I am trying to put some thoughts together on meat taxation, so I thought a good place to start would be to comment a little bit on the 2013 book Meatonomics, by David Robinson Simon. The cover of Meatonomics includes the phrase "$414 Billion Reasons to Eat Less Meat," and the substance of the book explains where these extra (annual, 2012 dollars) costs of meat (not paid for directly by consumers or producers) come from; they are helpfully summarized in two pages (pp. 202-203) in Appendix B.
Kudos to Mr. Smith for taking on this ambitious task, and for documenting and attempting to quantify the many external costs of animal agriculture. The details undoubtedly are debatable, but what I take to be the main message -- there are huge external costs associated with meat, egg, fish, and dairy consumption in the US and that a significant tax on products containing these ingredients should be a major part of a set of policy reforms -- is one with which I agree. (And if you don't agree, your position might be altered by reading Meatonomics.)
Once the existence of sizable negative externalities is established, the economic case for corrective measures, including a so-called Pigovian tax, is fairly strong. Smith's $414 billion is more than 1.6 times consumer spending on animal foods, so a Pigovian tax would increase retail prices by something on the order of 2.5 times their existing (2012) level. [OK, this claim is actually a massive simplification or even distortion.] The higher retail prices would decrease the quantity demanded of animal foods, of course, but economic efficiency would be enhanced, as consumers began to shoulder the full social costs of their dining decisions. Mr. Smith does not propose a full Pigovian tax, however; instead, he suggests (page 172) a 50% ad valorem tax on domestic retail sales of animal-based foods, which would raise consumer prices for those products by something like 50%, too, presumably.
The precise nature of Mr. Smith's accounting of external costs is relevant for desirable policy reforms. First, some 9 percent of the external costs come in the form of subsidies to agriculture, including irrigation subsidies. (Since much of the corn crop is used for animal feed, subsidies to corn, for instance, end up supporting animal agriculture.) The externalities associated with these subsidies would best be handled by eliminating the subsidies (which are spread around to all the uses of corn, including ethanol), not through a meat tax. Second, the majority of the external costs come through impacts on health (especially increased heart disease), but it is not clear that these are externalities. (Some, such as building up of antibiotic resistance through farm antibiotic use, are classic externalities, however.) They are not direct physical externalities, like when your steel mill pollutes my air (or vice versa), but rather, they operate through the socialization of some healthcare costs -- the spillovers are financial, and would not exist if we chose not to provide some public subsidy to healthcare. Using such financial spillovers as justifications for further public interventions (here, a meat tax), is not necessarily a good idea. After all, once it is agreed that such externalities can drive policy, then any personal behavior (not getting enough exercise, say, or eating an extra dessert) seems ripe for public control: your irresponsibility is costing me money! This is not a road down which I am eager to travel, at least without a lot of consideration. (Though I do support some socialization of health care expenses -- I just don't want their availability to be made contingent on whether your behavior is judged to be sufficiently protective of the public purse.) Of course, even if there were no issues with fiscal spillovers, we should still be concerned with the health effects of consuming animal products or anything else. Do individuals understand the health risks they are running, or are these risks for some reason undercounted in individual decision making? That is, health risks can be internalities, even if they are not externalities, and taxes might be helpful to overcome internalities, too.
The environmental externalities identified in Meatonomics are, for the most part, good old-fashioned standard externalities, suggesting that the current size of the animal agriculture sector is socially excessive and a meat tax would move us in the right direction. Mr. Smith also notes the willingness-to-pay by people for less cruel methods of farming, so not only is there too much animal agriculture, it is insufficiently protective of animal interests -- even if those interests are directly ignored, and only taken into account through human willingness-to-pay.
Kudos to Mr. Smith for taking on this ambitious task, and for documenting and attempting to quantify the many external costs of animal agriculture. The details undoubtedly are debatable, but what I take to be the main message -- there are huge external costs associated with meat, egg, fish, and dairy consumption in the US and that a significant tax on products containing these ingredients should be a major part of a set of policy reforms -- is one with which I agree. (And if you don't agree, your position might be altered by reading Meatonomics.)
Once the existence of sizable negative externalities is established, the economic case for corrective measures, including a so-called Pigovian tax, is fairly strong. Smith's $414 billion is more than 1.6 times consumer spending on animal foods, so a Pigovian tax would increase retail prices by something on the order of 2.5 times their existing (2012) level. [OK, this claim is actually a massive simplification or even distortion.] The higher retail prices would decrease the quantity demanded of animal foods, of course, but economic efficiency would be enhanced, as consumers began to shoulder the full social costs of their dining decisions. Mr. Smith does not propose a full Pigovian tax, however; instead, he suggests (page 172) a 50% ad valorem tax on domestic retail sales of animal-based foods, which would raise consumer prices for those products by something like 50%, too, presumably.
The precise nature of Mr. Smith's accounting of external costs is relevant for desirable policy reforms. First, some 9 percent of the external costs come in the form of subsidies to agriculture, including irrigation subsidies. (Since much of the corn crop is used for animal feed, subsidies to corn, for instance, end up supporting animal agriculture.) The externalities associated with these subsidies would best be handled by eliminating the subsidies (which are spread around to all the uses of corn, including ethanol), not through a meat tax. Second, the majority of the external costs come through impacts on health (especially increased heart disease), but it is not clear that these are externalities. (Some, such as building up of antibiotic resistance through farm antibiotic use, are classic externalities, however.) They are not direct physical externalities, like when your steel mill pollutes my air (or vice versa), but rather, they operate through the socialization of some healthcare costs -- the spillovers are financial, and would not exist if we chose not to provide some public subsidy to healthcare. Using such financial spillovers as justifications for further public interventions (here, a meat tax), is not necessarily a good idea. After all, once it is agreed that such externalities can drive policy, then any personal behavior (not getting enough exercise, say, or eating an extra dessert) seems ripe for public control: your irresponsibility is costing me money! This is not a road down which I am eager to travel, at least without a lot of consideration. (Though I do support some socialization of health care expenses -- I just don't want their availability to be made contingent on whether your behavior is judged to be sufficiently protective of the public purse.) Of course, even if there were no issues with fiscal spillovers, we should still be concerned with the health effects of consuming animal products or anything else. Do individuals understand the health risks they are running, or are these risks for some reason undercounted in individual decision making? That is, health risks can be internalities, even if they are not externalities, and taxes might be helpful to overcome internalities, too.
The environmental externalities identified in Meatonomics are, for the most part, good old-fashioned standard externalities, suggesting that the current size of the animal agriculture sector is socially excessive and a meat tax would move us in the right direction. Mr. Smith also notes the willingness-to-pay by people for less cruel methods of farming, so not only is there too much animal agriculture, it is insufficiently protective of animal interests -- even if those interests are directly ignored, and only taken into account through human willingness-to-pay.
No comments:
Post a Comment