Courses

How Food Regulations Make Us Less Healthy

Speakers
Daniel D’Amico,

Release Date
July 19, 2013

Topic

Lobbying & Special Interests
Description

Corn growers receive billions of dollars each year in subsidies from the U.S. government. The average American family pays $400 per year to subsidize corn. As a result, corn products and derivatives can be found in many items at American grocery stores. In the video, Professor Daniel J. D’Amico discusses how farm subsidies and other food regulations affect what Americans buy and eat.
Regulations can also act as barriers to entry for smaller growers. For example, requirements for marketing food sold in the United States as “organic” are strenuous. While we may think this means the consumer is better protected from unscrupulous farmers, Prof. D’Amico shows how they form barriers to entry for small farmers. The paperwork and other costs associated with complying with the regulations for organic produce may prove too expensive and time consuming for the small farmer. This, in turn, makes it more difficult to find organic produce locally.
Instead of allowing government to regulate and subsidize specific food types or farmers, Prof. D’Amico recommends a freer market. There are too many unintended consequences of food regulations and subsidies, such as price distortion and unfair competition between members of the same industry. A market without these distortions would allow consumers to buy less expensive, healthier food.

Feds vs. Raisins: Small Farmers Stand Up to the USDA [article]: The story of Marvin and Laura who have faced a decade-long legal battle with the United States Department of Agriculture (USDA). Every year, the Hornes plant seeds, tie vines, harvest fruit, and place grapes in paper trays to create sun-dried raisins. And every year, the federal government prevents them from bringing their full harvest to market
Eating Disorder: How Governments Raise Food Prices [article]: How tariffs, quotas, and “antidumping” laws reduce the supply of food and keep demand for food unmet
The Locavore’s Dilemma: Why Pineapples Shouldn’t Be Grown in North Dakota [article]: How support for the local produce movement flouts basic economic principles
How Government Makes You Fat – The Great Sugar Shakedown (video): The history of the American sugar quota program
John Stossel – A Sweet Deal? (video): John Stossel talks with Sallie James, the Cato Institute’s Trade Specialist, about American agriculture policy
Certified Organic Can Be Bad for Small and Local [article]: How “organic seed” requirements grant large companies monopolies, threatening the sustainability of small organic farmers
Desert Island Game (game, beginner): Can you learn something about trade and cooperation by being marooned on a desert island?
Trade Ruler (game, advanced): As the Supreme Ruler of an island, you want the country to prosper. By engaging in international trade, you can achieve this goal.

How Food Regulations Make Us Less Healthy
How do you choose what to eat? Most people don’t realize how big of an influence government policy has over the food they buy and consume. Rent seeking, lobbying, and regulatory barriers all change the way food is produced and sold throughout American refrigerators and American stomachs. Rent seeking occurs when private individuals use politics not for the public welfare but to obtain personal benefits. The benefits are concentrated to only those individuals within the special-interest group.
Take corn subsidies for one example. Government takes tax dollars from everyone and gives it to a smaller group of corn farmers. The costs to you or me are small, but the benefits received by corn growers are large. Since 1995 the government has given $73.8 billion to corn growers while the average household pays around $400 for food subsidies in a year.
So how does this affect the food I choose to eat? With corn subsidies, the price of foods containing corn is lower than it would be without the subsidy. Thus, people are willing to eat more of it. Because farmers can benefit so much from corn subsidies, they are willing to spend effort and real resources to get politicians and policymakers to support subsidies.
Regulations can act as barriers to entry as smaller, newer businesses have more difficulty affording the costs of regulation. A good example is regulation that certifies food as organic. Don’t these regulations help small farmers? Unfortunately, no. Buying organic has become a billion-dollar industry. Big businesses have lots of resources to invest time and money to make sure they benefit from and comply with organic certification. Small farmers on the other hand have a harder time affording the monetary costs, the paperwork, and the bureaucracy of compliance. Regulations are small costs to big farmers but big costs to small growers. So the general market for organic food is more dominated by large industrial farms and fewer local producers than it would be without regulation.
Many factors manipulate the market for food. Prices are distorted because of subsidies, and regulation impedes competition. With so many unintended consequences, is government the best way to promote food quality, health, and nutrition? I say no. A freer market without distortions would allow consumers to buy cheaper, healthier food.

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