laws. Public Choice, vol. 29 (Spring): 133-137. Suggests that support for the minimum wage even among those adversely affected may result from those benefiting having a clearer perception of the benefits than those who are harmed have of the negative effects. Kniesner, Thomas J. 1981. The Low-Wage Workers: Who Are They? In Rottenberg (1981a): 459-481. Finds that 60% of low-wage workers are women and less than 40% are teenagers. Also finds that low wages are not strongly associated with poverty. Less than 25% of low wage workers are heads of households, and only 30% live in families with incomes below the poverty level. Kohen, Andrew I., and Gilroy, Curtis L. 1981. The Minimum Wage, Income Distribution, and Poverty. In Minimum Wage Study Commission (1981), vol. 7, pp. 1-30. Since many low-wage workers live in high-income families, increasing the minimum wage is an ineffective way of increasing the incomes of poor families. Kosters, Marvin, and Welch, Finis. 1972. The Effects of Minimum Wages on the Distribution of Changes in Aggregate Employment. American Economic Review, vol. 62 (June): 323-332. Finds that increases in the minimum wage have a significant effect on employment patterns, especially for nonwhite teenagers. As a consequence, teenagers are less able to find jobs during periods of normal employment growth and are more likely to lose their jobs during cyclical downturns. Krumm, Ronald J. 1981. The Impact of the Minimum Wage on Regional Labor Markets. Washington: American Enterprise Institute. Finds that lower-skilled workers tend to be disemployed when minimum wages are applied uniformly, leading to higher wages for higher-skilled workers. Also, because the cost of living varies from region to region, the real minimum wage will also vary. Lang, Kevin. 1995. Minimum Wage Laws and the Distribution of Employment. Washington: Employment Policies Institute Foundation. Finds that increases in the minimum wage leads fast food establishments to replace adult workers with younger workers, and to replace full-time workers with part-time workers. Leffler, Keith B. 1978. Minimum Wages, Welfare, and Wealth Trans-fers to the Poor. Journal of Law and Economics, vol. 21 (October): 345-358. Finds that increases in the minimum wage lead to increases in welfare rolls. Argues that advocates for the poor may favor higher minimum wages in order to increase the number of people on welfare, because welfare benefits may exceed the income from work. Leighton, Linda, and Mincer, Jacob. 1981. The Effects of Minimum Wages on Human Capital Formation. In Rottenberg (1981a): 155-173. Finds that minimum wages discourage on-the-job training. Levitan, Sar, and Belous, Richard S. 1979. The Minimum Wage Today: How Well Does It Work? Monthly Labor Review, vol. 102 (July): 17-21. Argues that the benefits of the minimum wage outweigh its costs. Linneman, Peter. 1982. The Economic Impacts of Minimum Wage Laws: A New Look at an Old Question. Journal of Political Economy, vol. 90 (June): 443-469. Finds that the disemployment effects of the minimum wage fall mainly on blacks, females, restricted individuals, residents of small cities, those with low education, the old, and non-union members. Beneficiaries of the minimum wage mainly are males and union members. Mattila, J. Peter. 1981. The Impact of Minimum Wages on Teenage Schooling and on the Part-Time/Full-Time Employment of Youths. In Rottenberg (1981a): 61-87. Finds that the disemployment effects of the minimum wage have encouraged youths to stay in school. Also, youths have shifted out of full-time work and into part-time work, in order to accommodate schooling. McCulloch, J. Huston. 1981. Macroeconomic Implications of the Minimum Wage. In Rottenberg (1981a): 317-326. Finds negligible effects from the minimum wage on inflation. However, it may reduce the size of the capital stock by reducing profitability in covered industries, thereby leading to lower wages in the long run. McKee, Michael, and West, Edwin G. 1984. Minimum Wage Effects on Part-Time Employment. Economic Inquiry, vol. 22 (July): 421-428. Finds that the minimum wage discourages part-time employment in favor of full-time jobs. McKenzie, Richard B. 1980. The Labor Market Effects of Minimum Wage Laws: A New Perspective. Journal of Labor Research, vol. 1 (Fall): 255-264. Argues that increases in the minimum wage, which apply only to money wages, will lead to a reduction in non-money wages, such as fringe benefits. Thus employers can respond to a higher minimum wage by lowering benefits by the same amount. Mellor, Earl F. 1987. Workers at the Minimum Wage or Less: Who They Are and the Jobs They Hold. Monthly Labor Review, vol. 110 (July): 34-38. Finds that those earning at the minimum wage or less consist largely of young persons and women. The majority worked part-time in services or sales. Since many of these people probably also received commissions or tips, the number of workers earning the minimum wage or less may be overstated. Mellor, Earl F., and Haugen, Steven E. 1986. Hourly Paid Workers: Who They Are and What They Earn. Monthly Labor Review, vol. 109 (February): 20-26. Finds that 60% of those earning the minimum wage or less are under age 25 and one-third were teenagers. Meyer, Robert H., and Wise, David A. 1981. Discontinuous Distributions and Missing Persons: The Minimum Wage and Unemployed Youth. In Minimum Wage Study Commission (1981), vol. 5, pp. 175-201. Finds that abolition of the minimum wage would increase employment by out-of-school youth by 6%. Meyer, Robert H., and Wise, David A. 1983a. The Effects of the Minimum Wage on the Employment and Earnings of Youth. Journal of Labor Economics, vol. 1 (January): 66-100. Estimates that abolition of the minimum wage would have led to significantly higher employment among youth, especially black youth. Finds no evidence of higher earnings from the minimum wage. Meyer, Robert H., and Wise, David A. 1983b. Discontinuous Distributions and Missing Persons: The Minimum Wage and Unemployed Youth. Econometrica, vol. 51 (November): 1677-1698. Finds that if the minimum wage did not exist in 1978, employment among out-of-school young men would have been 7% higher. Also, the average earnings of youth would have been higher. Mincer, Jacob. 1976. Unemployment Effects of Minimum Wages. Journal of Political Economy, vol. 84 (August): S87-S104. Finds that the negative effects of a minimum wage increase are greatest for nonwhite teenagers. Moreover, the disemployment effects on the size of the labor force are greater than the effects on the unemployment rate. Mincy, Ronald B. 1990. Raising the Minimum Wage: Effects on Family Poverty. Monthly Labor Review, vol. 113 (July): 18-25. Finds a significant impact on reducing poverty from an increase in the minimum wage. This is because the disemployment impact falls mainly on teenagers, whose contribution to family income is small. Minimum Wage Study Commission. 1981. Report, 7 vols. Washington: U.S. Government Printing Office. Concludes that a 10% increase in the minimum wage will reduce teenage employment by 1%-3%. Moore, Thomas G. 1971. The Effect of Minimum Wages on Teenage Unemployment Rates. Journal of Political Economy, vol. 79 (July/August): 897-902. Finds that the minimum wage increases unemployment primarily for nonwhite teenagers. Neumark, David, and Wascher, William. 1992. Employment Effects of Minimum and Subminimum Wages: Panel Data on State Minimum Wage Laws. Industrial and Labor Relations Review, vol. 46 (October): 55-81. Finds that a 10% increase in the minimum wage reduces teenage employment by 1% to 2%, and a decline of 1.5% to 2% among young adults. Parsons, Donald O. 1980. Poverty and the Minimum Wage. Washington: American Enterprise Institute. Finds that the minimum wage mainly reallocates income among low-wage workers, benefiting adult females and hurting teenagers of both sexes. Peterson, John M. 1957. Employment Effects of Minimum Wages, 1938-50. Journal of Political Economy, vol. 65 (October): 412-430. One of the first empirical studies to show that minimum wages reduce employment. Peterson, John M. 1981. Minimum Wages: Measures and Industry Effects. Washington: American Enterprise Institute. Calculates the impact of the minimum wage on different industries. The negative employment effects primarily impact low-wage industries such as retailing. Peterson, John M., and Stewart, Charles T., Jr. 1969. Employment Effects of Minimum Wage Rates. Washington: American Enterprise Institute. Summarizes a large number of studies finding negative employment effects from minimum wages. Phillips, Llad. 1981. Some Aspects of the Social Pathological Behavior Effects of Unemployment among Young People. In Rottenberg (1981a): 174-190. Finds that primary impact of minimum wage is on young males, especially black males. This has encouraged continued school enrollment and entry into the armed forces. However, it has also encouraged "illegitimate" alternatives to employment, such as crime. Ragan, James F., Jr. 1977. Minimum Wages and the Youth Labor Market. Review of Economics and Statistics, vol. 59 (May): 129-136. Confirms that higher minimum wage rates reduce youth employment and increases youth unemployment rates, especially for nonwhite males. Ragan, James F., Jr. 1981. The Effect of a Legal Minimum Wage on the Pay and Employment of Teenage Students and Nonstudents. In Rottenberg (1981a): 11-41. Because the minimum wage reduces employment for teenagers, government funds spent on job training for teenagers must be counted as part of the cost of the minimum wage. Rosa, Jean-Jacques. 1981. The Effect of Minimum Wage Regulation in France. In Rottenberg (1981a): 357-376. Finds that the minimum wage reduces employment of youth in France, especially males. Rottenberg, Simon. 1981a. The Economics of Legal Minimum Wages. Washington: American Enterprise Institute. Collection of papers. Rottenberg, Simon. 1981b. Minimum Wages in Puerto Rico. In Rottenberg (1981a): 327-339. Finds that the minimum wage has caused massive disemployment in Puerto Rico and lowered the overall standard of living. Smith, Ralph E., and Vavrichek, Bruce. 1987. The Minimum Wage: Its Relation to Incomes and Poverty. Monthly Labor Review, vol. 110 (June): 24-30. Finds that 70% of workers earning the minimum wage in 1985 lived in families in which at least one other member held a job. Also, teenagers held almost one-third of all jobs paying the minimum wage. Smith, Ralph E., and Vavrichek, Bruce. 1992. The Mobility of Minimum Wage Workers. Industrial and Labor Relations Review, vol. 46 (October): 82-88. Examines a panel of workers earning the minimum wage in the mid-1980s and finds that over 60% were earning more than the minimum wage a year later, with gains averaging 20%. Sowell, Thomas. 1977. Minimum Wage Escalation. Stanford, CA: Hoover Institution Press. Argues that indexing the minimum wage would magnify its problems. Steindl, Frank G. 1973. The Appeal of Minimum Wage Laws and the Invisible Hand in Government. Public Choice, vol. 14 (Spring): 133-136. Argues that political support for the minimum wage results from the fact that those who benefit from a modest increase will outnumber those who lose. Stigler, George J. 1946. The Economics of Minimum Wage Legislation. American Economic Review, vol. 36 (June): 358-365. Argues that a minimum wage will reduce output and decrease the earnings of the poor. Tauchen, George E. 1981. Some Evidence on Cross-Sector Effects of the Minimum Wage. Journal of Political Economy, vol. 89 (June): 529-547. Finds that increases in the minimum wage tend to lower wages for those in uncovered sectors, because there is increased demand for uncovered jobs from those no longer employable at the minimum wage. Taylor, Lowell J. 1993. The Employment Effect in Retail Trade of a Minimum Wage: Evidence from California. Washington: Employment Policies Institute. Criticizes Card (1992b). Trapani, John M., and Moroney, J.R. 1981. The Impact of Federal Minimum Wage Laws on Employment of Seasonal Cotton farm Workers. In Rottenberg (1981a): 233-246. Finds that extension of the minimum wage to seasonal cotton workers in 1966 led to a substitution of mechanical processes for labor. Vandenbrink, Donna C. 1987. The Minimum Wage: No Minor Matter for Teens. Economic Perspectives, Federal Reserve Bank of Chicago, vol. 11 (March/April): 19-28. Finds large reductions in teenage employment from an increase in the minimum wage. Van Giezen, Robert W. 1994. Occupational Wages in the Fast-Food Industry. Monthly Labor Review, vol. 117 (August): 24-30. Shows that wages in the fast-food industry are closely tied to the minimum wage. Welch, Finis. 1974. Minimum Wage Legislation in the United States. Economic Inquiry, vol. 12 (September): 285-318. Finds that the minimum wage has reduced employment, especially among teenagers; it has made teenagers more vulnerable to the business cycle; and has forced teenagers out of covered occupations into those not covered by the minimum wage. Welch, Finis. 1978. Minimum Wages: Issues and Evidence. Washington: American Enterprise Institute. Finds that those primarily affected by the minimum wage are the aged, teenagers, and part-time workers. Welch, Finis, and Cunningham, James. 1978. Effects of Minimum Wages on the Level and Age Composition of Youth Employment. Review of Economics and Statistics, vol. 60 (February): 140-145. Finds that in 1970 the minimum wage reduced employment of 14-15 year olds by 46%, by 27% for those 16-17, and by 15% for those 18-19. Wessels, Walter J. 1980. Minimum Wages, Fringe Benefits, and Working Conditions. Washington: American Enterprise Institute. Finds that increases in the minimum wage lead to a reduction in fringe benefits and a deterioration of working conditions. West, E.G. 1980. The Unsinkable Minimum Wage. Policy Review (Winter): 83-95. Argues that economists should do a better job of explaining the negative effects of the minimum wage. Williams, Walter. 1977a. Government Sanctioned Restraints that Reduce Economic Opportunities for Minorities. Policy Review (Fall): 7-30. Argues that minimum wage laws have had a disproportionately negative effect on black teenagers. Williams, Walter. 1977b. Youth and Minority Unemployment. Study prepared for the Joint Economic Committee, U.S. Congress. Joint Committee Print, 95th Congress, 1st session. Washington: U.S. Government Printing Office. Points out that in 1947, prior to expansion of the minimum wage, black teenage unemployment was actually lower than white teenage unemployment, and that teenage unemployment generally was sharply lower than it is today.

WHAT REWARDS VIRTUE

What role does greed play in society? What rewards virtue?




What role do profits and prices play in society?



Have Ethanol Subsidies Impacted Food Prices?

"Using the 2004 corn price of $2.06 per bushel as a reference, actual corn prices increased by an average of $1.65 per bushel from 2006 to 2009. Only 14 cents (8%) of this increase was due to ethanol subsidies. Another 45 cents of the increase was due to market-based expansion of the corn ethanol industry. Together, expansion of corn ethanol from subsidies and market forces accounted for 36% of the average increase that we saw in corn prices from 2006 to 2009. All other market factors accounted for 64% of the corn price increase."  Read more here.

The Impact of Ethanol and Ethanol Subsidies on Corn Prices: Revisiting History
by Bruce A. Babcock and Jacinto F. Fabiosa. Center for Agricultural and Rural Development. Iowa State University.

Energy Use and GHG Emissions Associated with Local Food

The Economics of Local Food

”It is a maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy.” - The Wealth of Nations

This is tied to the concept of comparative advantage and gains from specialization and trade, which lead to an increase in the size of the ‘economic pie’ which can be used to make everyone better off. Modern food supply chains, made possible by companies such as Cargill, ADM, and retailers like Wal-Mart, have helped to reduce our impact on the environment.

The Inefficiency of Local Food
 Steve Sexton
11/14/2011

http://www.freakonomics.com/2011/11/14/the-inefficiency-of-local-food/

Forsaking comparative advantage in agriculture by localizing means it will take more inputs to grow a given quantity of food, including more land and more chemicals—all of which come at a cost of carbon emissions.....In order to maintain current output levels for 40 major field crops and vegetables, a locavore-like production system would require an additional 60 million acres of cropland, 2.7 million tons more fertilizer, and 50 million pounds more chemicals. The land-use changes and increases in demand for carbon-intensive inputs would have profound impacts on the carbon footprint of our food, destroy habitat and worsen environmental pollution.

It’s not even clear local production reduces carbon emissions from transportation. The Harvard economist Ed Glaeser estimates that carbon emissions from transportation don’t decline in a locavore future because local farms reduce population density as potential homes are displaced by community gardens. Less-dense cities mean more driving and more carbon emissions. Transportation only accounts for 11 percent of the carbon embodied in food anyway, according to a 2008 study by researchers at Carnegie Mellon; 83 percent comes from production.
 

The locavore’s dilemma 
Urban farms do more harm than good to the environment

Edward L. Glaeser
http://articles.boston.com/2011-06-16/bostonglobe/29666344_1_greenhouse-gas-carbon-emissions-local-food/2
Berkeley graduate student Steven Sexton estimates that an American switch to more local corn production would require 35 percent more fertilizer and 22.8 percent more energy....But the most important environmental cost of metropolitan agriculture is that lower density levels mean more driving. Today, about 250 million Americans live on the 60 million acres of this country that are urban — which is about four people per acre....If halving densities also doubled distance to the metropolitan area center, this would add an extra 44 gallons of gas annually. Together, the increased gas consumption from moving less than a tenth of agricultural farmland into metropolitan areas would generate an extra 1.77 tons of carbon dioxide per year, which is 1.77 times the greenhouse gases produced by all food transportation and almost four and a half times the carbon emissions associated with food delivery.

Food miles, Kowalski's and that steak on your plate
MPR News

"That steak you bought at the farmers' market from the family operation down the road might have taken more fuel to get to you than the rib-eye from a steer slaughtered in Kansas."

Read the article here.

The actual research is here.

Comparing the Structure, Size, and Performance of Local and Mainstream Food
Supply Chains


USDA Economic
Research
Report
Number 99
June 2010

"Transportation fuel use is more closely related to supply chain structure and size than to the distance food products travel. Products in local supply chains travel fewer miles from farms to consumers, but fuel use per unit of product in local chains can be greater than in the corresponding mainstream chains. In these cases, greater fuel efficiency per unit of product is achieved with larger loads and logistical efficiencies that outweigh longer distances."


From Marginal Revolution: Food Miles

"How far your food travels matters a lot less than what kind of food it is, or how it was produced. According to a recent study out of Carnegie Mellon University, the distance traveled by the average American’s dinner rose about 25 percent from 1997 to 2004, due to increasing global trade. But carbon emissions from food transport saw only a 5 percent bump, thanks to the efficiencies of vast cargo container ships. Should we minimize our “music miles” and boycott bands on tour?"

Eating Local and Climate Change link from National Geographic ("Eating Local" Has Little Effect on Warming, Study Says. Mason Inman  National Geographic News April 22, 2008)

"Being a "locavore" and eating foods grown near where you live may not help the environment as much as you might think, according a new study.When it comes to global warming, focusing simply on where food comes from will make only a small difference, the study's authors say."

Cited research: Environ. Sci. Technol. 2008, 42, 3508–3513

See also this entry from the EconLog blog:

 The Locavore's Dilemma: Why Pineapples Shouldn't Be Grown in North Dakota

In this post four arguments related to local food are discussed:
1: Buying Local Foods is Good for the Local Economy
2: Buying Local Foods Is Good for the Environment
3: Local is Fresher and Tastier
4: Local Food is Healthier and Should be Served in School

The authors conclude:

"Economists are a diverse bunch, but we have a few core principles, two of which are that there is a balance of payments and that there are gains from trade. These universal principles are as timeless as the law of gravity. If politicians and activists proposed to suspend belief in gravity, physicists would not cower. They would resolutely defend reality. So should we."

Also, find this Cato book forum with Pierre Desrochers (also a Mercatus Institute Fellow), co-author of The Locavore’s Dilemma: In Praise of the 10,000-Mile Diet.




Monday, May 23, 2011

Paper finds no empirical link between biofuels, land use changes

"An empirical approach is used to detect evidence for iLUC that might be catalyzed by United States biofuel production through a “bottom-up”, data-driven, statistical approach. Results show that biofuel production in the United States from 2002 to 2007 is not significantly correlated with changes in croplands for corn (coarse grain) plus soybean in regions of the world which are corn (coarse grain) and soybean trading partners of the United States. "


Reference:

“Indirect Land Use Change for Biofuels: Testing Predictions and Improving Analytical Methodologies” Biomass and Bioenergy.  Seungdo Kim and Bruce Dale. Michigan State University.

Tragedy of the Anti-commons

In a past post I discussed the scenario described as the ‘tragedy of the commons’ which characterizes many environmental problems, especially problems of overuse and resource depletion. To review, the tragedy of the commons basically occurs when ‘individuals have unlimited access to resources in absence of well defined property rights ( Sobell and Leeson, 2006). Without property rights, there can be no transfer of rights and no market to establish a price by which environmental tradeoffs can be valued. The problem is the failure of government to define and enforce property rights.

The ‘tragedy of the anti-commons’ is another type of government failure. This occurs ‘when too many owners hold (such) rights of exclusion’ (Heller, 1998). In this case resources are subject to underuse. This can also be described as a ‘tragedy of political commons’ when too many individuals have veto power in decision making processes ( Leeson, 2006). And note, related to other posts regarding public choice theory, these individuals are acting in their own interest, face ineffective incentive structures, and likely have limited information. When they actually do make a decision, it is likely a poor one.

A prime example of the tragedy of the anticommons and resource under use is the government’s response to hurricane Katrina. Post 9-11, FEMA was placed under Homeland Security, adding an additional layer of bureaucracy to the decision making process. There were further problems at the local level. An example given in a 2006 article in the journal Public Choice describes an incident where one out of state sheriff complied with all of the necessary procedures and paper work that would enable him to direct his resources for a relief effort and was never able to help. A second sheriffs department ignored procedure and was able to bring 9 truckloads of supplies and 33 deputies to the scene.

We also see that in the private sector, where this problem is less of an issue, companies like Wal-Mart, Home Depot, and State Farm insurance were well prepared and on the scene where they were needed.

Because of the tragedy of the anticommons, resources that could have been used in the relief effort were underutilized.

References:

Government’s Response to Hurricane Katrina: A public choice analysis
Public Choice Volume 127,numbers1-2/ April 2006
Russel S. Sobel and Peter T. Leeson

Heller, M. (1998). The tragedy of the anticommons.: Property in transition from Marx to Markets. Harvard Law Review, 111 930 622-688.

Knowledge Problem

Governments allocate resources in a fundamentally different way than free individuals behaving cooperatively in voluntary exchange via market capitalism. Individuals acting in their own interest results in a spontanous order guided by prices which reflect tradeoffs based on the knowledge and preferences of millions of individuals. Governments (via democratic processes) allocate resources based on the limited knowledge and preferences of a few voters, elected officials, or appointed bureaucrats. The fundamental problem facing all forms of government including democracies is that centralized decision makers never have enough information or proper incentives to act on the information at hand. As Economist F.A. Hayek (1945) said:

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

This is referred to by economists as the 'knowledge problem.'

For more information related to issues regarding democratic decision making, see Public Choice Analysis.  

SOURCES:
The Use of Knowledge in Society
F.A. Hayek
The American Economic Review Vol 35 No 4 (Sept 1945) p. 519-530

The Coase Theorem

Traditionally when it comes to enviromental pollution, the general philosophy was that ‘the polluter pays’. A factory polluting the air or water should pay for the damages that are caused. In a much simpler case, if you build a house next to me and you don’t like the smell of livestock waste coming from my property, the traditional philosphy would hold that you could have the government stop my operation.

The insight that Coase brought was 1) yes it is true that my operation is harming you via air pollution. 2) however, in stopping me via government or legal intervention ( or taxing my waste production) you are harming me.

Coase says that the issue is that nonone owns the air that sourrounds my livestock operation and your home. There then follows a dispute over how the air should be used- to absorb livestock odor, or to provide a scent free atmosphere in your back yard. Whenever the cost of one’s behavior is not factored into a price at which a choice can be valued, I can harm you without compensating you for it. ( i.e. an externality exists)

However, if I own rights to the air, then I can choose to pollute the air. If you own rights to the air, then you can prevent me from polluting it. If noone owns the air, then it is first come first served or winner takes all.

That is not the end of the story though. What Coase emphasizes is that if I own the rights to pollute, you can pay me to limit my pollution i.e. buy those rights from me. I can then use the proceeds to alter my livestock nutrition, genetics, and management to reduce the odor my operation is causing. On the other hand, if you own the rights to pollute I can purchase those rights from you, or invest in technology that will allow me to continue my operation without violating your rights. I will do which ever is most optimal. This can be accomplished without major goevernemnt regulation, or the arbitrary imposition of a tax.

The assignment of property rights and the potential for bargaining results in behavior that is changed or altered to account for the negative impact our choices have on others. This is the essence of what is known as the ‘Coase Theorem”

The Median Voter Theorem

In the last entry on voting paradoxes, I mentioned that things are different if preferences are single peaked. Let’s look at another scenario.


voter X: A B C

voter Y : C A B

voter Z : C B A

In this case, no matter what order is undertaken, C always ends up being the law that is enacted. These preferences are single peaked. ( if you graph them, you will find that for each individual they will have a top choice ( a peak point), and as you move further away from that choice ( in the A-B-C spectrum) they prefer the other choices less and less. In the previous example, voter Y did not have single peaked preferences and that is what caused the cycling or order dependent outcomes.

With single peaked preferences there is a new problem. With single peaked preferences, the median point of the preference distribution will elicit the most votes. Only those laws or candidates with a centrist twist will get the majority of the votes. Only those voters with centrist views will be happy, and it makes it very difficult for candidates to be elected if they want to bring about major reforms. This phenomenon is referred to as the ‘median voter theorem.’

Voting Paradoxes

The next issue I would like to introduce is  under the umbrella of public choice is the arbitrariness of putting decisions to vote. Let’s look at a particular voting scenario to illustrate this.

VOTER X: A >B >C

VOTER Y: C> A> B

VOTER Z: B> C >A

If the voters were voting on this issue, voter X would prefer law A over law B and law B over law C. In shorthand – A > B > C. To summarize all of the choices of the voters we see that 2/3 of the voters have preference A > B, 2/3 of the voters have preference B > C, but when voting A vs. C, 2/3 have preference C > A.

See if you follow the application of this. If we have two elections and the first is made between policy B and C, then B will win (2/3 of the voters have preference B > C). If this is followed by a second election A vs. B (Because C was eliminated in the first election) then A will be the law that ultimately passes by majority rule.

Now if the order is changed, in which the first election is between A and B, A will win (because 2/3 of the voters rank A > B). Then in the second election when A goes against C, C will be the law that passes by majority rule (again because 2/3 of the voters have preference C > A).

So when voting on these policies, the process becomes arbitrary. The outcome depends on the order of the vote, so a cycling of choices ensues. According to public choice economist Gordon Tullock, any outcome can be obtained in majority voting by at least one voting method. There is nothing magical and there is no ‘truth’ in the outcome just because it was reached by majority rule. Majorities can be irrational and dangerous. The exception to this is if preferences are single peaked. I will present this in a separate entry, because it presents problems of its own.

The Tragedy of the Commons

http://www.prism-magazine.org/apr07/tt_01.cfm

“People like the freedom to choose their lifestyles, what they consume and when they consume it,” observes Attari. “However, the environment is a ‘commons’ that we share with other citizens of the world, and when individual choices start negatively impacting others, we need to understand how to change or alter those behaviors.”

The phrase ‘tragedy of the commons’ was first used by Garret Hardin in a 1968 issue of Science.

To illustrate, in the case of cattle grazing on public land, it is in the interest of the cattle owner to place as many cattle as possible on the land. Of course too many cattle will result in erosion and deterioration in forage quality, but this cost is shared among all grazers. The grazer does not bear the full cost of grazing an additional animal, but receives the full benefit. Each grazer acting in his own interest results in the degradation of the ‘commons’ for everyone.

Whenever the cost of one’s behavior is not factored into a price at which a choice can be valued, a commons problem exists. This is in essence what we get from Hardin ( ‘The Tragedy of the Commons’) after applying a little basic economics to his reasoning.

However, according to Coase (‘The Problem of Social Cost’) with the establishment of property rights and markets (bargaining) the externality of the commons can be internalized. Behavior is changed or altered to account for the negative impact our choices impose on others. Demsetz (Towards a Theory of Property Rights) goes on to say that property rights often evolve as a means to internalize externalities. Sometimes given the current state of technology, the costs of developing property rights and markets are greater than the benefits that would arise. However, with technological development, these cost structures change and new options become available. Today we can see how technology has allowed for many externalities (or commons problems) in agriculture to be internalized with examples such as biotechnology and GPS. The article linked above focuses on how engineering can contribute to this end.

Many of the ‘commons’ problems that Hardin cites in his article such as polluting the commons with insecticides and fertilizer have much been mitigated with modern technology and markets. See also - articles labeled 'coase theorem.'

REFERENCES:

Towards a Theory of Property Rights.
Harold Demsetz
The American Economic Review. Volume 57, Issue 2. May, 1967

The Problem of Social Cost
R. H. Coase
Journal of Law and Economics, Vol. 3, Oct., 1960 (Oct., 1960), pp. 1-44

The Tragedy of the Commons
Garret Hardin
Science, Vol 162 no 3859 Dec 13, 1968 p. 1243-1248

The Economics of Welfare
Arthur C. Pigou Macmillan and Co. London, Fourth edition, 1932. First published: 1920.
http://www.econlib.org/Library/NPDBooks/Pigou/pgEW.html

A Meta-Analysis of Effects of Bt Cotton and Maize on Nontarget Invertebrates
Michelle Marvier, Chanel McCreedy, James Regetz, Peter Kareiva
Science 8 June 2007:Vol. 316. no. 5830, pp. 1475 - 1477

Type II Error Bias and the Response to Hurricane Katrina

Type II error bias is not limited to just the FDA. In the April 2006 journal Public Choice Russel Sobell and Peter Leeson explain that type II error bias played a role in the delayed response of the federal government after hurricane Katrina.

Let’s say our government leader finds themself in the following predicament. After the destruction and the levees have broken someone has to make the decision to send in relief workers. However there are risks. Disease infested water, collapsing buildings and roads, roaming bandits, toxic chemical exposure etc. If our leader sends in workers and they meet a terrible fate, the consequences are on his shoulders. Later the media would crucify him over sending our brave heroes in harms way.

Given limited information, here is the model in the context of hypothesis testing:

Ho: X= Xo ‘it is too harmful to send in relief ASAP’
Ha: X= Xa: ‘the harm is trivial, and justified to send in relief ASAP’


Type I Error: sending relief workers into unnecessary danger

If on the other hand, our government official decides to wait, until he has better information he could avoid this. The consequences may be the lives of hurricane victims, but the blame can be shared with nature.

Type II Error: Over cautiousness that prevents a quick response by relief authorities

In general this is one of the explanations given in the Public Choice article explaining the federal government’s response to Hurricane Katrina. It is also one of the reasons in general that many of our leaders at the federal, state, local, levels fail to make timely decisions or provide leadership when needed.

See: Russell Sobel & Peter Leeson, 2006.
"Government's response to Hurricane Katrina: A public choice analysis," Public Choice, Springer, vol. 127(1), pages 55-73, April.
link

Type II Error Bias and the FDA

Let’s assume that FDA researchers are reviewing a drug for possible approval. They are reviewing results and data from clinical trials etc. Of course there are some side effects , but only from a small percentage of the samples. Let’s look at a model of their decision making process in the context of hypothesis testing. Let’s assume:

Ho: X = Xo ‘drug is harmful’
Ha: X = Xa ‘drug is safe’

If the decision makers make the mistake of releasing a harmful drug, the consequences would be easily identifiable, and could be visibly traced to their decision. They would want to avoid this at all cost. In essence, they want to avoid making a type I error.

Type I Error: = releasing a harmful drug

From my previous discussion on hypothesis testing, we know that to decrease the probability of committing a type I error, we choose an alpha level that is lower. In a t-test, if we are really afraid of making a type I error, we might set alpha ( the significance level) at .05, .01, or to go overboard.001 etc.

As previously discussed, setting alpha lower and lower increases beta, or the probability of committing a type II error. Recall, a type II error is accepting a false Ho. In this case that would be equivalent to falsely concluding that the ‘drug is harmful’ when it could actually be released and improve the lives of millions.

Type II error bias = over precaution; setting alpha so low, or setting the standard of proof so high as to almost always reject Ho, and biasing the decision in such a way that the probability of a type two error (beta) is greatly increased.

As a result of type II error bias, many life improving drugs never make it to the market.

Type I and Type II Errors

In an experimental setting where a statistical test of a hypothesis is conducted one may either reject the null hypothesis ‘Ho’, or fail to reject Ho. Let’s assume that the true population parameter we are testing is X. Our null hypothesis may be Ho: X=Xo.


The probability of rejecting the null hypothesis when it is true can be defined by:


Alpha = P (reject Ho X = Xo)


Rejecting the null hypothesis when it is actually true is referred to in statistics as a type I error. Therefore alpha is the probability of ‘committing’ a type 1 error. In a basic statistics, when you conduct a basic t- test ( i.e. reject Ho if t > t-critical) at the 5% level of significance, you are establishing a 5% chance of committing a type one error.


Of course, you may fail to reject Ho, or loosely speaking ‘accept’ Ho.


The probability of ‘accepting’ Ho when it is false can be defined by:


Beta = P (accept Ho X = Xa)


Speaking heuristically, accepting a false Ho is referred to as a type II error. Beta is therefore the probability of committing a type 2 error.


It turns out, that as you increase the significance level of a test ( by making alpha lower and decreasing the probability of a type I error), the probability of a type II error (beta) increases. This is the theoretical basis for ‘type II error bias.’

Public Choice Theory

In class we discussed the differences between the ways that markets allocate resources ( using prices which reflect trade-offs based on the knowledge and preferences of millions of individuals) vs government (which allocates resources using command and control based on the more limited knowledge and preferences of a few voters, elected officials, or appointed bureaucrats).

The economic analysis of political institutions represents a sub field of economics referred to as 'Public Choice Economics.' The following link will take you to an article 'The Public Choice Revolution', Regulation Fall 2004.

This article summarizes some of the major findings from the field of public choice. The article discusses among many things, why do we need government, and what are the tradeoffs between tyranny (or Leviathan ) and anarchy.

"Once it is admitted that the state is necessary, positive public choice analyzes how it assumes its missions of allocative efficiency and redistribution. Normative public choice tries to identify institutions conducive to individuals getting from the state what they want without being exploited by it."

Another section looks at the analysis of voting. It discusses problems with using voting to allocate resources, such as cycling and the median voter theorem. It also looks at issues related to special interests, bureaucracies, and the role of representative government in democratic systems.

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

Particularly the article looks at how more government with a larger budget leads to more power for special interests:

"Interest groups will engage in what public choice theorists call “rent seeking,” i.e., the search for redistributive benefits at the expense of others. The larger the state and the more benefits it can confer, the more rent-seeking will occur. “The entire federal budget,” writes Mueller, “can be viewed as a gigantic rent up for grabs for those who can exert the most political muscle.”

The moral of the public choice story is that democracy and governments are not perfect. When we have issues with market outcomes and we are thinking about new regulations or government spending to correct those problems, public choice analysis offers a guide. Public choice analysis implies that we have to question which system will provide the best information and incentives to act on that information to achieve the results that we want. The democratic process itself offers no guarantee that the decision will be the best solution to our problems.
Concepts related to public choice theory include the following:

RENT SEEKING -  the act of seeking special privileges or protections form the government.

TYPE TWO ERROR BIAS - overcautious behavior, ex: FDA drug approval, response to Hurricane Katrina


VOTING PARADOXES- randomness of election outcomes

MEDIAN VOTER THEOREM- leads to exploitation of minority by majority


TRAGEDY OF THE COMMONS – lack of property rights and pollution

COASE THEOREM – symmetry of environmental pollution, internalizing effect of property rights and markets


TRAGEDY OF THE ANTICOMMONS – underutilized resources due to excessive checks on power, bureaucracy. Ex: response to hurricane Katrina

KNOWLEDGE PROBLEM- government relies on a ‘shrunken’ pool of knowledge vs. markets

By clicking the ‘public choice’ link below, or under the ‘labels’ sidebar you can find more detailed discussions of each of these concepts

Biotech Alfalfa: Who May Harm Who- An application of the Coase Theorem

From Drovers/Cattle Network "Using Property Rights Is A Trick Against Biotech Crops"

"Some politicians wrap themselves in the flag to justify their positions, and then there is Secretary of Agriculture Tom Vilsack appealing to farmers and ranchers' belief in "private property rights" to justify limiting biotech crop production"

Great article with a lot of great points. For the sake of this discussion, lets view biotech contamination of organic crops as 'pollution.' (despite the evidence that the risks are slight)

Traditionally when it comes to environmental pollution, the general philosophy was that 'the polluter pays'. A factory polluting the air or water should pay for the damages that are caused. In a much simpler case, if you build a house next to me and you don't like the smell of livestock waste coming from my property, the traditional philosophy would hold that you could have the government stop my operation. (or in this case, the biotech alfalfa grower pays for genetic contamination of organic alfalfa)

The economist Ronald Coase brought additional insight to this issue. 

1) yes it is true that my operation is harming you via air pollution. (odor)
2) however, in stopping me via government or legal intervention ( or taxing my waste production) you are harming me.

Coase says that the issue is that nonone owns the air that surrounds my livestock operation and your home. There then follows a dispute over how the air should be used- to absorb livestock odor, or to provide a scent free atmosphere in your back yard. Whenever the cost of one's behavior is not factored into a price at which a choice can be valued, I can harm you without compensating you for it. ( i.e. an externality exists)

However, if I own rights to the air, then I can choose to pollute the air. If you own rights to the air, then you can prevent me from polluting it. If noone owns the air, then it is first come first served or winner takes all.

That is not the end of the story though. What Coase emphasizes is that if I own the rights to pollute, you can pay me to limit my pollution i.e. buy those rights from me. I can then use the proceeds to alter my livestock nutrition, genetics, and management to reduce the odor my operation is causing. On the other hand, if you own the rights to pollute I can purchase those rights from you, or invest in technology that will allow me to continue my operation without violating your rights. I will do which ever is most optimal. This can be accomplished without major government regulation, or the arbitrary imposition of a tax.

The assignment of property rights and the potential for bargaining results in behavior that is changed or altered to account for the negative impact our choices have on others. This is the essence of what is known as the 'Coase Theorem"

However, if transaction costs are high, then bargaining may not take place. In that case, Coase emphasizes that any assignmnet of property rights should be based on which party can bear the externality at the lowest cost. Transaction costs can change based on changes in technology, which can also change how we define property rights. (for example, the technology that allows us to monitor CO2 emissions is what makes the concept of cap and trade possible).

How might this apply in the context of biotech alfalfa?  According to the Coase Theorem, it shouldn't matter who is assigned the rights in this case (giving the biotech producer the right to pollute, or giving the organic producer the right to stop neighbors from planting biotech). Both parties could bargain ahead of time to determine the optimal mix of biotech/organic production. Transaction costs should not be any higher than any normal land rental agreement.  Alternatively, one producer or the other could purchase insurance that would pay an indemnity in the event of contamination. (who would have to pay the premiums would depend on who has the right to pollute etc.) However, monitoring and enforcement costs could be high in terms of determining genetic contamination.

Another option would be a regulatory approach, limiting planting options for biotech producers.  This is what the Drovers article is critical of Tom Vilsack for. You could say it is enforcing property rights, but  only in a very arbitrary way, and unnecessary.

The agriculture industry offers some of the greatest examples of how technological advances and market forces lead to self correcting or internalization of externalities.  The adoption of biotechnology has led to reduced groundwater pollution, increased biodiversity, and reduced greenhouse gas emissions. All of which has occured in absence of taxes or government regulations. In the case of biotech alfalfa, a technological advancement that would trump legal or regulatory remedies would be use of 'terminator' gene technology.  Of course, that takes the power and prestige away from regulators, and empowers  property owners and market forces. In any case, what the Coase Theorem tells us is that there is no case for arbitrarily giving organic growers a trump card over those that want to use biotech alfalfa. The principle of polluter pays is not always optimal.