Skees, Jerry R.

English

Research Papers in Economics

Journal of Agricultural and Applied Economics, 30, l(July 1998):109-111
@ 1998 Southern Agricultural Economics Association
Economic Research in Food Safety—
Putting the Puzzle Together: Discussion
Jerry R. Skees
Food safety research is a new field of endeav-
or for most of us. The three papers focusing
on this topic (Buzby et al.; Jensen, Unnevehr,
and G6mez; and Golan, Ralston, and Frenzen)
merit our attention, as each adds something
unique to our research efforts in this important
area. While it is difficult to identify specific
common threads, I think there is one aspect
that is universal: information is largely lacking
for food safety research. There are some valid
reasons for this paucity of data, and I think it
is critical that we attempt to develop a better
understanding of this issue, and perhaps even
consider new institutional designs that may re-
solve the data problem. I will discuss this fur-
ther in my closing remarks.
While these papers all raise new issues and
demonstrate progress in food safety research,
it is also clear that we have a long way to go.
To my knowledge, few studies examine the
cost structure of various technologies in such
detail as provided by Jensen, Unnevehr, and
G6mez. More work of this nature is critical to
the industry and to regulators who are trying
to understand the cost structure of new tech-
nologies. The other two papers demonstrate a
stark difference in methods for valuing food
safety. While both may be viewed as gallant
attempts, neither can be viewed as the final
word. Buzby et al. explore three valuation
techniques that place a monetary value on risk
reductions for food safety. Golan, Ralston, and
Frenzen take a totally different approach at
valuing food safety by examining economic
activity beyond the direct and immediate im-
The author is a professor of agriculturaleconomicsat
the Universityof Kentucky.
pacts of medical expenditures. Although this
approach has some attractive dimensions, the
results are counterintuitive. Each paper has
relative strengths and weaknesses.
Cost of Improving Food Safety
The Jensen, Unnevehr, and G6mez paper does
a nice job of systematically working through
the cost structure of some emerging technol-
ogies for reducing pathogen counts on beef
carcasses. As theory suggests, these cost
curves demonstrate that the costs increase at
an increasing rate when attempting to reduce
the pathogen count beyond some point. Com-
plete elimination of pathogens is simply not
going to happen. Complete safety is not a re-
ality for this world.
Technologies that reduce pathogen counts
on carcasses have merit, and it is encouraging
that positive reductions can occur within a
range that is relatively low in cost. What is
missing from the Jensen, Unnevehr, and G6-
mez paper is a clarification of the marginal
benefit of reducing pathogen counts. Further
research is needed that links pathogen counts
on carcasses and the risk of pathogen-borne
illness. Food preparation is also an important
component in the complex food safety system.
Even low levels of pathogens can be deadly if
preparation is poorly done,
When we understand more about the rela-
tionship between pathogen counts on carcasses
and the risk of pathogen-borne illness, it may
be possible to put market incentives into the
system that reward food processors for adopt-
ing technologies that reduce pathogen counts.
The dairy industry successfully introduced110 Journal of Agricultural and Applied Economics, July 1998
such an incentive system by paying farmers
more for milk that has lower counts of somatic
cells or antibiotics (‘‘Here’s What’s Being Paid
. . . .“ Hoard’s Dairyman). Given the intro-
duction of the Hazard Analysis and Critical
Control Point (HACCP) system, and the fact
that more information will be collected on
pathogens, it may be possible to introduce
such a system within the meat processing are-
na. Branded products may make it possible to
market safer meat products to consumers (Cas-
well, Roberts, and Lin).
Valuing Food Safety
The two papers on valuing food safety (Buzby
et al.; and Golan, Ralston, and Frenzen) dem-
onstrate the problems in researching a com-
plex system where data are largely incomplete
or missing. Buzby et al. use a mail survey to
create a scenario for consumers to judge their
willingness to pay for safer food. While their
scenario should represent risk of about one in
1 million, the authors’ procedures suggest that
survey respondents place the number at about
43 in 1 million. As they summarize, “Most
respondents believe the risk to be larger than
expert assessments.” This finding is consistent
with the emerging literature on the psychology
of risk. Individuals tend to underestimate the
risk from natural disasters (Kunreuther) and
overestimate the risk from man-made activi-
ties (Camerer and Kunreuther). Improved
methods for obtaining information about the
perceptions of risk are important. However,
economists had better prepare themselves. It is
likely this research will demonstrate that de-
cision makers violate some of our basic as-
sumptions about rational decision making and
ranking of risk. Why would the same consum-
er who refuses to reduce risk by wearing a
seatbelt also be unwilling to accept the much
lower risk of consuming a vegetable that may
have been sprayed with a pesticide? These are
troublesome questions for those working to
develop a theory of risk behavior. They take
us to the very heart of the questions about
willingness to accept risk. Could it be that we
are willing to accept more risk if death comes
quickly, and less risk if death comes from a
prolonged illness?
Differences in the types of risk we are will-
ing to accept are also at the core of my con-
cerns with the Golan, Ralston, and Frenzen pa-
per. Though it is interesting to identify the
secondary medical impacts via a Social Ac-
counting Model, one is left confused, at best,
with the conclusion that there may be a posi-
tive economic effect in the economy due to
foodbome illnesses. The results are similar to
the Exxon Valdez event. Some have argued
that economic activity of cleaning up the en-
vironment after this major oil spill in the Alas-
kan waters generated a positive benefitlcost
number. Economic activity is not always good.
Environmental economists have rightly raised
questions about this result, wondering how we
could develop improved methods for “green
accounting” that would value natural re-
sources at levels that might reflect longer run
benefits of protecting the environment. The
Golan, Ralston, and Frenzen paper suffers
from a similar problem . . . maybe we are
lacking in our “suffering accounting. ” Con-
sider again the findings of Buzby et al. where,
with both the contingent valuation techniques
and the experimental markets procedures, con-
sumers appear to place a higher value on food
safety than the risk may warrant. People don’t
want to die of cancer. Our attempts to measure
and value this disutility are feeble at best. Go-
lan, Ralston, and Frenzen do contribute to our
understanding of who suffers the most from
foodbome illnesses. However, I would prefer
not to see input-output models used to value
food safety until we have further sorted out
the philosophical underpinnings of these mod-
els and how they add to our knowledge about
food safety.
Improving Information in Food Safety
Government regulates food safety for some
very good reasons. First, there are asymme-
tries in the information between consumers
and producers of food regarding the safety
characteristics of food. Second, it has been im-
possible to price food safety because of these
information shortcomings. Finally, there areSkees: Food Safety Research: Discussion 111
significant transaction costs associated with at-
tempts to overcome the information asymme-
tries. Antle develops a nice argument for the
principles for efficient food safety regulation.
Recognition of the information asymmetries is
at the core of his arguments.
Information shortcomings are also at the
core of the problems encountered by the re-
searchers of these papers. The industry will
always know more about the safety character-
istics of the food supply than will government
regulators or consumers. A few years ago, I
was visiting with an industry representative
about HACCI? When we begin discussing the
data collection on pathogen counts, I com-
mented that this would be an ideal opportunity
to learn more about the linkage between
pathogen counts and risk. This discussion
made the industry representative very ner-
vous. He indicated that there would be no de-
sire to keep these records for such purposes.
This left a strong impression on me. While I
fully understood this degree of paranoia in a
world of lawsuits and litigation, I also began
to reflect about how the institutions could be
restructured to change the incentives for the
industry to be more forthcoming with impor-
tant information that would benefit both the
industry and consumers. If there were systems
that could be put in place to ease the concerns
of the industry about litigation, then perhaps
it would be more willing to share information.
Further sorting of the best performers in the
processing industry could have some positive
benefits as well.
One innovation that may change the incen-
tives is insurance. If the processing firm were
insured against individual litigation and
against the business interruption that would
come from bad publicity due to a pathogen
problem, then maybe the incentives for shar-
ing information would change. HACCP offers
the opportunity to underwrite such risk, as the
government is now requiring that firms adopt
this system. The meat inspection system will
reduce the transaction cost of learning which
processing firms are a better risk. This would
allow insurers to reduce rates and access to
food safety insurance products. Putting the
tensions within the industry to reward good
performers and highlight those processing
firms that are having problems is important.
Kosty investigates this possibility in an M.S.
thesis that I directed. These ideas raise new
questions about the extent to which govern-
ment regulators could be replaced by insur-
ance underwriters.
One must also consider the findings from
the Buzby et al. study and my discussion
about the psychology of risk. Maybe it is time
that the industry attempts to capitalize on the
willingness to pay for safer food. If consumers
perceive the risks to be greater than they ac-
tually are, how well might branded products
work in a world where HACCP offers an op-
portunity to collect information in a more sys-
tematic fashion on pathogen counts?
References
Antle, J.M. Choice and Efficiency in Food Safety
Policy. Washington DC: The AEI Press, 1995.
Camerer, Cl?, and H. Kunreuther. “Decision Pro-
cesses for Low Probability Events: Policy Im-
placations. ” J. Policy Anal. and Manage.
8(1989):565–92.
Caswell, J.A., T. Roberts, and C.-T.J. Lin. “Oppor-
tunities to Market Food Safety.” In Food and
Agricultural Markets: The Quiet Revolution,
eds., L.I? Schultz and L.M. Daft. USDA/Eco-
nomic Research Service, and the National Plan-
ning Association, Washington DC, 1994.
“Here’s What’s Being Paid for Quality.” Hoard’s
Dairyman (22 May 1992):8.
Kosty, L. “The Potential for Insurance Markets in
Improving Safety in Meat Processing.” Unpub.
M.S. thesis, Dept. of Agr. Econ., University of
Kentucky, 1998.
Kunreuther, H. “Limited Knowledge and Insurance
Protection.” Public Policy 24( 1976):227–61.

ECONOMIC RESEARCH IN FOOD SAFETY - PUTTING THE PUZZLE TOGETHER: DISCUSSION

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