What is the current best estimate of the cumulative elasticity of chicken?

post by reallyeli · 2019-05-03T03:27:57.603Z · score: 21 (9 votes) · EA · GW · 15 comments

Recently, I began eating vegetarian. I was motivated both by a utilitarian desire to decrease animal suffering, and by a non-utilitarian desire to live more in accordance with my values. (So, in particular, I don't think the answer to this question will strongly affect my decision to eat/not eat meat.)

A friend objected to the idea that eating vegetarian resulted in less suffering for animals. He reasoned that economics says a drop in demand for some commodity should cause prices to fall for that commodity, and overall consumption remains the same. (Non-vegetarians would just buy more meat.)

I was surprised by this line of reasoning and hadn't thought of it before. (By contrast, I am familiar with the question "does my not purchasing chicken really cause the supermarket to order less chicken?" and am comfortable with the answer discussed e.g. in https://reducing-suffering.org/does-vegetarianism-make-a-difference/).

I did some research and learned the term "cumulative elasticity" from https://animalcharityevaluators.org/research/dietary-impacts/effects-of-diet-choices/ (although is this the term of art? I can't find many other hits when Googling.) When you abstain from buying X kg of chicken, total supply of chicken goes down by X kg * cumulative elasticity.

The ACE article links to https://docs.google.com/spreadsheets/d/1iNDQIt9MRD4r1ws5M_2hQ-MNjMY-bcUra0fpOmF4Am0/edit#gid=0 which gives an estimate for the cumulative elasticity of chicken as between 0.06 and 0.7. But the article I got it from has a big disclaimer at the top: "We do not feel that this report is up to our current standards." This, and the wide range, make me want to see other sources of data.

I'd like to know:

- Am I going about answering my friend's question correctly?

- If I am, has any other work been done on estimating the cumulative elasticity of (say) chicken? How is such research done?

15 comments

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comment by saulius · 2019-05-03T10:08:50.904Z · score: 15 (9 votes) · EA · GW

According to the article The Impact of Food Prices on Consumption: A Systematic Review of Research on the Price Elasticity of Demand for Food, the elasticity for poultry in the U.S. is 0.68 (95% confidence interval is 0.44-0.92). This value is based on 23 estimates. Table 1 in the article contains elasticities of other animal products as well. But on a closer look this seems to not be the thing that you are looking for: "we sought to estimate the effects of price changes on consumer demand".

In general, I would say that your friend is right that consuming less chicken might lead to less of a difference in supply than one would naively think, but it still leads to a difference. At least that's my understanding. But I have a very shallow understanding of this topic.

comment by HaukeHillebrandt · 2019-05-03T13:02:26.736Z · score: 6 (1 votes) · EA · GW

Thanks Saulius - I think this is really interesting info.

However, I feel that this be misleading in that it overstates the case for vegetarianism over clean meat R&D, because what one is really interested in is meat or animal product elasticity. In other words, poultry elasticity understates the counterfactual where reduction of poultry supply due to someone's vegetarianism increases the supply of other animal products.

comment by saulius · 2019-05-03T15:08:55.447Z · score: 3 (2 votes) · EA · GW

I don't quite understand this comment. I don't think there was any discussion here about vegetarianism vs. clean meat R&D. Maybe you should clarify if it's important :)

comment by HaukeHillebrandt · 2019-05-04T05:44:15.795Z · score: 8 (2 votes) · EA · GW

Sorry I was being unclear.

I was trying to make a point about the comparative effectiveness of two popular kinds of interventions in animal welfare: animal product reduction advocacy (e.g. leafletting, corporate campaigns etc.) vs. clean meat R&D.

The effectiveness of animal product reduction advocacy relies more heavily on the elasticity.

Poultry elasticity might be higher than the—harder to measure, more meaningful—animal product elasticity. For instance, reduction in demand for poultry might lower the price of feed further down in the supply chain - reducing the price and thus increasing the demand of other animal products.

Thus, using poultry elasticity as a parameter when evaluating animal product reduction advocacy interventions overstates its effectiveness (relative to clean meat R&D).

comment by reallyeli · 2019-05-06T17:31:02.493Z · score: 1 (1 votes) · EA · GW

Thanks for finding this paper. But I think they are answering the question "If I change price, what happens to demand?", while I am asking "If demand drops (me not buying any chicken), what happens to total quantity sold?"

comment by cole_haus · 2019-05-04T04:10:01.464Z · score: 3 (3 votes) · EA · GW

Consideration 1: Economists often consider small actors in competitive markets to be price-takers meaning that they cannot influence prices on their own. This seems like a pretty plausible characterization of any individual food buyer.

Consideration 2: "He reasoned that economics says a drop in demand for some commodity should cause prices to fall for that commodity, and overall consumption remains the same." This is not correct. In inward shift in the demand curve ("a drop in demand") (for ordinary downward sloping demand curves and upward sloping supply curves), causes both equilibrium price and quantity to decrease. I'd guess the thing he's trying to get at is that for a good which is unit elastic, a small drop in price is offset by a small increase in quantity which leads to total revenue being unchanged.

So our first option is to regard individual actors as too small to influence the price. If we reject this and think they do have an effect, their effect would be to shift the demand curve in---dropping equilibrium price and quantity.

Aside: I'm reasonably well-informed about economics and don't recall having ever heard the term "cumulative elasticity" before.

comment by reallyeli · 2019-05-06T17:28:39.057Z · score: 2 (2 votes) · EA · GW

It doesn't seem consistent to me to say "I'm too small of an actor to affect price, but not to affect quantity sold."

Thank you for the small education in economics of consideration 2, though. I've read the Wikipedia article and found it helpful, although I have further questions. Are there goods that economists think do work like what my friend is describing? Is there a name for goods like this?

comment by Brian_Tomasik · 2019-05-17T20:20:35.694Z · score: 2 (2 votes) · EA · GW

Are there goods that economists think do work like what my friend is describing?

Relative to Econ 101 models, that would only happen if supply is perfectly inelastic (i.e., the supply curve is vertical).

Edited to add: ...or if demand is perfectly elastic (i.e., the demand curve is horizontal). Given how much people like eating meat, this seems very implausible.

comment by samaramendez · 2019-05-06T16:42:30.924Z · score: 1 (1 votes) · EA · GW

Many great points already about how to respond to your friend. I'd like to expand a bit on a few.

  • Shaybenmosche mentions the connection between two markets that illustrates interesting subtleties. Yes, you leaving the market reduces demand for meat and likely lowers the price which may in turn increase demand for the remaining people in the market. But you entering the market for meat alternatives increases demand and price there, which will drive producers to innovate and/or enter the alternatives market.
  • Cole points out that a shift of the demand curve leads to a reduction of price and quantity, which follows from the fact that you as a new vegetarian have left the market for meat. An interesting extension of this idea is that demand for meat may be more inelastic after your exit (given that remaining consumers are more inelastic in their demand than you). This is not necessarily great news for the animal advocate who hopes that increases in price (due to policy or otherwise unrelated to the price changes in your scenario) will reduce meat consumption and therefore animal suffering. But it does somewhat undermine your friend's argument - the reduction in price that occurs because you left the market will probably affect the inelastic meat eaters less than your friend imagines.
  • Saulius mentions the Andreyeva et al (2010) paper, which is a good meta-analysis of the food elasticity literature. The answer to your question about cumulative elasticity is mostly here (they find the mean of elasticities that are estimated using a variety of methods), although I think you're looking for aggregate elasticity, which is roughly the shape of the aggregate demand curve with respect to price. The main difference between the two concepts is that aggregate generally refers to summing over people or products, while cumulative seems to sum over time (though I'm less familiar with this literature). There are many subtleties about the different methods used to estimate elasticities that I'd love to discuss, but won't here because this comment is already long.

Following up on Saulius' reply, we generally prefer less-aggregated elasticities when it's possible to estimate them finely, because the aggregate elasticity is sweeping a lot of important dynamics under the rug. I suspect that's probably what you're interested in as well - given the different behavior patterns of demographic groups of people, what is the overall effect of a price change in chicken on quantity demand for chicken? If I've misinterpreted your question, please let me know! The good thing about estimating elasticities for demographic groups is that the researcher can combine them after the estimation procedure to understand the overall effect of some change.

As the Andreyeva et al paper shows, a lot of research has estimated price elasticities for food, and other work has estimated income elasticities of demand for meat. Less well-studied (because the models get complicated quickly) are cross-price elasticities for different types of meat and their alternatives. This is on my short-list of projects to work on next.

Thanks for opening up the discussion here!

comment by reallyeli · 2019-05-06T17:20:12.819Z · score: 2 (2 votes) · EA · GW

Thanks, Samara. I found the paper you're talking about here: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2804646/pdf/216.pdf

I'm out of my depth here, but it looks like the paper is answering the question: "if the price of chicken changes from $X/kg to $(X + Y)/kg, how will kg of chicken sold change?" While the question I'm asking is "if I don't buy chicken, how will kg of chicken sold change?".

comment by samaramendez · 2019-05-06T21:48:47.120Z · score: 3 (2 votes) · EA · GW

Thanks for the clarification, I understand your question now. You're asking about estimating the size of a demand shift that results from one economic agent leaving the market, as opposed to an elasticity. I believe we're asking the same question; with elasticities, I want to investigate the underlying mechanism that takes us from your leaving the market to a shift in the demand curve. Whereas you would like to know the end result only.

The answer to this question (the effect on aggregate demand of one person leaving the market) may be difficult to estimate correctly. The best approximation I can think of in the existing literature is the effect of food scares on demand. For example, this paper on news coverage of salmonella outbreaks and this paper on media coverage of the BSE (mad cow) outbreak on demand for British beef both show the impact on demand of media coverage of food scares. Of course, they have to use a media coverage as a proxy for people leaving the market, since there's no way to collect data in that way.

Circling back to your friend's question, I do think that it's unlikely that you or another individual leaving the market would affect price enough to trigger increased purchases in the people remaining. I suspect that you leaving the market would also have a very small effect on aggregate quantity demand, in the same way that your marginal non-purchase of chicken will be unlikely to change the way that the supermarket orders their products. Similarly, just you entering the market for meat alternatives won't cause a large increase in demand. I do think your discussion with your friends will plant some seeds, though.

comment by reallyeli · 2019-05-07T03:58:16.716Z · score: 1 (1 votes) · EA · GW

I like the idea of using food scares as a proxy! Very cool.

It sounds like you are saying that knowing "how will kg of chicken sold change given change in price" will let you answer "how will kg of chicken sold change given me not buying chicken." I don't see quite how to do this, could you give me a pointer? (for concreteness, what does the paper's estimate of elasticity of poultry at 0.68 mean for "kg of chicken sold given I don't buy the chicken")

Perhaps more importantly, it sounds like you might disagree that one person abstaining from eating chicken has a meaningful impact on the number of chickens raised + killed. If so I'm quite interested, as this is something I have become convinced against by sources like https://reducing-suffering.org/does-vegetarianism-make-a-difference/.

My current model is that if I buy the meat of one chicken at a supermarket, that *in expectation* causes about one chicken to be raised + killed.

comment by samaramendez · 2019-05-07T15:08:54.436Z · score: 1 (1 votes) · EA · GW

Sure, I didn't discuss the connection between your demand decrease and the remaining people's elasticities. Let's use Brian's example of the supermarket supply system to illustrate that connection.

When you stop buying chicken, demand in the store has decreased. Perhaps it decreases to the point where the store decides to put the chicken on sale. Other shoppers who still buy meat will see the sale price and change their purchases according to their price elasicities, which are defined as the percent change in quantity demanded given a 1% change in price. Using the specific example of the paper's elasticity, a 1% decrease in price would cause a shopper to buy 0.68% more chicken. In the next ordering cycle, the inventory manager orders less chicken because you decided not to buy chicken and because the other shoppers purchased some of the excess stock at the sale price. We could call this a new equilibrium, and we see that equilibrium quantity demand has shifted. I won't make an assumption on whether the equilibrium price is lower in this little supermarket scenario (only because I'm not sure how supermarkets actually set their prices).

These causal pathways are always a little tricky because you can always talk your way out of any scenario, but the underlying mechanism behind a demand shift in a larger, more abstract market could work like this.

This hypothetical supermarket brings up your second point. You're right for calling me out on my statement about not making a difference - your non-purchase of meat in a grocery store does have the probability of setting off a chain reaction in the supply chain that reduces the number of chickens killed in expectation. I should have been more clear in my previous comment, because I was certainly thinking of a larger-scale aggregate market like, for example, the entire US market for chicken. In this case, you are one of ~300m people in the market for chicken, and your one-time non-purchase would have a small effect that would be hard to estimate (this is a more precise statement of what I meant).

I do believe that you save may chickens, in expectation, with a non-purchase. And further, I do believe that your continued non-purchase of chicken and your entry into the alternatives market will, in expectation, save more chickens. I also believe that your non-purchase of chicken will likely lead you to change other purchasing decisions according to your ethics, and I believe that your ethical decisions will, in expectation, influence the people around you. (This is also something I'd like to study formally in the future.) So I believe, in expectation, you can do a lot of good!

comment by shaybenmoshe · 2019-05-04T20:40:43.655Z · score: 1 (1 votes) · EA · GW

Not exactly answering your question, but I think this argument (and follow up question) neglect an important aspect of your contribution.

Having more vegetarian and vegan people creates an incentive to develop meat substitutes (e.g. beyond meat, impossible).
If those substitutes, and especially clean meat, will hold up to their promise (i.e. cheaper, taste just as good, and be at least as healthy as regular meat), it will have the potential to change the meat industry dramatically.
In this situation, way more people may become vegetarian or vegan due to economical or health reasons.

comment by beth​ · 2019-05-03T10:59:48.799Z · score: 1 (1 votes) · EA · GW

I remember EA-aligned vegan Youtuber Unnatural Vegan making a video about this argument last week in response to a recent Vox article. She argues that the meat industry is very elastic, but I don't think she cites any specific sources. As she normally does tend to do that, I suspect those numbers are hard to come by.