Friday, January 20, 2012

Food Bill

Kate Wilkinson, Minister for Food Safety, justifies proposed changes to New Zealand's food safety regime by citing the costs:
"The bill is designed to simplify 30-year-old food safety regulations and ultimately aims to reduce our high level of food-borne illness and corresponding economic cost.
"It's estimated that food-borne illness caused a $162 million loss to the New Zealand economy in 2010."
Wow. The economy lost $162 million due to food-borne illness. About $40 per capita. Seems a bit high, but not prima facie implausible. But let's have a look.

Australia's Applied Economics produced the report for the New Zealand Food Safety Authority a little over a year ago (HT: Squid expert Luis). The summary table at p. vi tallies costs of $161.9 million from foodborne disease. But $16.4 million of that is government outlays on food safety regulation. Unless the legislation specifically reduces the government's monitoring costs, which seems rather unlikely with a more onerous regime, that portion of cost cannot be saved. Similarly, cited industry costs of $12.3 million include both compliance costs and costs to business in case of outbreak; the effects of the new legislation here are then ambiguous as outbreak costs may fall but compliance costs will rise. Kate Wilkinson's citing of a total cost figure that includes enforcement and compliance costs as argument for stricter regulation is a bit of a problem; the more the government spends on food safety regulation, by that argument, the greater the argument for spending even more. Just like when the New Zealand Police include the costs of drug interdiction efforts as a benefit of drug seizures. I'm certainly not saying that the government's $16.4 million outlay was a waste; it's just not properly seen as something that can be abated by the new legislation. Fortunately, that's only about a sixth of the total.

The bulk of the remaining tabulated costs are individuals' intangible willingness to pay to avoid a foodborne illness - about $100 million in residual private costs as estimated from NZ value of statistical life estimates. We can leave aside for now problems in that we don't have good prevalence data on non-reportable illnesses like norovirus that manifests as mild gastroenteritis; Applied Economics is very up front about the limits of inadequate data here. But by far the biggest part of the cost estimates comes out of willingness to pay measures.* That's important. Why? Because people are choosing, all the time, which dining establishments to frequent.

Suppose that there's a roadside falafel place with food I adore but that comes with completely known 1% risk that I'll get mild food poisoning. I eat there a hundred times, I get food poisoning once. But I keep going back because of the taste. If new food safety regulations mean the place shuts down, Wilkinson's measure says I'm better off because I'm saved those willingness-to-pay derived figures on the costs of mild food poisoning. But I've already specified that I knew about the risk and judged it worthwhile; I'm then necessarily worse off if I can't get a falafel. You can't easily use a willingness-to-pay measure to overturn a consumer's decision when consumer decisions underlie willingness-to-pay measures. You can perhaps make an asymmetric information argument; that tends to argue for random inspections and public posting of findings on facility cleanliness rather than for big compliance regimes.

So is the new regime worth the cost? That depends on the compliance costs that will be faced by small and mid-sized traders. Wilkinson assures us that small traders won't face onerous burdens, but I'd really prefer seeing proper analysis of the Bill from someone like Otago's Andrew Geddis. And we have to keep in mind that a substantial proportion of the costs Wilkinson cites might actually be voluntary choices consumers are making that, on lucky draws, yield tasty goodness any diminution of which consequent to regulation ought be counted against the Bill's possible health benefits. Banning me and others like me from having my hamburgers medium-rare might save the health system a bit, but it'll certainly cost me some utils. Equally bad is what a big fixed-cost regime would do to food startups. I really hope that the legislation isn't as costly on those two fronts as some folks fear; I'd love to see independent legal analysis.



*Most of these costs come from more serious instances where people do go to the doctor, so the potential for being orders of magnitude out on actual instance of "treat at home" norovirus doesn't do tons to the bottom line.

10 comments:

  1. I'm not sure that this legislation is really worth enacting. My objections are not along the line of some detractors, who could best be described as conspiracy theorists, suggesting that the govt is out to get the farmers market crowd. I'm more concerned with effectiveness of the new laws. It is likely that the vast majority of minor food illnesses occur not from roadside falafel vendors and the like, but from poor food handling practices in the home. There are simple things we can do to reduce this: wash our hands, store raw meat covered and on the bottom shelf of the fridge and cooked food (also covered) higher up, wash our hands, don't use the same utensils on cooked food or salad ingredients that you used on raw meats, wash our hands, give salad veggies a rinse before chopping them up, wash our hands, etc.
    Our current food safety legislation already capably deals with commercial food vendors, with local by-laws requiring council food safety inspections contributing to the mix. I have trouble seeing the value in the new food bill because I don't think it will make any real difference to the rates of food-borne illness in NZ.

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    1. I expect that the legislators just haven't paid much attention to potential effects on entry, small dealers, farmers' markets and the like: coordination costs are very high for those groups to make submissions or lobby. The Greens are able to coordinate a bunch of the food barter crowd, but I'm not sure whether they much worry about potential constraints on new traders entering the cash market. In that kind of case, you just need the big guys saying "Nah, that's all good, we can handle it" to get outcomes that really screw over small traders. But again, I really really want to hear some competent legal analysis of the bill.

      There's some evidence that increased regulations on poultry a couple years back knocked down the incidence of campylobacter. And it's unclear that govt can do much of anything to stop people doing stupid stuff in their own homes. Agreed that the bulk of cases are likely due to in-home stuff; that might just be a margin that's hard to affect except by regs making the ingredients cleaner to start with.

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    2. And it's unclear that govt can do much of anything to stop people doing stupid stuff in their own homes.

      Nor should they evn try in my opinion, so long as nobody is getting hurt.

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    3. If it were feasible for government to somehow monitor folks' in-home food prep to avoid food poisoning, there would be lots of folks advocating it.

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    4. Live web cams in everyone's kitchen. Big brother is watching.

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    5. We could then all have daily two minute hates against campylobacter, it would be great ;-)

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    6. There's some evidence that increased regulations on poultry a couple years back knocked down the incidence of campylobacter.

      Campy is readily killed at normal cooking temperatures, so if you cook chicken thoroughly you shouldn't have too many problems. It doesn't hurt to rinse chicken under the tap before cooking it as well, if you really want to be a bit anal about it. When I was working in food testing roughly 90% of raw chickens we tested contained Campy, so it is fair to say it is pretty endemic in the industry. I also seem to recall that there was a reasonably major advertising/education campaign about food handling at the time which may also have contributed to the reduction in campy infections.

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  2. Eric - I think the point from Lats was that, of the potential harm that could be avoided, a substantial proportion occurs in the home kitchen. If, as you say, we're unlikely to be invading home kitchens any time soon, then the maximum benefit that can be achieved here is substantially reduced.

    Food regulations are one of my pet hates. So far as I can tell many of them are either disguised protectionism, or stupid ideas dreamed up by bureaucrats with not enough to do with their time.

    My specific hate is the way that the govt banned sale of unpasteurised orange juice unless squeezed on the premises. This is one reason that in Wellington, where many cafes used to have beautiful proper squeezed juice (delivered fresh each day), they now have on premise squeezed juice from cheap "squeezers" (better described as grinders), or crappy pasteurised juice. People cannot afford a proper squeezing machine for a cafe. You can still buy good juice at places like Moore Wilsons, but you cannot sell it in a cafe.

    My question is always how many lives this wonderful law has saved. It has substantially reduced my utils from drinking OJ in a cafe. I doubt it's saved anyone from anything - it's a theoretical problem to suit a solution that someone already had.

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    1. Thanks PaulL, that was entirely the gist of my post. I feel much the same about some of the "unintended" consequences of food safety regs, although I do think there need to be some checks and balances on commercial food vendors. We probably ought to ease up on unpasteurised cheeses here as well as juice. Sure, label them as such, and allow the customer to make the decision about the relative risks. So pregnant women concerned about Listeria, Salmonella, etc can choose not to eat risky foods, but those of us who wish to live life on the tasty edge can do so if we so desire.

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