Agricultural Subsidies in the US and new GM crops in Africa

The USDA “rural” subsidies aren’t so much rural as agricultural. Most people living in rural areas in the US are not farmers and don’t receive a penny through the USDA. What the USDA does fund, however, is highly skewed away from what most people would like in our agricultural subsidies:

The report found that the USDA spent nearly twice as much to subsidize just the 20 largest farms in each of 13 leading farm states examined as it invested in rural-development programs to create economic opportunity for the three million people living in 1,400 towns in the 20 most-struggling rural counties in the same 13 states.

Current policy encourages big farms to get even bigger. Fewer farmers means fewer people in rural America. As farms consolidate, the population in the countryside declines. As the farm population declines, small towns also decline as less farmers need supplies and services. Rather than sustaining rural life, the current farm commodity system subsidies the decline of rural life.

Interesting agricultural fact in Uganda: “A typical adult here eats at least three times his or her body weight in bananas each year…” The spread of banana Xanthomonas wilt (BXW) is threatening that.

 Kamenya, a powerfully built 37-year-old, was forced to dig up 1,500 of his 4,500 plants, destroy them, and allow the soil to lie fallow for at least six months. He also had to sterilise his farm tools. This eventually helped control the disease, though he still has problems…. In central Uganda, one of the main banana-growing regions, BXW hit up to 80% of farms, sometimes wiping out entire fields.

Local researchers are working on creating GM bananas to deal with BXW. Kamenya responded to the anti-GM food crowd: “Most of the people against this have choices. Somebody who is hungry does not have a choice. GM, organic or whatever – you have to feed the people."

At the end of the article, it even provides instructions for making typical Ugandan mashed banana (matooke). For comparison, I have about 2 bananas a day and still do not quite eat my weight in bananas every year. I do eat more than the Lovely and Gracious’ weight in bananas, though.

The first GM cassava seeds are out in Nigeria. CR41-10 was designed to resist cassava mosaic disease.

Unusual thoughts: livestock

Free Derange
Grocery Store | Venice Beach, CA, USA
Me: “Hello, how can I help you?”
Customer: “Yes, what does free range chicken mean?”
Me: “That means our chickens are not raised in cages. They get to walk around outside, which is important to the quality of life for the animals.”
Customer: *with a horrified expression* “How do you make sure they don’t eat bugs and stuff while they’re outside?”
Me: “We make sure the farmers put up a sign ‘don’t eat bugs’ in chicken scratch so they can read it.”
Customer: “Oh, okay. I’ll take two breasts.”

“Immigrants to the United States, rights advocates say, are treated like cattle. Little do they know how wrong they are. Cattle are treated much better.”  A marvelous article describing how cattle have much freer, better quality migration than humans, free of discrimination and with instant access to welfare (subsidies)

FAO is providing North Korea help fighting foot and mouth disease.

Among the points that comes out of the Worldwatch Institute’s report on agricultural innovations is that we can double food production in areas that are currently low producing areas using agro-ecological methods. Change.org would like to spin that into saying that we could get by with only organic methods everywhere, which is not actually supported by the findings. Organic methods out-produce traditional agriculture. It also requires more time and monetary investments.

Five Second ... White Man's Burden

It is easy for people to misread Easterly's views. I'm not certain why, other than that people don't read him carefully. In White Man's Burden [the Click to Look Inside link on the picture doesn't work, so click the title here to look inside], he opens by introducing that there are two problems: one is the suffering of the poor, the other is the historic inability of the West to solve the problems. In particular, despite spending $2,300,000,000,000 on foreign aid over the last 50 years, that we are still unable to get twelve cent medicines to the people who need them most. His work focuses on the second problem.

He does not in the entire book argue that we should spend less trying to help the poor. He argues that we are trying to help in ways that are largely ineffective. "I ... keep trying, not to abandon aid to the poor, but to make sure it reaches them." "Western assistance ... can still play some role in alleviating the sufferings of the poor."

He does not argue that aid can never be effective. He argues that the way we have gone about it has often been ineffective and proposes some ways to help it be more effective. He cites Botswana as an example of aid "supporting reform and good government," though detailing how abysmally it has failed to do the same elsewhere; he cites pages and pages of World Bank, WHO, and IMF programs that were successful.

He does not claim that we should give up trying to help people. He pleads that we change the question from How can I use foreign aid to solve every problem in the world to "What can foreign aid do for poor people" and then do it. "Aid agencies cannot end world poverty, but they can do many useful things to meet the desparate needs of the poor and give them new opportunities."

He does not provide a blueprint for how to solve every problem with aid. He does suggest several dimensions where significant progress could be made by experimentation in making aid more effective. They include:

Accountability and Specialization "The utopian agenda has led to collective responsibility for multiple goals for each agency, one of the worst incentive systems invented since mankind started walking upright.... Have individual accountability for individual tasks. Let aid agencies sepcialize in the sectors and countries they are best at helping. Then hold aid agencies accountable for their results by having truly independent evaluation of their efforts." "Not overall sweeping evaluations of a whole nationwide development program, but specific and continuous evaluation of particular interventions."

Feedback and Meaningful Participation from Recipients. "The needs of the rich get met because the rich give feedback to political and economic Searchers, and they can hold the Searchers accountable for following through with specific actions. The needs of the poor don't get met because the poor have little money or political power with which to make their needs known and they cannot hold anyone accountable to meet those needs." The jargon is already there, but he takes down Poverty Reduction Strategy Papers as one set of planners talking to another set of planners, often written by the recipient government at the dictation of the donors, sometimes even undermining democratic processes and selections. "Visibility gives more power to Searchers while invisibility shifts power to Planners. The problem with aid is that the poor are mostly invisible." "Participation should mean more buying and voting power in the hands of the poor in aid."

Fund Maintenance. "Aid donors should just bite the bullet and permanently fund road maintenance, textbooks, drugs for clinics, and other operating costs of development projects. Politically dysfunctional governments that don't do maintenance can concentrate on other things. ... The return on spending on instructional materials in education is up to fourteen times higher than the return on spending on physical facilities." p. 190

On Peacekeeping: "Peacekeeping could be good, but just who is willing to be accountable for its success or failure. ... Interventionism suffers from the patronizing assumption that only the West can keep the locals from killing eah other. ... Peace usually succeeds war because of a decisive victory by one side, not because of negotiated settlements by outsiders. ... UN interventions produced a stable peace only a quarter of the time. With no intervention, a stable peace resulted nearly half the time." He is overall quite negative on military interventionism.

One thing that I have admired about Easterly is that he is willing to admit that he was wrong. He does so at least twice in the book, once discussing market reform "shock therapy" and once in discussing structural adjustment. I asked him at his blog whether some of his own work fell under a criticism he had just made, and he admitted that one of the papers I mentioned fell into the same category. He promised a bit more of a response which I'm still waiting for, but there's something comforting in talking with someone you know is willing to say "I was wrong." In the book he opined that the military would be the least responsive to criticism, but on his blog has noted with surprise that the military responded the most cordially and promisingly of any group he has criticized.

One of my few criticisms is that he simultaneously calls for more observability while deriding current aid projects for overly focusing on observability without differentiating what should be observable. That is, he wants to trim down the number of goals any agency is responsible for, so it is more observable who does what, but he laments incentives that support building facilities or roads because they are more visible than textbooks or maintenance.

After presenting a fairly convincing case that Planning really doesn't work, I also noted with some irony that there was a heavy element of planning involved in the homegrown development cases he lauds at the end of the book. He acknowledges some of this, that "the success stories follow a variety of formulas," but prefers to call South Korea and Japan's actions intervening in economies rather than planning and to note that China and Singapore are "quite far from a laissez-faire model." "What we do know ... is that the West played small part in them." This leaves open a door for domestic planning to be good and foreign planning to be bad, a door I think he could do a much better job turning into a window or a peephole.

"Success attracts paternity claims." So every theory of development claims success for the various successes. When Sachs visited Cornell, for instance, he laughed at Easterly's assertion that aid hasn't done much and cited the total figure of aid given to China and India. Easterly notes that those large sums only amount to $0.001 per day for each Chinese person and $0.005 for each Indian person. Compare that to the much larger sums spent in Africa (which Sachs calls a mere $0.50 per person) and you wonder how so little could do so much while so much does so little.

Some very good 'side note' sections: The importance of social networks (p. 82-87), property rights (p. 90-99), the difficulties of making democracy work and its evolution (p. 116-129), comparing the cost effectiveness of health initiaives (HIV prevention, AIDS treatment, and others; p. 249-258). He also has some excellent snapshots of World Bank publications from the 1950s or 1980s to today, all saying the exact same thing: things are bad, but there are promising signs out there. I learned that it is much easier for me to be sanguine when reading about the colonial disasters of England, France, and Portugal than to read about the (usually CIA-backed) disasters the US sponsored (270-338).

Notable Quotables after the break:

Lit in Review: Livestock risks

From the last issues of the Review of Agricultural Economics (2009), Vol. 31, No. 3 and 4.

McCann (2009) "Transaction Costs of Environmental Policies and Returns to Scale: The Case of Comprehensive Nutrient Management Plans," No. 3, 561-573.
Livestock produce fertilizer. Put too much fertilizer on the land and the soil nutrients potentially end up in the drinking water. In the US, large livestock operations are required to have comprehensive nutrient management plans, made either by a government official or a private technical service provider. Recent studies have shown that farmers with plans put fewer nutrients on their land than those without, but still are putting too much on.

Eventually, the government hopes to expand this requirement to all livestock farms. Small and medium-sized farmers [I know what you're envisioning: munchkins raising guinea pigs. Let's not be silly.] face a number of transaction costs that larger farmers don't [it takes more steps to cover the same ground, for one. Stop that!] and extension services are not widespread enough to cover small farms as well. Farmer surveys (26 observations out of 1030 returned surveys out of over 3000 sent out to farmers in Iowa and Missouri. meh!) said the average monetary cost of preparing the CNMP was $460, with nothing significantly correlated, plus about 17 hours of work on the farmer's part [11 hours for the smallest farms, 24 for the largest] and 149 hours from government officials. The more animals you have, the lower the total cost per animal is.

Thus the conclusion is that extending the current set up to small and medium livestock farms would give large firms additional cost advantages. She argues that another method needs to be devised to keep the playing field level while still reducing the risk of environmental damage from livestock operations.

Elbakidze, Highfield, Ward, McCarl, and Norby (2009) "Economics Analysis of Mitigation Strategies for FMD Introduction in Highly Concentrated Animal Feeding Regions," No. 4, 931-950, ungated  An outbreak of Foot-and-Mouth Disease in Britain at the turn of the century caused damages of $720 to $2300 million, and larger losses in tourist income. Their simulation model has two components: an epidemiological model of disease risk and spread patterns and an economic model to examine losses. They include a fairly detailed table on the costs for appraisal, cleaning, vaccinations, etc by herd size and a rough estimate of the value of the livestock at different weight assumptions, including twelve classifications of cattle, six sheep, and six pigs.

Simulations indicate an outbreak of FMD in Texas would cost $1 billion in Texas cattle alone. Early detection efforts would save $150 million just for large feedlots and $3 mil for backyard production, so there's a fairly large margin to spend on the efforts. "Vaccine availability and enhanced surveillance were not economically effective ... compared to delayed vaccine availability and the default surveillance strategy." This is in part due to the assumption that vaccinated animals lose 50% of their value due to trade restrictions, though trade losses are not included in the model themselves.


Carlberg, Brewin, and Rude (2009) "Managing a Border Threat: BSE and COOL Effects on the Canadian Beef Industry"No. 4, 952-962
This teaching case describes cattle production and processing capacity in Alberta and Saskatchewan. Cattle processing used to be more spread out across Canada, but technological changes concentrated the processing in those two provinces. Farmers in the other provinces either trucked their animals across the country to have them processed or shipped them into the US. Just before the BSE [Mad Cow Disease] outbreak in 2003, 44% of Canada's cattle came into the US for processing. The BSE outbreak shut that down completely, glutting Canada's processors and wreaking havoc with cattle prices.

In response, the US has drafted mandatory Country of Origin Labeling (COOL) laws that came into effect March 2009. Some estimates indicated that processing costs could be as high as $50 million per plant to segregate the animals and their meat, a 2% per head increase. Since meatpacking is a low-margin business, this is economically important. Of course, you can avoid many of these costs if you don't use animals from other countries, so this has the potential to significantly decrease US plants' willingness to process Canadian livestock. There are plans to increase Canadian processing capacity to reduce reliance on US processors, just in case.

[Cow 1: Are you worried about becoming a raving lunatic because of BSE too?
Cow 2: Me? No. I'm a horse.]

Micro-livestock for Congo

 AP reports on the possibility of combating hunger in the DRC by using a smaller breed of livestock. They breed quickly, they can be hidden or carried around in the event of an attack, they have fewer diseases than most, and they taste like dark chicken! Researchers only thought of it because the people are already starting to do it themselves.

Move over, micro-finance. Micro-livestock is on the way!

(Hat tip: Poverty News Blog)

Opportunity Cost is Everywhere: The Ethics of Search and Rescue

An outstanding post (hat tip Texas in Africa) considering what is gained and sacrificed for landing more search and rescue personnel on the ground. The basic math is that we send in 1700 S&R, who can only get there 1-2 days after the disaster so they have very little time left to find people, thousands have already been saved by locals, and we pull out another 90. Or we could send in more medical personnel to help everyone else. It's about lives saved, not money spent, and there's no attempt to try to monetize human life. Could we save more people and relieve more suffering doing something else?

One commenter makes an extremely cogent point in the other direction. After pointing out the importance of outside help to relieve exhausted local S&R, this ethical plea:

There is also an emotional necessity to bringing in more S&R, even when other types of aide are desperately needed. How well could other aide workers function, if they knew that people were trapped, local rescuers exhausted to collapse, and no one is left to do the last of the “digging out”? For both local and foreign aide workers, the decision to leave trapped people to die so that the effort can be made to help in other ways would be a difficult one. Knowing that the S&R is continuing eliminates that distraction.

I wonder for how many other disease or development related projects this is also the case? I can focus on hunger, comforted that someone else is handling malaria, who is in turn comforted by knowing I'm trying to get them fed. Is this a positive externality? Are different interventions complementary? Would you dare propose a study that could experimentally demonstrate it?

Lit in Review: Three on Agricultural Risk

From the American Journal of Agricultural Economics, Vol 91, No 3 - August 2009

Di Falco and Chavas, "On Crop Biodiversity, Risk Exposure, and Food Security in the Highlands of Ethiopia," p. 599-611.
Facts: Ethiopia experienced droughts in 1965, 1974, 1983-4, 1987, 1990-91, 1999-2000, 2002. Ethiopia is a global center of genetic diversity for several crops, including barley. [A communal barley harvest in Ethiopia, right]
Method: Moment-based specification of the stochastic production function to identify how biodiversity affects the first three moments, unique farm survey, 1999-2000.
Findings: Most decision makers exhibit risk aversion and are DARA. Biodiversity increases farm productivity, even controlling for management practices and microclimate factors. Biodiversity increases skewness and variance, so higher upside and lower downside. The effects are larger on poorer soils (biodiversity and land quality are substitutes). Experience is not statistically significant.
Future research identified: This was a one year survey, so couldn't address the dynamics of management decisions.

Gramig, Horan, and Wolf, "Livestock Disease Indemnity Design When Moral Hazard is Followed by Adverse Selection," p. 624-641, ungated.
Discussion: The US Constitution requires governments to repay farmers when their livestock must be seized to prevent or treat infection. These indemnity payments are a form of implicit insurance and also, critically, disaster payment. Unconditional payments reduce the incentive for farmers to invest in biosecurity measures, particularly if they are paid the full market healthy price so that they suffer no loss at all.
Policy recommendation: Use two policies, one penalty for failure to disclose problem and one indemnity to incentivize proper levels of biosecurity investment. Belgium and the Netherlands give no payment for dead animals (so they want to report before the animal dies) and only partial payment for sick animals (so they want to invest in biosecurity). Private markets may be in conflict with the public policies.
Future research: This paper does not account of the externality and free rider problem: my optimal choice of biosecurity depends on my neighbors'.

Ito and Kurosaki, "Weather Risk, Wages in Kind, and the Off-Farm Labor Supply of Agricultural Households in a Developing Country," p. 697-710, ungated.
Method: multivariate two-limit tobit, Survey of Living Conditions, Uttar Pradesh and Bihar, 1997-98, with labor allocation in 31 (!) categories based on source of wage and whether in cash or in kind.
Facts: 41.4% of households (hhds) rely only on self-employment - largely they have more land and a higher reservation wage; 58.6% have at least one family member earnings wages, usually non-agriculture.
Findings: Education decreases the share of agricultural wage work. The more worker-age males and dependents in a hhd, the lower labor share on own-farm and more for off-farm wage work. The number of working-age females is not significant. Rainfall variance reduces own-farm labor, implying that risk makes people work off-farm. Rainfall variance increases agricultural work paid in kind and nonagricultural work, but is not statistically significant in determining agricultural work paid in cash.