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Food Safety
Major force in restructuring food system:
- Emphasis on traceability
- Calls for Country of Origin Labeling
Recent concerns
- Globalization and potentially weak standards—
e.g., with Chinese products
- Bacterial contamination
- Mad Cow Disease
- Potential risks with GMOs?
- Obesity
Food Safety
Types of Food Safety Problems
- Options for Regulating Them
- Implications of Food Safety Regulation for System
Structure and Performance
How Risky is Our Food?
Why Get the Government Involved?
- Supply and Demand for Food Safety
- Missing Markets?
How Do You Decide How Much to Invest in
Food Safety, How and Where?
Types of Food Safety Problems:
Each Regulated Differently
How Safe is Food to Produce?
Chronic Health Problems Due to Poor
Diet
“Contaminants” – The “classical” food
safety issue
Let the market take care of it….
9 Hayek argues that markets are extremely
efficient ways of organizing economic activity because they effectively synthesize lots of highly dispersed information regarding consumers’ desires and producers costs and express that information in prices.
9 Are Hayek’s arguments valid for dealing with food
safety issues like Mad Cow Disease and
potentially contaminated imports? Why or why
not? What alternatives do you suggest?
French Fries and Food Safety:
McDonald’s Obesity Suit
9 Does Society:
9 Provide public information about the relationship between high levels of fat consumption and disease? 9 Require labeling stating that high levels of consumption are hazardous to your health? 9 Regulate the level of fat allowed in french fries? 9 Tax calories?
Federally Informed Diets
9 U.S. key strategy has been information
provision or control
9 Consumer education
9 Content labeling
9 Warning labels
9 Advertising restrictions
9 Where is Joe Camel?
9 How much action is enough?
9 Will market forces contribute to good eating habits? Initiatives by fast food companies, insurance companies?
Types of Food Contaminants:
Chemicals
Intentional Poisoning – Bioterrorism
Allergens – e.g., introduced via bio-
engineering
Pesticides
Animal drugs
Environmental contaminants
Food Additives
Types of Food Contaminants:
Biological
Bacteria
Fungi
Viruses
Prions
Toxins
Parasites
Relative Risks
Microbial contamination
Toxic chemicals
Animal Drug Residues
Pesticides
Environmental contaminants
Biotech
Bio-terrorism
Increasing Uncertainty
Why Get Government Involved?
Will information (e.g., labeling), product
liability laws, and reputation solve the
problem?
Are there missing markets?
Determinants of the demand for
food safety
Income
Information/knowledge/perception
Other factors?
Supply of Food Safety
Perceived willingness to pay
Rise of certification programs
Problems of information asymmetry and
attribution
Who has incentive to fully reveal
information?
Problems of consumers capacity to
process information.
Profits for Innovators
Texas American , hamburger patty supplier
- Switched from spot market to contract sales
- Fewer product returns and customer complaints
- Cheaper production costs
- schedule workers and equipment use better
- less product spoilage
Jack in the Box became channel captain for meat
industry on pathogen control
- Avoided bankruptcy in 1993
- Expanding stores, sales, and profits today
www.ers.usda.gov/publications/aer831/
Roberts, ERS, 2004
Economics of New Tests
(Roberts and Unevher)
In 1990, limited information about pathogens in food
- High cost, time to result, lack of specificity, etc.
- Where do they enter food chain? Where do they
grow?
Source of market failure
- Limited ability to monitor pathogens
New testing technologies available to reduce market failure Roberts, ERS, 2004
Supply of information
Advances in pathogen testing
- Tests for more pathogens
- Faster results - 1-2 days
- Sensitivity– can detect low levels
- Specificity– identify specific strain
- Test for several pathogens with one sample
- Fewer false positives/negatives
- Quantify pathogens
Automated record keeping
and analysis
Roberts, ERS, 2004
Demand for Information
Increased value in last decade
- New FSIS regulations (PR/HACCP)
- Require Salmonella , generic E. coli tests
- Increased risk aversion among buyers
- More publicly available information
- More outbreaks detected with FoodNet
- Private contracts can require tests
- Increased international trade of meat and poultry products
Roberts, ERS, 2004
Meeting Customer Needs: Creekstone
Farms’ Battle with USDA
Petitioned USDA to allow private testing for BSE (Feb 19, 2004) Market driven decision
- Open Japan’s market (and others) to Creekstone product
- Meet customer’s need by testing every animal
- Kansas Secretary of Agriculture: Testing every animal adds value to their product…. should be able to employ appropriate marketing strategy is appropriate for them. (Kansas City Star, April 13, 2004)
USDA’s Answer: NO! (April 12, 2004)
- USDA will continue to negotiate with the Japanese RE: U.S. beef exports
- BSE testing of younger animals is not scientifically justified or necessary (have budged on this a bit).
- “need sense of unity when addressing trading partner concerns“ Opponents: Costs of testing eventually passed to producers, up to $ per calf March 26, 2006: Creekstone lawsuit..”USDA overstepped its legal authority…acted as "a roadblock" to Creekstone's efforts to satisfy customer needs”
Food Safety and Market Failure
Food safety primarily a credence good
- Cannot observe quality of good
- not a search good (quality determined before
purchase)
- only limited experience good
Main information problem
- linking illness to food consumed
Now---Improved testing Drivers for private food safety innovations
New pathogen testing technologies
www.ers.usda.gov/publications/aer799/
How Do You Decide How Much to
Invest in Food Safety, How and
Where?
How to estimate costs and benefits?
- USDA estimates costs at $6.8 billion/year for 5 major contaminants
- Lost wages; valuing lost lives.
- USDA cost calculator
Uncertainty
Useful Websites on Food Safety
http://www.ers.usda.gov/publications/aer
www.ers.usda.gov/Data/Foodborneillness
www.ers.usda.gov/Emphases/SafeFood
http://www.michigan.gov/mda/0,1607,7-125-
1568_21390-53829--,00.html
www.ers.usda.gov/Data/HACCPSurvey/
http://www.foodsafetynetwork.ca/
http://www.cdc.gov/foodnet/
