Economics and its Relevance to the Debate on Food Standards

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A Discussion from the late 1990's 


The White Paper (1998) tends to overlook economics and perhaps the funding problems can be traced back to this neglect. In particular, The White Paper does not seem to address the issue of paying for public goods. It is difficult to value public goods, such as food standards, since they have to be offered for free. Public goods are nonexclusive; everyone is entitled to them; they cannot be withheld from anyone once they have been supplied. To elaborate, they are provided across the whole population so that one person's consumption does not stop another person's usage. If a public good is available for one it is offered to all and everyone can benefit without reducing its value to others. There is a strong incentive for consumers to undervalue their demand for the good as this will indicate that they want to pay less. Consequently, voters underestimate their willingness to pay. As people can benefit without paying directly then they are getting a free ride because the benefits are socialised white the costs are privatised. That is, society receives the benefits while the taxpayer pays.


Taxation is seen as the only method for paying for public goods. However, it is unclear how much taxation should be paid for food standards. Yet, this creates problems since it is unclear what value individuals place on food standards. Since policy makers cannot estimate this value then they are unable to construct a valid demand curve. Policymakers do not have market signals so it is difficult for efficient choices to be made. In a market for private goods you can find out how much people want something from their willingness to pay for it. However, elections which determine the provision of public goods do not give clear signals to policymakers. You can only learn how many people want something; not the strength of their feeling.  Consequently, some assessment is needed of strength of feeling, that is, how much people are willing to pay for food standards. This is the objective of the Contingent Valuation Method.  Apart from the "free riders" mentioned earlier there is also what might be called "forced riders". An individual paying a standard rate of tax might feel overcharged. This is because public goods are provided in single quantities and at constant tax rates. Therefore some people receive higher standards than they want. The electorate's dislike of "forced riding", as well as "free riding", makes public goods difficult to fund. Perhaps, this explains why politically simpler alternatives have been chosen such as the greater use of private provision.


Why politics is needed in a study on food standards


It is difficult to apply principles of market pricing to public goods. It is suggested that people could be charged according to the marginal value that they place on varying levels of provision. But for this governments would have to know the demand curve of every individual. However, individuals demand curves are not observable. Theories which attempt to apply market pricing to the provision of public goods are fraught with difficulty. The complexity remains in determining how to pay for public goods without reducing social welfare (Beyond Politics p.11)


The discussion on food standard provision also needs to consider value judgments which are made about economic issues.  Whether, a particular tax is just, e.g. the extent of the levy on supermarkets or independent stores depends on the criteria we employ in making such judgments. There is no widespread agreement on the appropriate criteria. It should be recognised that economics needs political decision-making to resolve conflicts over values.


It should be recognised that economics cannot be value free. For example, as John Kenneth Galbraith puts it "monetary policy is not socially neutral". For example, higher interest rates suit those who have money to lend" (p.63 Douthwaite 1992). The specialisation that has separated the study of politics and economics disguises the linkage between the two disciplines. It should be remembered that 100 years ago the two subjects were studied together as political economy.

It has to be recognised that there is a conflict in policy-making. There is a demand for more information and analysis in an attempt to produce rational decisions. However, voters want to be able to tell their representatives their opinions on various issues even if as ordinary citizens they do not qualify as experts on the issues. The right policies are those which are not decided by experts but those which emerge from right processes and right processes are those where citizens choose for themselves, no matter how foolishly.  People want decisions to be well analysed. However, they also want decisions to be made in a democratic way which means that it will be political. Thus, there is a contradiction on the one hand people want policy making to be scientific yet on the other hand they want it to be political. To resolve this contradiction; policy makers should use the advice of experts but should not "abdicate their political functions to them" (Llindblom 1980).

Also, it is not possible to leave political decision-making to experts.  Experts could determine decisions; that is how to distribute gains and losses only if there existed some accepted criteria for doing so. Such criteria they lack. Expert analysis cannot find policies which are unequivocally good for all. Philosophical enquiry has failed to produce universally agreed answers to such questions such as - how much should one generation sacrifice for the benefit of another? Therefore experts can only propose their own criteria for solving problems.  Only the political process can resolve the dispute between various experts.  Therefore, expert analysis is not an alternative to politics but it operates as an element of politics. Various participants in political interaction use analysis to improve the way they play their interactive roles. Politicians can use analysis to justify their particular policy line. There is a competition of ideas whereby there is an exchange between partisan policy makers who use partisan analyses. Analysis, in large part, is transformed from an evaluative technique into a method of exerting influence, control and power which we call partisan analysis (Lindblom 1980).

Perhaps it is not possible to take party politics out of the debate on food policy. This is because on issues, such as BSE, scientific evidence is inconclusive and expert opinion is in disagreement (Lang et. al. 1996:5). Political decisions have to be made; science does not necessarily direct what action should be taken. There is an intermediate stage between science and resource allocation - this is political decision-making.  Politics cannot be taken out of food policy.