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overconsumption

I’ve been looking at a hotel on booking.com for a conference. Incidently, a friend of mine looked at the same hotel for this conference. Now facebook informs me that this friend of mine has also been looking at the same hotel.
Isn’t this just great? Look how helpful those advertisement companies are. Maybe I’d have never met him there.
Incidently, what facebook and co apparently didn’t know is that I did a joint booking, a room for my friend and one for myself.
For some reason, my friend’s google agenda has already put this event in my friend’s calendar. And the only thing I passed to booking.com is my friend’s name.
So booking.com gives information to some advertisement company that shares this information through facebook, and it also provides information to google.com. Wow. Isn’t the internet a great place nowadays?
And seriously, all this fuzz about facebook sharing user data with some company that used this in the US election? That is simply the tip of an iceberg.
Face it: There is no regulation on the internet. There is no anonymity. Advertisement companies are exploiting everything you do. Facebook and co. are living off that.
As an economist I can only tell you: put your money in advertisement companies. Governments don’t seem to want to regulate these, and this is cleary where all the business is. After all, all the big companies are investing significant and increasing shares of their earnings on advertisement. Coca Cola spends roughly four billion USD annually on advertisement. Four billion USD. In one year. On advertisement. More than the annual development aid of most European countries. A company does this. A single company.
And so it doesn’t surprise me that everyone is constantly buying all this crap, these gimmicks, widgets and gadgets. You can erroneously claim that you may be immune to advertising, but in all honesty your are not. And why should you be? Why should you be the only one that is immune? What makes you different?
And if you still believe that you are not affected by advertisement, then look around you. What stuff do you own? What things do you really need? Which ones do you really use? Where do you eat? What do you eat? What do you drive? What clothes do you wear? How big is your house/flat? How many clothes do you have and how many do you actually wear? And so on…
The moral of this story? I would say that we need two discourses on advertisement. One, which is more fundamental: Do we really need advertisement? If I know what I need then I go into a specialized shop to buy it. And only it. And that’s it. I don’t need advertisement to tell me about all these products which are out there that I don’t need right now. However, what about products that I don’t know about now but may find useful anyway? This is informative advertisement. It would be useful as long as it simply informs me. Forget all the packaging stuff, all the plastic wrapping that has nothing to do with the product and only makes it look good so you are induced to buy it. One should buy a product for the product’s sake and not because the packaging is nice. You are anyway going to throw it away in the moment you unpacked it.
Two, should we allow preference-changing advertisement? This is entirely different to the previous advertisement. In the former case you are informed about the existence of product, in the later case you are induced into believing a product is useful for you. That’s simply messing with your mind. Most of the advertisement out there is preference-changing advertisement. And of course it works. Otherwise all these companies wouldn’t invest in it. You’ll buy, and it’ll just end in some corner of your flat. But you bought it, and the wheels kept turning… Your money is now someone’s else money, and the only difference is that you’ll need to buy a new cupboard to hold all the additional stuff that you bought and will never use. And this is where Walmart jumps in.  Walmart spends annually 2.4 billion USD on advertisement. And so it goes.
Food waste: Surplus tomatoes are dumped on farmland in Tenerife, Canary Islands, Spain

Surplus tomatoes are dumped on farmland in Tenerife, Canary Islands, Spain.
Photograph: Sally A. Morgan/Ecoscene/Corbis
 
Today I give some thoughts on the Installment 2: Reducing Food Loss and Waste, the second report by the WRI. Up front I have to say it is a very well done, interesting piece, definitely worth taking a close look at. What is especially good about these reports by the WRI is that they are concise, precise, and still contain a lot of information. Now some snapshots and thoughts:
 
The problem:
  1. “When converted into calories,global food loss and waste amounts to approximately 24 percent of all food produced.”

So this should really slap you in the face. 1/4 of all food produced is lost or wasted.

How does the WRI define food loss and food waste?

Food loss is the unintended result of an agricultural process or technical limitation in storage, infrastructure, packaging, or marketing.”

Food waste is the result of negligence or a conscious decision to throw food away.”

So, I guess, what the report is trying to get at is that food loss is a result of inefficiencies on the producers’ side, while food waste is the due to consumer behavior and demand. For example, consumers prefer nice, good looking apples of the same sizes instead of mishaped ones with brown bits. At least, if they have the choice, then they will only buy those that look nice, while those other, “faulty” ones will not be bought and eventually will be thrown away. Thus, this is food waste. Food loss occurs, for example, because the apples need to be transported from Italy to Germany, and on the way a part of it gets crushed.

However, the distinction between food loss and food waste is not always necessarily clear, since obviously the producers’ and the consumers’ sides interact on the market. So, if German consumers demand apples from Italy and a part gets crushed on the way, then the WRI defines this as food loss. While if German consumers demand local apples then maybe none gets crushed. So is it now negligence (and thus food waste) from the consumers’ side if they buy apples from Italy and a part gets squashed? They could have bought these apples from a German producer instead and thus prevented the squashing of the apples. Or is it food loss and should be attributed to inefficiencies on the producers’ side? What I am suggesting is that the distinction between food loss and food waste needs to be treated carefully, otherwise one closes doors for potential policies that only address the one or the other, for maybe the false reasons.

In terms of regional distribution, the WRI report notes that “[t]he total share of food lost or wasted ranges from 15 percent to 25 percent across most regions (Figure 6). The oneexception is North America and Oceania, where loss and waste is approximately 42 percent of all available food.” In terms of calories per capita per day, North America and Oceania lose or waste twice as much as Europe or Industrialized Asia, and around three times as much as the rest of the world. It would really be interesting to know precisely why food loss is so much higher in North America and Oceania than in the ROW.

The implication:

  1. “Economically, they represent a wasted investment that can reduce farmers’ incomes and
    increase consumers’ expenses.”
  2. “Environmentally, food loss and waste inflict a host of impacts, including unnecessary greenhouse gas emissions and inefficiently used water and land.”
  3. Obviously, a greater food loss or waste will imply that it is more difficult to feed the expected 9.3 billion people in 2050.

Food loss is likely to waste farmers’ income, but food waste not necessarily. The food loss, as discussed below, occurs mostly in LDCs – they are unlikely to have the money to improve efficiency. Thus, it may very well be the case that only rising income in LDCs will have the desired effeect on food loss. Food waste is a consumer side problem, and occurs mostly in rich countries. Thus, if the rich throw food away simply because they can afford to do so, then this increased consumers’ expenses is not really a problem for them. The poor cannot afford to waste food so do this very little. Also, food waste is not necessarily a problem for the poor and may even raise farmers’ incomes! Farm revenues are (price x quantity), and if the increase in quantity that goes to food waste is sufficiently larger than a (possible) price reduction due to the additional amount produced, then this raises farmers’ income. Furthermore, if demand increases further with a given quantity produced, then this may even raise prices and thus lead to an increase in farms’ income. Thus, food loss is a problem for farming incomes, but food waste largely a problem only for creating a sustainable food future.

A discussion of some of the solutions suggested:

  1. food redistribution –> “This strategy applies at the production stage with crops that otherwise would go unharvested, at the manufacturing stage with overproduced products, and at the distribution and market stage with food left unsold at stores and markets.”
  2. Food date labelling –> The “use-by” labelling is the “the last date recommended for the use of the product from a food safety perspective.” One suggestion here could be to adopt the “minimally-conservable until” labelling that is used in Germany. It is a less restrictive labelling in the sense that “use-by” is a hard constraint that basically says: Use latest until expiry date, because on the expiry date the food will not be edible anymore. In contrast, the “minimally-conservable until” label suggests: Ok, you should start thinking about eating this sooner rather than later. It provides a less rigid constraint on the date of consumption.
  3. Reduce portion sizes (in restaurants) –> this is unlikely to happen. Think about it – take two identical restaurants, one with a small portion and the other with a big one – which one would you go to? Another issue here is culture: In many Asian countries it is rude to leave an empty plate behind, as then this means that the person who invited could not feed everyone sufficiently. Changing this attitude in restaurants from the consumer side and the restaurant owner side will be extremely difficult.

Some more random points: Quite interestingly, food waste seems to be positively correlated with income (see Figure 6 in report), while food loss is negatively correlated with it. Thus, food loss is likely to be a problem of storage costs, transportation problems, inefficiencies in the production-to-consumption chain. Clearly, assuming the causality runs from income via technology/management/infrastructure to food loss, then improvements in income for the LDCs should yield a double divident: poverty reduction and reductions in food loss. In contrast, since food waste seems positively correlated with income (which should be clear: if you have little money to buy food, then you are going to be much more careful with it), then simple increases in income are likely to only lead to a re-distribution of the problem – from food loss to food waste. Thus, both for developed countries and for LDCs that are growing quickly, a strong focus should be placed on the consumer side.

Just a note: I find the focus on gender in the WRI report a little too restrictive. Why not child poverty and child health? Why not social security? Why really gender? In my own opinion, gender problems tend not to be overcome by simply increasing wealth. For example, “Domestic violence is the leading cause of injury to women between the ages of 15 and 44 in the United States, more than car accidents, muggings, and rapes combined. (“Violence Against Women, A Majority Staff Report,” Committee on the Judiciary, United States Senate, 102nd Congress, October 1992, p.3.)” See also a WHO report here. I would suggest to focus more closely on poverty and not be “distracted” by gender issues. Also, because the two points raised in the report,

  1. “Reducing food losses increases the return on investment of time spent farming and could reduce the total time needed to work in fields”
    and
  2. “Reducing food waste could reduce total household expenditures on food, freeing up resources for health, education, and other household benefits”,

are really not gender oriented but instead are household oriented or poverty alleviation.

How about economic incentives?

  1. Tax the amount of food loss. This should increase efficiency at the production/transportation/marketing stage. An obvious problem is that this will be less effective in poor countries where producers simply cannot afford the expensive technologies or management options. 
  2. Ask for significantly higher insurance rates for overweighted people. Just like it is the case for someone undertaking a dangerous sport, smokes or has a family history of specific diseases, the insurance industry could also raise insurance costs for overweighted. I think all this discussion about fairness is surprising. Obviously, there are some diseases or medication that lead to overweight. In these cases, insurance rates could be adjusted accordingly.
  3. Consumer attitudes: could be changed via implementing a sort of sport-oriented society, like it is the case in many European countries now. Sports, physical fitness starts to be a trendy thing. Overweightness less so. Relaxed living, taking time to dine out, reduces both stress and junk/fast food intake.
  4. giving incentives to the old local small stores: if you only need a minute to walk to your next bakery or local shop, then one will buy more on a need-for basis and not this bulk shopping. Less things will be pushed to the back of the refrigerator where it is only found because it already starts to walk by itself…..

 

https://i2.wp.com/www.ynaija.com/wp-content/uploads/2012/10/Starving-Child.jpg

The World Resource Institute is currently working on a report entitled “Creating a Sustainable Food Future”. Its adequately-chosen subtitle is “The great balancing act”. Here are the issues:

The problems:

  1. by 2050, “available worldwide food calories will need to increase by about 60 percent from 2006 levels if everyone is to be sufficiently fed.”
  2. “the world needs agriculture to contribute to inclusive economic and social development.”
  3. “the world needs to reduce agriculture’s impact on the environment and natural resources.”

The reasons:

  1. higher demand: Population is going to increase from currently 7 billion to 9.3 billion in 2050. and obviously currently poorer regions get richer and thus want to shift to from a cereal to a meat diet, e.g. China does this already now.
  2. Growth in the agricultural sector would drive employment of a potentially substantial part of society, and can generate benefits for women.
  3. we should all know why: water stress, ocean dead zones, etc.

The observations/suggestions/lessons:

It is basically the objective of the report to try and find a solution to all three problems. A first (utopian) observation of the report is that, even if all food currently produced was to be distributed evenly across the expected 9.3 billion people in 2050, then still everyone would fall short of the required daily calories intake by 200 kcal, around a tenth of the necessary, daily calories. Consequently, in order to cover the basic needs of all, society has to produce more food. How much? The report’s “projection implies a 63 percent increase in required crop calories from 9,500 trillion kcal per year in 2006 to 15,500 trillion kcal in 2050. The result is a 6,000 trillion kcal per year “gap” between production in 2006 and the need in 2050.” This requires the same increase in crop production during the next 40 years as we have seen during the past 40 years.

So first thoughts here are already troublesome: It is extremely doubtful that the objective of the report, namely the creation of benefits for women, is really achievable. The report notices this itself. Since women already make up the majority of agricultural workers in sub-Saharan Africa and South Asia, it is unlikely that there will be the significant positive impacts for women that the report talks about. Where should they come from? And clearly, the main problem is that in sub-Saharan Africa there is already significant water stress holding up the growth in the agricultural sector, and this will only increase substantially during the next years. In a recent article, Luca Marchiori, Jean-Francois Maystadt and myself have shown that there is already national and international migration in many sub-Saharan countries as a result of weather variations that affect agriculturally-dependent countries the most. Food production is only expected to worsen in those countries according to studies by Eric Strobl and his co-authors.

Then, it is unlikely that yields in the agricultural sector increase like they did during the past 40 years- fertilizers are already used nearly everyone and in may places to a maximum. In addition, a chunk of the recent increase in agriculturally-used area (mostly grazing area) has come from cut-down tropical rain forests. The reason for using those areas for cattle or agriculture is obviously that they hold higher yields than other areas. Given the need to significantly reduce the destruction of the rain forest, and also the need for re-forestation in order to curb CO2 concentrations in the atmosphere, it is also unlikely that we will see a similar increase in agriculturally-useful area as we had during the past 40 years.

So let’s discuss some possible solutions advocated by the WRI: They suggested a good, exhaustive list of clearly well-thought options that each adds little by little to improving the expected food shortage in 2050. My favorites:

  • “REDUCE OBESITY: In most of the world except sub-Saharan Africa, consumption of animal products is already high and leads to more protein intake than is necessary for human health” –> basically, everyone is getting fatter! Obesity is a serious social health problem nowadays, strongly associated with diabetes, heart failures, and also mental issues like depression and lost working hours. The WHO called it a “global epidemic”, with around 10% of the world population being obese. Social costs for these are enorm. Curbing obesity could be a double-divident policy: reducing social costs and increasing food for the rest of world.
  • “EAT FEWER ANIMAL PRODUCTS: Reduce the share of animal-based foods in a person’s daily diet”. Once you have read books like Animal Liberation, you might want to reduce meat intake for ethical reasons, too. (It’s just really difficult during summer BBQs…)
  • “REDUCE BIOFUELS” This obviously allows for more food production, and immediate basic needs should have preference over a small increase in climate change from reduced biofuels. Biofuels are currently losing out anyway, as impact on food prices and availability was considerable. Sort of reminds me of Mao’s problem with the Great Leap Forward…

Then there is a new report out, the “Reducing Food Loss and Waste” report. That seems to be a good report, too, well-done. Going to look into it, but not tonight…

In a world filled to the brim with inequality and negative externalities that our past and current consumption impose upon future generations (e.g. climate change and environmental destruction), it has frequently been voiced that a part of society (the wealthy…) overconsumes. But by what standard should we measure whether there is overconsumption?

Keynes suggested that people consume for two reasons, namely to satisfy absolute wants and relative ones. According to Keynes, absolute wants are those that we have “whatever the situation of our fellow human beings may be”, while relative ones are those that we satisfy only to show superiority over others. Here, Keynes described something that Veblen called conspicuous consumption; basically consumption that is undertaken only to increase one’s own social status in comparison to one’s peers’.

Clearly, there is nothing wrong per se with relative consumption – if it increases happiness, then the more the better. However, there is a tendency to view relative consumption as something bad. For example, Professor Singer recently suggested that conspicuous consumption may be immoral since the money for it could be used for better reasons like reducing poverty.

It should be clear that Professor Singer’s argument may also be used to address absolute consumption. Let us, for clarity, split absolute consumption into two sub-categories – `basic need consumption’ and `comfort consumption’. Basic need consumption is simply the amount of consumption necessary to cover one’s basic needs. The United Nations defined these basic needs as consisting of food, safe drinking water, sanitation facilities, health, shelter, education, information and access to social services. Someone who is deprived of these basic needs is living in `absolute poverty’, and the estimated amount of money necessary to achieve this basic need consumption is $1.25/day (in Purchasing Power Parity). There is, as always, some discussion of whether this required amount of basic need consumption is too high or too low, but let’s simply stick to it for now.

In contrast, comfort consumption is consumption that is optional and only undertaken to simplify one’s life or meet additional desires (other than relative ones). For example, buying a house or a car tends to be undertaken to simplify one’s life, and going on holidays or buying books is done to meet additional desires. Thus, it is comfort consumption that gives us the possibility to lead a secure, cosy life and pursue additional dreams. It is clear that any reason forwarded against conspicuous consumption may equally well be raised against comfort consumption. For example, apart from raising one’s own happiness, there is no need to go on a holiday or to buy a car. Consequently, the money may be better spent on reducing poverty.

So, we have two categories of consumption, namely basic need and comfort (which includes relative) consumption. Clearly, basic need consumption is a necessity without which one cannot live, while comfort consumption is, in a sense, optional. So what tells us whether we consume too much? Obviously, we can turn to the old philosophers to gain a first insight here. For example, according to Buddhist teaching, “whoever in this world overcomes his selfish cravings, his sorrows fall away from him, like drops of water from a lotus flower.” Similarly, according to Matthew (19:24), Christian teaching forwards that it is “easier for a camel to go through the eye of a needle than for a rich man to enter into the kingdom of God”, while Taoists believe that “he who knows he has enough is rich”. In the Oracle of Delphi it is carved that “nothing in excess” is the goal to pursue. While one may feel for some reason at once supportive of these messages, it is nevertheless not clear why they should apply or be followed. Certainly there is a moral reason behind this, but if I do not harm anyone with my consumption, even if it is extremely large, and if I gained the riches through my own hard and rightful work, then why should there be a problem?

Furthermore, what is a rich man? How does one know when one has enough? And what are selfish cravings in comparison to selfish desires like those that one satisfies with comfort consumption? It is easy to know that Mr Pink who owns three houses, a Rolex and a Lamborghini is rich, but only 400 years ago Mr Brown who had his own piece of land and maybe a cow was perceived to be well off, too. However, while we nowadays may view  Mr Pink as being sweetly rich, we would view Mr Brown as rather poor and just about being able to meet his basic needs. Consequently, the understanding of what constitutes a rich or poor person evolves with the stage of development of society. As a result, it is difficult to perceive what the old philosophers exactly meant when talking about “the rich”.

Thus, the road to pursue in trying to understand what constitutes an overconsumption has to lie in the fact that it may precisely not be true that one does not harm anyone by overconsuming, and that there are other moral obligations that arise once one has the ability to prevent harm. For example, if the current generation’s consumption induces significant climate changes that then deprive future generations of their ability to satisfy their basic needs, then the current generation’s consumption harms the future generation. Similarly, if I buy a Rolex while I could instead spend the money on feeding a starving child, then I do not prevent harm that I easily could avert. These points then touch upon the aspects of intergenerational and intragenerational justice. There is, like anywhere, no unique theory of justice. Here I am going to use a sufficientarian notion of justice – not because it is necessarily the best, but simply because it is a good first step and sufficient to help make a point. My view is that a first step, and only a first step, towards justice is that the basic needs of all should be covered. This includes the basic needs of everyone in the current generation, but also those of the future generations. This is simply a minimalistic theory of justice that minimizes suffering. Indeed, we will see that there are enough shortcomings already based on this rather basic approach to justice, that we do not (yet) need to deeply go into more demanding theories of justice. Once basic needs are covered, then at least the basic foundations are laid in such a way as to allow a person to live a life without a daily worry focused on survival.

In principle, this approach to justice is then related to the concept of harm. Though there are subtle philosophical differences and still extensive discussions without full consensus, in general it should easily be acceptable that person A is responsible if he or she directly harms another person B. In addition, person A is also accountable for not preventing harm from person B, if it is in the ability of person A to prevent the harm. This is a somewhat consequentialist understanding of justice – the consequence matters more than the reason for action. As an example, this understanding of justice implies that killing someone is bad, but also not preventing someone from drowning while one could rescue that person is also bad. One could argue that harming someone directly is morally worse than harming someone indirectly, but the reason for that is not necessarily obvious and furthermore does not matter for us right now. Simply put – both causing direct harm and not preventing indirect harm (if one has the ability to prevent it) is bad.

We are now equipped with a minimal notion of justice, and also with an understanding of what consumption level is covered by this notion of justice, namely basic needs consumption. Let’s see where this takes us in our understanding of overconsumption. In the intragenerational setting, estimates by Chen and Ravallion suggest that, in 2005, approximately 1.4 billion people lived below the basic need consumption at an average income of $0.87/day (PPP), with an average shortfall of $0.38/day (based on the $1.25 threshold). Consequently, roughly $0.5 billion/day is needed to prevent harm from everyone, in the sense that this raises everyone’s consumption above the basic needs. This is about the annual GDP of Australia or Taiwan. There are roughly 0.5 billion wealthy people living, on average, on $31/day per person. If they give up approximately $1 per day, then this would still keep them $28.75/day above the basic need consumption. Thus, their consumption is optional, i.e. comfort consumption. Consequently, our notion of minimal justice demands that this group of wealthier ones has the ability to prevent indirect harm and should take action accordingly. Obviously, a more rigorous analysis would take national poverty lines into account and adjust this result accordingly. One could also take all those who live above $1.25/day into account when calculating the required amount to be transferred, and even adjust this amount by the respective incomes (like a progressive transfer). But the results will still hold.

In the intergenerational setting, the question is whether our current level of consumption harms future generations in the sense that we deprive them of resources that are necessary to keep them from consuming below the basic needs level. There are clearly many uncertainties that need to be taken into account here. One way that is used to study to what extent our current consumption affects future generations is the so-called Integrated Assessment Modelling. Here, the impact of several hypotheses on consumption paths over time, together with their feedback effects on climate change and interactions with technological change, population growth and other factors, are studied. One of the most famous models is the DICE model by Professor Nordhaus. According to his model, consumption during the next 100 years will steadily increase. Consequently, we should worry much less about intergenerational justice based on the sufficientarian notion of justice. However, the optimal scenario of the DICE model leads to a temperature increase of at least 5°C by 2200. As a consequence, the optimal results of the DICE have been called in question, especially by the International Panel of Climate Change (IPCC). For example, for a temperature increase of 5°C, the estimates suggest a significant loss of species (more than 40%), hundreds of million people faced with water stress or increased health burdens. Consequently, there is significant uncertainty over the true impact of climate change on consumption. Nevertheless, the DICE model also suggests that policies that reduce the temperature increase to below 2°C will have little impact on the consumption path. The 2°C threshold is the increase in temperature at which effects on the climate and mankind are still believed to be moderate. Hence, good policy has the ability to minimize the consumption externality on future generations while still allowing consumption to grow.

Clearly, these simulations abstract from regional or local impacts that may have a substantial adverse effect on inhabitants. For example, local changes in climates may significantly alter the living conditions of its inhabitants. How these are supposed to be valued is not an easy task. For example, is it enough to know that average consumption will rise so that, in the future, it is possible for the rich to compensate the poor for the severe climate change impacts that we induce? This is clearly a difficult question for our notion of justice. The reason is that by its excessive consumption the current generation harms a sub-population of a future generation. However, the economic values that the current generation creates for the future generation are sufficient to avert the harm. The only condition required then for this to be a just allocation is that the future generation manages to transfer enough consumption to those that are living – due to the climate change we induced – below the basic need consumption. So, though our actions harm someone directly, we also give the ability to others to prevent the harm that we produced. The main problem here is that we require the future generation to decrease the inequality that we created, and we can by no means be certain that this will be the case. This will be a discussion for a later post.

In conclusion, discussions of overconsumption should focus more closely on issues of intragenerational equity and basic needs consumption. Applications of other theories of justice, like those that focus more strongly on equality, should then be left as a possible second step or as a reminder of what may be achievable or potentially desirable. However, demanding the whole nine yards if few are prepared to even take the first step may be counterproductive. The Millenium Development Goals point in the right direction that our notion of intragenerational justice prescribes, but clearly there is a long way to go still.

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