Monday, April 14, 2008

Just Feed 'em More Yoo-Hoo

I have been eyeing the recent press on rising US food prices with a whole lot of interest. I am not actually in the United States at the moment, and thus cannot see the inflation first hand. But goodness, by all accounts it is a doozy.

Here is the thing, though. If you are going to write about inflation and public policy, you should at least consult an economist first. Otherwise it sounds like our local governments are being run by a bunch of morons. Well, perhaps they are, at least at the school district level.

If you don't have the patience to read the WashPost article on the rising costs of school lunches (referenced above), here is a summary. Food costs are going up, so schools are serving less nutritious food as a result. Because, of course. That is the most logical answer to a higher milk bill.* Serve more Yoo-Hoo.

Why not raise the price of lunches, you ask? Well, apparently that would be disastrous. In Alexandrea, the school district's Director of food and nutrition says that there is a "tipping point" and that even a 10 cent increase in the price of lunch could... well.. tip us. Tip us where? Into an abyss where kids do not eat? Is that the decision that an extra 10 cents** will tip us into? Eating or not eating? Never mind the fact that some school districts in DC have not raised the price of school lunches for TEN YEARS (according to the same article).

OK people, let's revisit basic microeconomics. Of course, quantity demanded falls as (real) prices rise - but the key is: by how much? Knowing almost nothing about the data, I would bet good money that demand for kids' lunches is inelastic, at least amongst people who do not qualify for the reduced lunch price program. So how is it that we are talking about - nay making public policy statements about - gut feelings around "tipping points."

Instead, how about hiring someone to do some empirical work? For a small sum of money (at least in comparison to the $3 million in increased milk fees paid by NY schools this year), someone could do some estimations of demand elasticities and calculate just how much of an increase in cost parents are willing to bear. The data already exist! You just need to crunch some numbers, Ms. Alexandria nutrition director. How about doing that before you start running to Congress for more subsidies? Or replacing seafood with chicken nuggets?

Of course some kids will consume fewer lunches (all other things constant). OF COURSE. But by how many? And what will the substitution effect be - will they start packing lunches? Who will be affected most (i.e., what segment of the population)? Find those kids and target them with better subsidies. Don't instead provide the whole population with poor quality food choices - less fruit and veggies, more refined sugars and other crap.

The article also casually mentions that the US federal government subsidizes every single school lunch. A child paying full price for lunch gets a 23 cent subsidy; kids who qualify for reduced price lunches get more. Gracious. Why? Do we need to encourage every public school parent to buy lunch at school, regardless of income? Even if the school lunch in question is becoming less and less nutritious?

This is a straightforward empirical question: what portion of rising food costs can be pushed back on to parents directly without a significant drop in number of lunches bought. Once we know the answer, then we can devise sound public policy to address the issue and re-balance the school budget. However, the solution to rising milk costs should not be, should never be, to lower the quality of food.

You - Mr./Ms. Public School District Director - should educate our kids, shape their preferences for a lifetime of eating. If the data show that increased lunch prices will result in some people not eating, then find those people, fix that specific problem. Don't instead make poor food choices for all of our kids without analysis.

Here is a crazy idea. If we are really worried about rising prices, then how about we teach the kids to grow their own food for lunch. Oh wait. That would mean sunshine, work and exercise. Yeah, that was a dumb thought.

*Let's not even talk about why milk prices are high in the first place.

**An extra 10 cents per lunch, what would that mean for the parent of a child who eats cafeteria food regularly? Assuming 5 days of lunches a week, 36 weeks a year (the average # of weeks a school in the United States is open annually), the extra burden on a parent would be US$18. Per year.


Beuk said...

Don't quit your day job...Oh wait, maybe you can go work for the government, yeah there is an idea. Ever wonder why all the movies in the future portray the government job as the best one to have, with the fancy clothes and latest weapons? Because it is going to have to be to attract the brightest and best. Until then, cheers to Yoo-hoo.

Amy said...

What the h*ll? They need to be serving Milo - all the kids drink it in Malaysia and look where it has gotten them!