Monday, February 8, 2016

The Cost of Ignorance

How does an economy grow?  At the end of each quarter we hear news about the growth of the economy, how Gross Domestic Product has increased.  In very simple terms this means the economic “pie” is getting bigger; the country is theoretically that much richer.

This is important because some folks with minimum economic understanding think that if one person gets more, someone else must end up with less.  They believe the economy is a zero-sum game with winners and losers.  This may be true in some individual interactions, but it’s generally not the case.  When you go the to bakery to buy a birthday cake both parties are better off.  The baker wanted your money more than the cake.  You wanted the cake more.  It was easier for the baker to make and decorate the cake than for you to do it yourself.  Both parties are winners.  That’s why when you pay, you say “Thank you” and the baker says "Thank you.”

In the long run everyone benefits from economic growth.  Consider this (based on 2013 numbers from the Census Bureau):  “Americans who live in households whose income is below the federal ‘poverty’ level typically have cell phones (as well as landline phones), computers, televisions, video recorders, air conditioning, refrigerators, gas or electric stoves, and washers and dryers and microwaves.”  About 76% had a car or truck, and 31 percent had two or more cars or trucks.  Many of those were luxury items in 1970, if they existed at all.  The poor are still not well off, but the growth of the economy has made some improvement in their lives.  The rest of us often take for granted things that were unheard of in our grandparents’ day.

But the economy doesn’t grow on its own and automatically.  Businesses must increase efficiencies to improve productivity and come up with creative solutions to real problems.  When they do that we have more, better and cheaper products and services.  If they waste time and resources needlessly, no one benefits.

What concerns me is the trend toward “faux” improvements driven by a misinformed and scientifically gullible public (in some cases bordering on superstitious).  Once it was a joke when a company came out with a product labeled “new and improved.”  People were skeptical.  Was there really a change, or did they just change the packaging?  Now the old “new and improved” has been transformed to “all natural” or “organic” or “non-GMO,” and instead of being skeptical, consumers keep asking for more.

This came up again in some recent news and advertising.  The first example is an ad for Gluten Free Cheerios.  See the company statement:  “As a leader in the growth of organic agriculture, we naturally became involved in the production of gluten-free oat ingredients as more and more of our customers began asking us to utilize our expertise to produce gluten-free oat ingredients for use in their products.”  [emphasis added]  It’s not that there are more and more cases of celiac disease, a valid health reason for seeking out gluten-free products.  People hear about gluten sensitivity from TV doctors selling the latest health fads or from social media comments.  As a type of self-diagnosis, some try a gluten-free diet and convince themselves that it makes them feel better.

On one hand, big food companies are accused of trying to trick us into eating food not good for us (see below); but when consumers believe made-up stories about ingredients or processing methods, those same food companies are happy to jump on the band wagon to provide the new fad foods or ingredients, often giving the companies the opportunity to charge us more as they are praised for being sensitive to the public’s wishes!

The second example comes from a very balanced report on CBS Sunday Morning about genetically modified foods (GMO).  The expert in favor states:  "There's not a single instance of harm to human health or the environment using genetically-engineered crops… farmers have been genetically altering food for thousands of years, using techniques like grafting, hybridization, and cross-breeding…Everything we eat has been genetically altered using human intervention."  The expert on the other side says:  "I am increasingly concerned at the ways in which corporations have gained more and more control and influence over our food system."  This exchange strongly sounds like a thinking argument vs. a feeling one.

Again, many of the changes are consumer-driven rather than science-driven.  “Polls show 57 percent of Americans think GMOs are unsafe to eat. But consider this: 88 percent of scientists say GMOs are safe.”  (The entire segment lasts 10:30 and is worth watching or reading.)  It concludes by pointing out that in richer countries with more than enough food we can afford to be fussy.  The problem is felt in the poorer nations where people don't have much food.  The push to ban GMOs “is really harming the people most in need.”  And if they can develop bananas resistant to the virus that’s wiping them out or a peanut that doesn’t trigger an allergic reaction in children, is that a terrible thing?

When I continue to see the food police soliciting food companies and the government to make these changes, I wonder if all the effort is making any meaningful contribution or if it's just a kind of waste – a case of negative productivity, as when everyone is pulled away from their regular duties to attend a mandatory meeting.  Is this hypersensitivity about food adding any real value to the economy? Where will we be years from now when we have no choice other than organic, all natural, gluten-free and non-GMO food and must pay more for it? Will instinct rule out over our logic as we demand changes without substance or scientific backing?  The poor will not be better off.  The economy as a whole will not be better off; and we will have squandered another opportunity to improve the lives of our children by reacting to myths. 

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