Sunday, July 01, 2012

As a Share of Household Spending, U.S. Has Most Affordable Food in World & It's Never Been Better



We hear reports all the time that real household incomes are stagnant or falling, the middle class is disappearing, household wealth has declined, and income inequality is rising.  All of those reports might make one think that the standard of living for the average American is bad and getting worse.  But here's one basic measure of a country's standard of living that shows Americans are better off than their consumer counterparts anywhere in the world: The share of household consumption expenditure on food consumed at home, see table below (USDA data here).  

Relative to our total household spending, Americans have the cheapest food on the planet - only 6.6% of the average household budget goes to food consumed at home.  European countries like Spain, France and Norway spend twice that amount on food as a share of total expenditures, and consumers in countries like Turkey, China and Mexico spend three times as much of their budgets on food as Americans.  

Another measure of food affordability, total food expenditures in the U.S. as a share of disposable income (see chart above, USDA data here), shows that food has become more affordable in the U.S. over time.  Spending on food has fallen from more than 25% of the average American's income in 1933 to only 9.4% in 2010, an all-time low.  Between 1980 and 2010, the share of disposable income spent on food in the U.S. fell from 13.2% to 9.4%, which is equivalent to almost a 4% increase in the average American's disposable income over the last 30 years.   And a number of countries in the list below spend more on food as a share of household expenditures today than Americans spent on food during the Great Depression. 

Bottom Line: As a share of our disposable income, food in the U.S. has never been cheaper than it was in 2010 (more recent data are not yet available).  And Americans spend less on food as a share of our household expenditures than consumers anywhere else in the world.   

     Share of Household Spending    
on Food, 2010
%
United States6.6
Singapore7.5
United Kingdom9.7
Canada9.8
Ireland10.2
Switzerland10.3
Australia10.7
Germany11.0
Austria11.1
Denmark11.5
Netherlands11.6
Hong Kong, China12.1
Finland12.5
Qatar12.5
Sweden12.6
Belgium12.7
Spain13.1
France13.2
Norway13.4
Malaysia13.9
Bahrain14.3
Kuwait14.5
United Arab Emirates14.5
Japan14.8
Italy14.8
Slovenia14.9
South Korea15.0
New Zealand15.0
Portugal15.6
Czech Republic16.0
Greece17.3
Latvia17.5
Israel17.6
Ecuador17.8
Slovakia17.9
Hungary17.9
Uruguay18.6
Colombia18.8
South Africa19.6
Poland20.2
Argentina20.2
Estonia20.3
Bulgaria21.3
Turkey21.4
Lithuania21.7
China22.3
Mexico22.7
Croatia23.2
Chile23.2
Costa Rica23.4
Iran23.4
Saudi Arabia23.7
Taiwan23.9
Brazil24.8
Thailand25.0
Dominican Republic25.1
Turkmenistan25.8
India27.7
Bolivia28.0
Venezuela28.9
Peru28.9
Russia29.0
Romania29.7
Uzbekistan31.4
Indonesia32.2
Bosnia-Herzegovina32.7
Macedonia32.9
Tunisia35.6
Kazakhstan35.9
Philippines36.4
Egypt38.0
Guatemala38.0
Vietnam38.0
Nigeria39.8
Morocco40.5
Jordan40.6
Georgia41.3
Ukraine41.7
Kenya41.7
Pakistan41.9
Belarus42.1
Algeria43.7
Azerbaijan45.3
Cameroon46.9

92 Comments:

At 7/01/2012 12:13 PM, Blogger morganovich said...

i'm left wondering:

to what extent is this due to the actual price of our food relative to the rest of the world and to what extent is this just driven by our having higher incomes?

i suspect it's some of both depending on to whom we are being compared. swiss food is just flat our much more costly, but food in places like thailand is much cheaper than our, but incomes are also much, much lower.

rather than describing our food as "cheaper" perhaps "more affordable".

i do wonder a bit as well (and don't have a ton of info) about whether we are comparing like to like here.

the EU in particular has more stringent rules than we do about GMO, steriods, antibiotics, etc. much of what they call "normal" we would call "organic" here and such food carries a significant premium.

this may also have something to do with the expenditure differentials.

 
At 7/01/2012 12:17 PM, Blogger Mark J. Perry said...

Good point, I changed the title of the post to "most affordable."

 
At 7/01/2012 12:22 PM, Blogger Glaucon said...

But what about compared with Australia? Does Australia have the same "issues" with GMOs as does Europe?

Australia is allegedly comparatively free with that of America: http://www.heritage.org/index/default

Just curious what could be the issue (perhaps it's not such an issue) with Australia.

 
At 7/01/2012 12:33 PM, Blogger Buddy R Pacifico said...

46.9% of household income is spent on food in Cameroon.

Here is what the CIA reports in their factbook:

"Because of its modest oil resources and favorable agricultural conditions, Cameroon has one of the best-endowed primary commodity economies in sub-Saharan Africa>"

Cameroon's favorable agricultural conditions rates it a "best-endowed" but...

"Cameroon's business environment - one of the world's worst..."

 
At 7/01/2012 1:02 PM, Blogger Buddy R Pacifico said...

Singapore ranks second lowest in household spending on food. This is remarkable because the country is totally reliant on agricultural imports.

Singapore imports its food mostly from Malaysia, Indonesia and Thailand.

Cameroon is rich in farmland with high food expense; and Singapore is barren of ag land and almost the lowest in food expenditures.

"Singapore has a highly developed and successful free-market economy." (CIA Factbook)

 
At 7/01/2012 1:07 PM, Blogger Larry G said...

how about taxes? Canada is #4 but anyone who has purchased food in Canada will tell you that it's quite a bit more expensive.

Even fast food is more expensive in Canada.

Also, as already alluded to - buying power is involved.

Purchasing power parity

Big Mac Index

Starbucks tall latte index

http://en.wikipedia.org/wiki/Purchasing_power_parity

 
At 7/01/2012 1:26 PM, Blogger Henry H said...

It would be interesting to overlay a graph of the % of obese Americans over the 1st graph and show the % of obesity for each country in the bottom table. The smaller share of household spending may be a major cause of obesity.

 
At 7/01/2012 2:07 PM, Blogger Chuck said...

what are crop subsidies like in other countries? the price of the staples of the standard american diet are artificially pushed down by USDA farm subsidies. corn, soy, and wheat receive much of those subsidies.

people may now have more money to spend on ipads, lawn care, and gasoline as examples because they spend less on their food. my guess is people are more often choosing less expensive food options more often. were they to avoid subsidized crops, their food bill would go up.

unfortunately the graph for the climb in obesity rates in the US looks like the exact opposite of the graph on this post. the incline up is just as steep.

 
At 7/01/2012 2:16 PM, Blogger Rick Lowe said...

Do you think all the farm subsidies play into this?

 
At 7/01/2012 2:30 PM, Blogger Chuck said...

@rick

if you are asking me the question, ask it again a different way as i am not clear what it means.

 
At 7/01/2012 2:40 PM, Blogger rjs said...

you could also say As a Share of Household Spending, U.S. Has Least Affordable Healthcare in World & It's Never Been Worse:

http://blogs.wsj.com/economics/2011/04/09/number-of-the-week-u-s-spends-141-more-on-health-care/?mod=WSJBlog

 
At 7/01/2012 2:53 PM, Blogger Chuck said...

@rjs

least affordable healthcare with mediocre results.

question is, does big business want us eating cheap food to make people chronic consumers of expensive healthcare.

expensive, healthy food is not nearly as profitable as people taking several huge margin pills every day of their life.

 
At 7/01/2012 3:03 PM, Blogger Che is dead said...

"you could also say As a Share of Household Spending, U.S. Has Least Affordable Healthcare in World & It's Never Been Worse" -- rjs

You could say that, but you would be wrong. In many other countries healthcare is rationed, either outright or through impediments to access. In the U.S. people are allowed to spend whatever they like on healthcare. As a result, Americans have access to technology, drugs and procedures that are denied to people subjected to more socialist systems. When measured by medical outcomes, Americans currently have the best healthcare in the world.

 
At 7/01/2012 3:06 PM, Blogger Che is dead said...

"least affordable healthcare with mediocre results." -- Chuck

Complete gibberish.

 
At 7/01/2012 3:29 PM, Blogger Chuck said...

@che
http://www.economist.com/blogs/buttonwood/2011/03/health_costs_and_life_expectancy

 
At 7/01/2012 3:36 PM, Blogger PeakTrader said...

Chuck says: "least affordable healthcare with mediocre results."

Government has driven-up the costs of health care, e.g. through excessive regulations, to the point it's now a luxury good.

How to cut U.S. healthcare costs over 50% and maintain the best quality in the world:

1. Limit medical lawsuits and awards, to lower malpractice insurance premiums (which is up to $200,000 a year) and unnecessary medical tests.

2. Lower standards to practice medicine (to increase labor)

3. Allow insurance companies to sell health-care policies across state lines (currently, average health care insurance ranges from a low of $1,254 in Wisconsin to a high of $8,537 in Massachusetts).

4. Allow innovation (example below);

Kaiser Microclinics At 50% of the Cost of a Full-Service Hospital

"Two doctors working out of a microclinic at a mall could meet 80% of a typical patient's needs. With a hi-def video conferencing add-on, members could even link to a nearby hospital for a quick consult with a specialist. Patients would still need to travel to a full-size facility for major trauma, surgery, or access to expensive diagnostic equipment, but those are situations that arise infrequently. The per-member cost at a microclinic is roughly half that of a full Kaiser hospital."

 
At 7/01/2012 3:37 PM, Blogger PeakTrader said...

Chuck, if you subtract the black population, traffic deaths, and gunshot deaths, the U.S. has the highest life expectancy in the world.

 
At 7/01/2012 3:41 PM, Blogger PeakTrader said...

Also, the U.S. measures the infant mortality rate much stricter than other countries.

 
At 7/01/2012 3:44 PM, Blogger Chuck said...

@PT
If my wife was a porn star, I woulda almost hooked up with a porn star last night.

 
At 7/01/2012 3:48 PM, Blogger Che is dead said...

@Chuck

When life-expectancies are adjusted for things that are not amenable to the health care system (like murder rates) Americans have the highest life expectancy in the world."

 
At 7/01/2012 3:49 PM, Blogger PeakTrader said...

"Many developing countries lack the resources to keep track of infant deaths; therefore data for these areas are estimates only. Another methodological problem in measuring infant mortality is ascertaining the number of live births. Sometimes this problem is one of undercounts of births (i.e., births are not registered and thus not counted); sometimes the difficulty lies in inconsistently differentiating stillbirths and live births, especially across countries because this distinction is not as clear-cut as one might imagine."

 
At 7/01/2012 3:55 PM, Blogger Che is dead said...

"The WHO does rank the U.S. No. 1 of 191 countries for "responsiveness to the needs and choices of the individual patient." Isn't responsiveness what health care is all about? Eight of the top 10 medical advances in the past 20 years were developed or had roots in the U.S. The Nobel Prizes in medicine and physiology have been awarded to more Americans than to researchers in all other countries combined. Eight of the 10 top-selling drugs in the world were developed by U.S. companies. The U.S. has some of the highest breast, colon and prostate cancer survival rates in the world. And our country ranks first or second in the world in kidney transplants, liver transplants, heart transplants, total knee replacements, coronary artery bypass, and percutaneous coronary interventions. We have the shortest waiting time for nonemergency surgery in the world; England has one of the longest. In Canada, a country of 35 million citizens, 1 million patients now wait for surgery and another million wait to see specialists ... Food, energy, housing and health care consume the same share of American spending today (55%) that they did in 1960 (53%)." -- Where U.S. Health Care Ranks Number One, WSJ

 
At 7/01/2012 4:01 PM, Blogger PeakTrader said...

"The U.S. has the best record for five-year survival rates for six different cancers. In some cases the differences are huge: 81.2% in the U.S. for prostate cancer vs. 41% in Denmark and 47.4% in Italy; 61.7% in the U.S. for colon cancer vs. 39.2% in Denmark; 12% in the U.S. for lung cancer vs. 5.6% in Denmark.

Also interesting is the fact that there is often a significant difference between white and black cancer survival rates in the U.S., e.g. prostate cancer - 82.7% for whites vs. 69.2% for blacks. But even in that case, the five-year survival rate for blacks (69.2%) is still higher than for all European countries except Switzerland."

 
At 7/01/2012 4:02 PM, Blogger Chuck said...

By the way, it should be called sick care not health care. Medicine in America is about treatment not prevention. Good news is we have cheap crap to eat till we get one of the common lifestyle diseases.

 
At 7/01/2012 4:05 PM, Blogger PeakTrader said...

These patients may pay full cost:

"A study by Deloitte LLP has found that more than 400,000 non-U.S. residents obtained medical care in the U.S. in 2008, and it forecasts an annual increase of 3%.

Some 3.5% of inpatient procedures at U.S. hospitals were performed on international patients, many of them escaping from Canada's supposedly superior health system."

 
At 7/01/2012 4:07 PM, Blogger Che is dead said...

"Medicine in America is about treatment not prevention." -- Chuck

Yeah, yeah, yeah. And medicine in Canada, the U.K., Germany, France, Sweden and Japan is about paying your punitive taxes, getting in line and shutting the fuck up.

 
At 7/01/2012 4:15 PM, Blogger Chuck said...

@che
......and living longer. It has been shown several times when doctors strike from a hospital, death rates drop. One of the top causes of death in the US is prescribed medication.

 
At 7/01/2012 4:37 PM, Blogger PeakTrader said...

Chuck says: "...when doctors strike from a hospital, death rates drop. One of the top causes of death in the US is prescribed medication."

When did U.S. doctors go on strike?

I found many instances of foreign doctors, e.g. in Europe, have gone on strike.

You may be confusing (poor quality) foreign doctors with (high quality) American doctors.

 
At 7/01/2012 4:38 PM, Blogger PeakTrader said...

Afterall, why would high quality doctors work in a socialized system, e.g. in Europe?

 
At 7/01/2012 5:07 PM, Blogger Hydra said...

And medicine in Canada, the U.K., Germany, France, Sweden and Japan is about paying your punitive taxes, getting in line and shutting the fuck up.


================================

At least you have a line. When my insurance company rescinded my insurance retroactively, they refused to tell me why, and would not correspond with me at all..


Talk about shut the fuck up.......

 
At 7/01/2012 5:37 PM, Blogger morganovich said...

chuck-

"......and living longer. It has been shown several times when doctors strike from a hospital, death rates drop. One of the top causes of death in the US is prescribed medication"

the first claim sounds a little suspect to me. do you have a source on this? and would such deaths be merely delayed by postponing risky procedures?

i also have some real doubts about prescribed medication being a leading cause of us death. do you have a source on that claim? sure, people on such drugs may be more likely to die, but that seems likely to have more to do with the underlying condition being treated than the drugs themselves.

saying that someone with cancer died of chemo would seem to be missing the point a bit.

 
At 7/01/2012 5:39 PM, Blogger morganovich said...

hydra-

"At least you have a line. When my insurance company rescinded my insurance retroactively, they refused to tell me why, and would not correspond with me at all..


Talk about shut the fuck up......."

and in the UK, they just kill you off to free up beds.

http://www.dailymail.co.uk/news/article-2161869/Top-doctors-chilling-claim-The-NHS-kills-130-000-elderly-patients-year.html

that would seem to be the ultimate STFU, no?

 
At 7/01/2012 5:56 PM, Blogger Chuck said...

prescription drugs 4th leading cause of death
http://articles.mercola.com/sites/articles/archive/2012/02/11/leading-causes-of-death-cost-for-us-economy.aspx

 
At 7/01/2012 5:57 PM, Blogger Chuck said...

prescription drugs 4th leading cause of death
http://articles.mercola.com/sites/articles/archive/2012/02/11/leading-causes-of-death-cost-for-us-economy.aspx

 
At 7/01/2012 5:59 PM, Blogger Chuck said...

to be clear, i hate socialized health care. i think every employer should go to high deductible health plans.

 
At 7/01/2012 7:55 PM, Blogger Benjamin said...

The USA also has a totally subsidized and socialized agriculture sector.

 
At 7/01/2012 8:24 PM, Blogger juandos said...

"Singapore imports its food mostly from Malaysia, Indonesia and Thailand"...

Have you ever seen what passes for food in Malaysia, Indonesia, & Thailand?

 
At 7/01/2012 8:28 PM, Blogger juandos said...

"When my insurance company rescinded my insurance retroactively, they refused to tell me why, and would not correspond with me at all."...

Assuming that happened at all, I sure would like to hear what the insurance company's take on having you as one of the policy holders was...

 
At 7/01/2012 9:17 PM, Blogger Henry H said...

Rising healthcare costs are attributed to growing obesity which is attributed cheaper food.

 
At 7/02/2012 2:21 AM, Blogger Ron H. said...

"At least you have a line. When my insurance company rescinded my insurance retroactively, they refused to tell me why, and would not correspond with me at all.."

Oh goody! there's that personal anecdote again.

 
At 7/02/2012 2:34 AM, Blogger Ron H. said...

Chuck:

"If my wife was a porn star, I woulda almost hooked up with a porn star last night."

Very funny. Peak's point is valid. If you are going to compare life expectancy among countries, you need to control for dissimilarities.

"question is, does big business want us eating cheap food to make people chronic consumers of expensive healthcare."

You keep implying a connection without making the connection. Where's your support? No more opinion pieces please.

 
At 7/02/2012 2:38 AM, Blogger Ron H. said...

juandos

"Assuming that happened at all, I sure would like to hear what the insurance company's take on having you as one of the policy holders was..."

Good one. I can imagine why they were reluctant to talk to him.

 
At 7/02/2012 2:52 AM, Blogger Ron H. said...

"prescription drugs 4th leading cause of death"

Do you have anything from an actual medical study instead of an advocacy site?

 
At 7/02/2012 8:20 AM, Blogger Jet Beagle said...

Buddy Pacifico: "Singapore ranks second lowest in household spending on food. This is remarkable because the country is totally reliant on agricultural imports."

At first glance it seems remarkable. But isn't the cost of agriculture products a small part of the final price paid for most food items? The raw material cost of even milk - a product produced by the cow - is only about 30 percent of the final supermarket price. For processed food such as a box of macaroni and cheese, the cost of the raw material is much lower.

 
At 7/02/2012 8:31 AM, Blogger Don Culo said...

Where is the U.S. on the Fat scale?

Yes we have cheap burgers and fries but at what cost to our health?

 
At 7/02/2012 8:34 AM, Blogger Jet Beagle said...

Chuck : "the price of the staples of the standard american diet are artificially pushed down by USDA farm subsidies."

Really? I thought U.S. government intervention did exactly the opposite. The Dairy Price Support program of the USDA is exactly designed to keep diary prices artificially high. As professor Perry pointed out earlier this year, U.S. sugar tariffs forced American consumers to directly or indirectly pay twice the world rate for sugar. Export subsidies increases the demand for farm products in the U.S., thus raising prices for domestic cosumers.

Of course, the most expensive government interference in agriculture markets is probably the ethanol mandate.

Are you sure the government is helping American consumers?

 
At 7/02/2012 9:00 AM, Blogger Larry G said...

re: do govt subsidies increase or decrease the price of food.

seems like there should be a way to take something like a half-gallon of milk and do an international comparison as to how much it costs in a purchasing-power-adjusted basis.

We could also do that with other things like corn or sugar, etc.

 
At 7/02/2012 9:08 AM, Blogger Jet Beagle said...

Larry G,

You can do that, but I think it is a waster of time. The entire purpose of sugar tariffs is to raise the prices paid to American sugar cane growers. The entire purpose of dairy price supports is to raise the price paid to American dairy farmers. The real purpose of ethanol mandates is to raise the prices paid to corn producers such as Archer-Daniels-Midland.

If you want to try and disprove the basic economics of price supports and tariffs, go ahead and try.

 
At 7/02/2012 10:47 AM, Blogger Larry G said...

" The entire purpose of dairy price supports is to raise the price paid to American dairy farmers."

I AGREE about the purpose.

I'm asking how it affects the price at the consumer level - on a comparative international basis.

Is American subsidized milk among the higher price (on a purchase parity basis) in the world?

In other words subsidized dairy OUGHT to result in increased costs to consumers but if our milk is not actually priced substantially higher than other countries what does that mean?

you ought to be able to make a case to support the premise.

right?

 
At 7/02/2012 11:14 AM, Blogger bart said...

Yes, food is down as a share but so many other things are *way* up.

CPI component weights, 1948 on


CPI component weights, 1948 on (2)

 
At 7/02/2012 11:37 AM, Blogger Jet Beagle said...

Larry G: "In other words subsidized dairy OUGHT to result in increased costs to consumers but if our milk is not actually priced substantially higher than other countries what does that mean?"

It could simply mean that, for the U.S., the other costs are less than those for the rest of the world. For example, if the U.S. has a more efficient system of transporting milk, our milk prices could still be lower despite the dairy price supports.

The important issue to me is not how our food prices compare to those of the rest of the world. Rather, the issue is would our food prices be lower without government intervention in the market. And the answer to that is most certainly "Yes".

 
At 7/02/2012 3:14 PM, Blogger Jet Beagle said...

Henry H: "It would be interesting to overlay a graph of the % of obese Americans over the 1st graph and show the % of obesity for each country in the bottom table. "

I don't think affordable food and obesity are correlated.

Here's a few observations:

Nation ____Food %____% Obese

US____________6.6%______33.9%
Singapore_____7.5%_______6.9%
Canada _______9.8%______23.1%
Switzerland__10.3%_______8.2%
Japan________14.8%_______3.1%
Greece_______17.3%______22.5%
Poland_______20.2%______18.0%
China________22.3%_______2.9%
Mexico_______22.7%______23.6%
India________27.7%_______0.7%

Obesity data from World Health Organization.

 
At 7/02/2012 4:36 PM, Blogger Ron H. said...

"seems like there should be a way to take something like a half-gallon of milk and do an international comparison as to how much it costs in a purchasing-power-adjusted basis.

We could also do that with other things like corn or sugar, etc.
"

Let us know what you find.

 
At 7/02/2012 4:45 PM, Blogger Ron H. said...

Che: "The WHO does rank the U.S. No. 1 of 191 countries for "responsiveness to the needs and choices of the individual patient." Isn't responsiveness what health care is all about?"

Well, to individual human beings it's extremely important, but to collectivists, it's only the numbers that matter.

 
At 7/02/2012 4:46 PM, Blogger bart said...

I don't think affordable food and obesity are correlated.

Nice work, thanks.

 
At 7/02/2012 4:49 PM, Blogger bart said...

seems like there should be a way to take something like a half-gallon of milk and do an international comparison as to how much it costs in a purchasing-power-adjusted basis.


The Big Mac index

 
At 7/02/2012 4:57 PM, Blogger Larry G said...

" "seems like there should be a way to take something like a half-gallon of milk and do an international comparison as to how much it costs in a purchasing-power-adjusted basis.

We could also do that with other things like corn or sugar, etc."

Let us know what you find"

well, I'm not the one who says that subsidies result in higher food prices.

I'm, in fact, a bit skeptical that our milk prices are expensive compared to other countries.

I note the availability of the Big Mac Index and Starbucks tall latte index.

how about an index for commodities that have price supports?

but here's an interesting map:

http://en.wikipedia.org/wiki/File:PPP2003.svg

 
At 7/02/2012 4:57 PM, Blogger Ron H. said...

"By the way, it should be called sick care not health care. Medicine in America is about treatment not prevention."

Perhaps there's an assumption in America that people should be allowed to make their own choices about prevention, and that treatment should be for those cases where more is needed.

Young children, of course need help learning from their parents how to make good choices, but when they become adults they tend to rely on themselves, and expect others to do the same.

I know, personal responsibility is a quaint notion these days.

 
At 7/02/2012 5:01 PM, Blogger Larry G said...

" I know, personal responsibility is a quaint notion these days"

individual mandates are quaint?

who knew?

 
At 7/02/2012 5:04 PM, Blogger Ron H. said...

"you ought to be able to make a case to support the premise.
"

Did you mean: "Larry ought to be able to make a case to support or refute the premise.

 
At 7/02/2012 5:10 PM, Blogger Ron H. said...

Larry:

You need to differentiate between tariffs, price ceilings, price floors, subsidies, and other types of government price controls. They don't all have the same effect.

Some, such as US corn subsidies might help US farmers, but devastate third world farmers who can't compete on the global market.

 
At 7/02/2012 5:12 PM, Blogger Larry G said...

if the premise is that price supports increase the cost of milk such that we pay more in this country than other countries....

the big Mac index seems to be an example that it can be done.

how about an index for price-supported commodities like Milk ?

doing so could make a convincing case that commodity supports are not only theoretically bad but proven to be bad in actual practice also.

 
At 7/02/2012 5:30 PM, Blogger Larry G said...

re: differentiating

I was primarily thinking of the commodity support policies but actually my view would be the same.

but I thought the "problem" with such govt/central planning "interference was that such policies were bad because they increased prices to consumers.

we seem to have some of the most affordable food on earth even when measured by purchasing parity methods.

it's hard to believe that our food prices would be even lower if we got rid of the various commodity support policies but I'd certainly be interested in seeing such an analysis.

 
At 7/02/2012 5:33 PM, Blogger bart said...

Gasoline prices by country


Gasoline prices by country, different sort

 
At 7/02/2012 5:33 PM, Blogger Ron H. said...

"do govt subsidies increase or decrease the price of food."

Try re-framing this question.

"well, I'm not the one who says that subsidies result in higher food prices."

But you did express an interest in the subject:

"in other words subsidized dairy OUGHT to result in increased costs to consumers but if our milk is not actually priced substantially higher than other countries what does that mean?"

When you use the word "we", who exactly are you including?

Are you asking others to do the work for you, so you can have the answers without any effort?

 
At 7/02/2012 5:40 PM, Blogger Ron H. said...

"how about an index for commodities that have price supports?"

I'm not sure how that would help you. The Big Mac and Starbucks indexes compare prices for finished products at an individual retail level, while subsidies apply to single commodities at the other end of the production chain.

Would it be useful to know the effect of US wheat subsidies on the price of a Big Mac in Greece?

 
At 7/02/2012 5:46 PM, Blogger Ron H. said...

"I'm, in fact, a bit skeptical that our milk prices are expensive compared to other countries."

There must be some reason for that skepticism, what is it? What support do you have for your skeptical view?

Or you just like to write things like that in response to what others write so you can feel like you are included in the conversation?

 
At 7/02/2012 5:50 PM, Blogger Larry G said...

" Would it be useful to know the effect of US wheat subsidies on the price of a Big Mac in Greece? "

it would be more complicated than if you restricted the index to single commodities - comparing across the board to see if commodity prices themselves are affected by price supports and other 'interference"policies.

tying to examine that as a constituent part of a product with many other inputs would be likely not useful.

but if someone wanted to make a case that price supports actually increased the price of the specific items affected by those got policies, it could be a powerful argument against those policies - not on theoretical grounds but on actual measurable impacts.

the weaker argument would be that commodity support products are STILL cheaper in this country compared to other countries without.

 
At 7/02/2012 5:53 PM, Blogger Ron H. said...

This comment has been removed by the author.

 
At 7/02/2012 5:56 PM, Blogger Ron H. said...

"individual mandates are quaint?

who knew?
"

How silly.

Forcing people to do things doesn't mean they have suddenly grown a sense of personal responsibility.

If I arrested you and transported you to Omaha to stand trial for murder, would anyone say you were taking personal responsibility for your actions by traveling to Omaha?

 
At 7/02/2012 6:20 PM, Blogger Ron H. said...

"if the premise is that price supports increase the cost of milk such that we pay more in this country than other countries...."

But that is NOT the premise, no one but you has mentioned it, and no one but you seems to care about a comparison of milk prices among countries.

The issue with price supports for milk is that it makes milk - as well as other dairy products - more expensive for consumers than they would be without the price support, which is it's intended purpose.

Of course there isn't just one single US price support for milk, and there certainly isn't just one price for milk in the US.

You could, if you knew how, use the Big Mac index to investigate for yourself, but it doesn't look like anyone else is going to do it for you.

There is nothing to determine. If there's something else you're concerned about, you will need to say what it is, but this particular question has been answered.

 
At 7/02/2012 6:31 PM, Blogger Ron H. said...

"re: differentiating

I was primarily thinking of the commodity support policies...
"

And what, exactly, are those? There are many, and they aren't all the same, so is there a specific one you wish to discuss?

Which type of government price distortion are you most interested in learning about?

 
At 7/02/2012 7:05 PM, Blogger Larry G said...

any/all policies that are claimed to harm commodity prices and in turn made or food less affordable.

unless of course no one actually makes that claim.

it's sort of a side issue to the idea that the US has the most affordable food in the world - DESPITE the fact that we have policies that appear to increase the price of food.

so if we the best in the world,does it also mean we also have best economic polices and that perhaps the commodities policies actually help affordability?

One would think the countries that most interfere with their agricultural production would end up with the least affordable food in comparison to other countries that do not do that.

but the opposite appears to be the result.


unless we could actually show that our food would be even more affordable without those policies.

 
At 7/02/2012 8:09 PM, Blogger Ron H. said...

"so if we the best in the world,does it also mean we also have best economic polices and that perhaps the commodities policies actually help affordability?"

No, it means we are the best in the world despite the policies that cause distortions in commodity prices. Keep in mind that the cost of corn, for example, only contributes a small amount to the price of that box of cornflakes you buy in the store.

Also we are rich, so a major change in the price of corn doesn't make much of a difference to cereal lovers, but may mean the difference between life and death to millions of 3rd world poor. Scarcity due to ethanol mandates that causes starvation in poor parts of the world seems hard to tolerate.

When you discuss subsidies and other price control it's important to remember that the total true market price is being paid by someone, maybe just not those that are immediately visible. Government subsidies are paid by taxpayers, or maybe by taxpayers grandchildren

Are you still trying to make a case for central planning?

 
At 7/02/2012 8:17 PM, Blogger Ron H. said...

"but the opposite appears to be the result."

Your evidence for this please.

 
At 7/03/2012 6:45 AM, Blogger Jet Beagle said...

Larry G:"so if we the best in the world,does it also mean we also have best economic polices and that perhaps the commodities policies actually help affordability?"

Please be specific. Different government interventions will have different impacts on consumer prices.

Dairy price supports are exactly designed to raise the prices of dairy farmers products. This in turn increases the costs to producers of milk. If you believe in the laws of supply and demand (Of course, I'm never sure exactly what some people who comment here believe), then you must believe that increasing the raw material prices of milk producers will increase the price of their product.

As Ron H and I have tried to explain, the issue is not whether dairy price supports result in the U.S. having higher or lower milk prices than other nations, The issue is whether milk prices would be lower absent dairy price supports.

If you want to argue the merits of another specific market intervention, please give it a shot. I will be happy to explain who is harmed by the market intervention and why they are harmed.

 
At 7/03/2012 6:47 AM, Blogger Larry G said...

re: the poor - well, again, you'd think that thc countries that did not have commodity support programs could help the poor best....

why rely on countries that have commodity supports and ethanol subsidies to produce the lowest price commodities?

re: the opposite has occurred

it's the results right in front of you.

the lowest priced food commodities in the world seem to come from central planned economies with subsidies and price supports.

right?

 
At 7/03/2012 7:12 AM, Blogger Larry G said...

"Please be specific. Different government interventions will have different impacts on consumer prices.

Dairy price supports are exactly designed to raise the prices of dairy farmers products. This in turn increases the costs to producers of milk. If you believe in the laws of supply and demand (Of course, I'm never sure exactly what some people who comment here believe), then you must believe that increasing the raw material prices of milk producers will increase the price of their product."

Oh I do believe that and I believe that supply/demand IS what controls markets and that govt policies can and do distort it but I also KNOW that govt policies - like dairy "supports" also exist.

What I was commenting on is that it appears that we could (I have not found proof) have the most affordable milk in the world despite our price supports and despite the fact that other countries may well have more free supply/demand markets than ours - sans price supports."


"As Ron H and I have tried to explain, the issue is not whether dairy price supports result in the U.S. having higher or lower milk prices than other nations, The issue is whether milk prices would be lower absent dairy price supports.

and I agree but I have not seen any data that confirms this and I would still ask why we seem to have lower-priced milk than countries with no price supports and more pure supply/demand systems

"If you want to argue the merits of another specific market intervention, please give it a shot. I will be happy to explain who is harmed by the market intervention and why they are harmed."

there's a paradox here.

we are one of the most centrally-planned regulated countries in the world and we are also a country with a wide variety of govt interventions in the markets via price supports and subsidies.

... yet ... despite all of that ... we seemingly produce some of the most affordable food in the world

of the 200+ other countries in the world of which many may have far fewer regulations and no price supports and subsidies - they seem to still have more expensive food.

one would think that in those countries with more unfettered markets that they'd easily best us in affordability of food - but they don't.

so I tried to focus on ONE commodity - rather than a big mac or a latte - a basic human need - milk.

because that's not a manufactured product with multiple components but instead a more or less pure "right out of the cow" product.

It's a question about a seeming paradox - not a statement that markets don't work or that govt interventionist policies are "good".

it may not have an easy answer but my overall observation is that it appears that the countries with the most central planning and interventionist policies seem to be among the most competitive in producing affordable food.

 
At 7/03/2012 8:32 AM, Blogger Jet Beagle said...

Larry G: "we are one of the most centrally-planned regulated countries in the world"

I can't agree with that statement.

Obama and the Democrats are trying to move us there, but I don't think the U.S. is nearly as controlled as Japan, Sweden, France, and the other large developed countries.

Some states in the U.S. are much more regulated than others. California is a nightmare.

 
At 7/03/2012 8:43 AM, Blogger Jet Beagle said...

Larry G,

As I pointed out earlier, in the U.S. the price of milk paid to the dairy farmer constitutes only 30% of the price the end consumer pays for milk. Consider the other costs which a retaler incurs directly or indirectly before placing the plastic container of milk on the shelf:

- pasteurization;
- productioon of plastic container;
- cost of machinery to fill containers;
- labor to operate milk plant;
- transportation of milk to retailer;
- insurance;
- cost of capital for machinery, trucks, retail store equipment, etc;
- utilities, at processing plant and at retail store;
- retail labor.

These are just a few of the costs which determine the floor price at which milk may be profitably sold. It's very likely that these costs are lower in the U.S. than in many other nations.

Finally, even before all those costs are incurred, you must consider the cost to the dairy farmer of producing milk. Even with dairy price supports, it is possible that the very favorable georgraphy of the U.S. makes dairy farming less costly in the U.S. than elsewhere.

There's no paradox, Larry, if you recognize that the price to the consumer is determined by much, much more than just the cost of the material inputs.

 
At 7/03/2012 8:48 AM, Blogger Jet Beagle said...

Larry G: "well, again, you'd think that thc countries that did not have commodity support programs could help the poor best...."

I think Mark Perry has pointed out before, or perhaps it was Don Boudreaux: property rights are an essential prerequisite for the efficient functioning of markets. Many less developed countries cannot develop simply because potential entrepreneurs have no assurance that a business they build will remain theirs.

I'm not sure which "poor" countries you are referring to, but consider whether property rights exist before trying to make economic comparisons between them and the U.S.

 
At 7/03/2012 9:58 AM, Blogger Jet Beagle said...

Larry,

My source for asserting the relative freedom of America is the Heritage Foundation's Index of Economic Freedom.

Afforability of food is correlated with this Index of Freedom

10 countries with most affordable food

Country______Food %___Freedom Index

United States____6.6__76.3
Singapore________7.5__87.5
United Kingdom___9.7__74.1
Canada___________9.8__79.9
Ireland_________10.2__76.9
Switzerland_____10.3__81.1
Australia_______10.7__83.1
Germany_________11.0__71.0
Austria_________11.1__70.3
Denmark_________11.5__76.2

10 large countries with unaffordable food

Country______Food %___Freedom Index

China_________22.3___51.2
Mexico________22.7___65.3
Brazil________24.8___57.9
Thailand______25.0___64.9
India_________27.7___54.6
Russia________29.0___50.5
Romania_______29.7___64.4
Egypt_________38.0___57.9
Nigeria_______39.8___56.3
Pakistan______41.9___54.7

 
At 7/03/2012 12:18 PM, Blogger Ron H. said...

"(I have not found proof)"

That's exactly the problem. You insist on arguing things that you pull out of your ass instead of making an argument based on any shred of evidence that could be taken seriously.

You continue to conflate commodity prices with the prices of retail goods and wonder why you can't find a correlation.

You have already agreed that the effect of US wheat price subsidies on the price of Big Macs wasn't useful information, yet you think you should know the same about milk.

You incorrectly assume that because US consumers spend less of their income on food than other countries that food prices in the US must be lower than in any other country.

You incorrectly assume that because the US government meddles in commodities markets that it must have the most centrally planned economy in the world.

You could see where the US ranks in economic freedom if you bothered to follow the links provided.

Your assumptions are wrong, your premises are wrong, your "facts" are wrong, your "logic" is wrong, and your conclusions are wrong.

Did I leave anything out?

The bottom line here is that you are just wrong.

 
At 7/03/2012 1:26 PM, Blogger Larry G said...

re: economic freedom and lower prices

and the Heritage Index...

looking at the top 10:

would we say (or not) that the top 10 are also among the most regulated economies in the world?

how about socialized health care and the attendant payroll taxes to pay for it?

Pasteurization and other food safety rules? top 10 = the most regs?

don't confuse "poor" with 3rd world in the context that I speak.

I would pick the top 10 countries with the LEAST regulations and NO payroll taxes and NO other taxes corporate and individual income as ones who, in theory, would have much "freer" market supply/demand economies. and in theory, able to outperform the countries with more regulations and other central-planned "disadvantages".

don't you find it more than a coincidence that none of the 3rd world least-regulated countries come even close to out-performing all these uber-regulated countries with heavy taxes and socialized health care?

You'd think that at least one or two 3rd world countries would quickly rise to the top of the heap since they are free of virtually all the things that people here say hurt the free market and harm market economies?

I just find it a paradox.

 
At 7/03/2012 1:58 PM, Blogger Jet Beagle said...

Larry G :"would we say (or not) that the top 10 are also among the most regulated economies in the world?"

Of course not. Why would you think that?

Regulation is directly correlated to size of government relative to GDP. Size of government relative to GDP is an important component of Heritage's index of Freedom.

Did you look at the link I provided?

 
At 7/03/2012 2:01 PM, Blogger Jet Beagle said...

Larry G: "don't you find it more than a coincidence that none of the 3rd world least-regulated countries come even close to out-performing all these uber-regulated countries with heavy taxes and socialized health care?"

Once before you told me you were hear to learn. You're not going to learn anything by making completely unfounded assertions.

Look at the link I provided, and see how Heritage derives the Index of Freedom. And do that before you post another comment about "least regulated 3rd world countries".

 
At 7/03/2012 2:10 PM, Blogger Ron H. said...

"Did you look at the link I provided?"

He may have looked at the index, but he doesn't understand what he's seeing.

 
At 7/03/2012 2:11 PM, Blogger Ron H. said...

"would we say (or not) that the top 10 are also among the most regulated economies in the world?"

not

 
At 7/03/2012 2:18 PM, Blogger Larry G said...

re: look at your link.

yup.. I'm fairly familiar with it. Looked at it quite a bit - trying to discern what role regulation plays in economic freedom.

for instance, one might presume (or not) that property rights are protected with regulations since there are a number of countries who don't protect property rights as well as others do and in general, it appears to me to the lesser regulated countries ...ALSO don't do a good job with property rights and rule of law ( isn't rule of law ALSO another type of "regulations"?).

No I'm serious. It sure seems like a paradox to me that the MORE regulated countries seem to rise to the top of the economic freedom index.

If we were going to list the top 10 least regulated countries in the world- who would those countries be and how prosperous would they be?

looking deeper into it:

" We measure ten components of economic freedom, assigning a grade in each using a scale from 0 to 100, where 100 represents the maximum freedom. The 10 economic freedoms are grouped into four broad categories or pillars of economic freedom:

Rule of Law (property rights, freedom from corruption);

Limited Government (fiscal freedom, government spending);

Regulatory Efficiency (business freedom, labor freedom, monetary freedom); and

Open Markets (trade freedom, investment freedom, financial freedom)."

http://www.heritage.org/index/faq

the data explorer allows one to rank order according to each individual criteria so you can, for instance, look at the top 10 who protect property rights as well as the top 10 with the most regulatory efficiency, (business freedom) etc.

so no matter what criteria you choose to rank order - it usually returns a very similar list of industrialized countries that are centrally planned and have fairly extensive regulations.

So I've tried to generate a list of the least regulated countries and for some reason... few, if any of the 3rd world countries appear in the columns associated with what heritage calls "efficient regulation" as opposed to less or no regulation.

Surely the 3rd world countries are the least regulated and that includes protecting property rights by govt rules. would you agree that it takes govt to protect property rights?

so ...the least regulated countries in the world with the most unfettered markets (which would include corruption - no laws to curtail it) -
do not do well economically.

and all the countries that rise to the top of the list - all seem to have MORE regulations than the 3rd world economies.

So.. from that ..could one deduce that all countries with robust economies have more regulations than 3rd world countries with crummy economies?

Are regulations necessary for good economies?

 
At 7/03/2012 2:22 PM, Blogger Larry G said...

notice - these are not assertions but questions...... guys...

just questions....about things that seem paradoxical....

 
At 7/04/2012 12:38 PM, Blogger Ron H. said...

This comment has been removed by the author.

 
At 7/04/2012 12:45 PM, Blogger Ron H. said...

"just questions....about things that seem paradoxical...."

No one sees a paradox but you Larry. The confusion is all in your head, and everything that anyone here can think of that might help clear it up for you has been tried.

 

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