Freeman

FEATURE

Food Deserts or Just Deserts?

The regulatory consequences of the farm bill and other interventions

JULY 02, 2014 by STEWART DOMPE, ADAM C. SMITH


 

According to the United States Department of Agriculture, 23 million Americans live in so-called food deserts. A food desert is defined as an urban neighborhood or rural town without access to fresh, healthy, and affordable food. The argument goes that lack of access leads to poor dietary choices and a higher incidence of obesity, diabetes, and heart disease.

The proposed solution is a series of government grants (i.e., subsidies) that will be given to anyone, including residents, businesses, non-profits, colleges and universities, and community development corporations. There are at least 19 programs from three departments (Treasury, Health and Human Services, and Agriculture) that offer grants and other resources to combat food deserts. To the rescue!

The reality, however, is that this new policy is an attempt to address the unintended consequences of existing policy. The stated problem of a food desert is that fresh fruits and vegetables are unavailable at affordable prices in low-income areas. The issue here is not low prices but relative prices. Low-income consumers have a choice of how to spend their food budget and obviously want the most caloric bang for their buck. Even if fruits and vegetables were available at lower prices, they must compete against heavily subsidized processed foods containing carbohydrates and corn syrup.

Where do these subsidies come from? Meet America’s favorite barrel of pork, the farm bill. Whenever someone bemoans partisan gridlock, gently remind them that the farm bill always passes with bipartisan support and, in its 2014 iteration, has a price tag of nearly $1 trillion. For years the farm bill has heavily subsidized the production of wheat, corn, and soybeans with the intended consequence of lowering the prices of products containing those goods.

So it’s no surprise—at least for anyone who recalls from their principles of economics class that demand curves slope downward—that Americans’ consumption of carbohydrates has increased substantially over time. Indeed, we eat 25% more carbohydrates today as part of our daily diet than we did 30 years ago. All sweet treats and candy are cheaper because of corn subsidies, as are breads, cereals, crackers, and everything else containing wheat. A USDA program of farmers' markets and community gardens will do little to offset the literal billions spent on corn and wheat subsidies.

Another important issue affecting food availability in rural areas is population density. Those living in far-flung rural communities have to drive many miles to reach a supermarket. Supermarkets compete by offering a wide selection of goods at low prices. Without the population to generate a high turnover, they cannot justify their business model. Supermarkets, however, are not the only source of food services. In several prominent studies, stores with fewer than 20 employees were not counted. This methodology was employed because smaller stores, typically bodegas operating in ethnic neighborhoods, are less likely to have the space for fresh produce or refrigeration. This is a strong bias against smaller, family-owned businesses that operate in areas not traditionally covered by so-called big-box retailers.

Lack of population might explain the problem in rural areas, but regulation is the blight of the urban poor. Cities like New York and Washington, D.C., have made it very hard for companies like Walmart to operate in their cities. They have even passed discriminatory legislation with the express purpose of making it harder for Walmart to do business in those communities. The standard claim against Walmart is that its prices are so low that other businesses can't compete. But if we’re trying to offer affordable produce to large numbers of people, isn’t that sort of the point? Cities that make it hard for big-box stores to operate hurt their poorest residents. Affluent suburbanites can afford to drive to (and purchase from) Whole Foods and other high-end grocers. For everyone else, zoning laws hurt those who lack the mobility to travel outside the zone or otherwise fail to meet the sticker price of these privileged establishments.

Finally, there is already an existing technological solution to the problem of availability: frozen and canned fruits and vegetables. These goods are high in nutritional content, and their packaging means that stores don’t have to worry about spoilage the way they do for their fresh produce. Fresh food has desirable qualities when it comes to taste and presentation, but it comes at a cost. Consumer demand decides whether a store carries fresh produce or not. Intervening in the market on aesthetic grounds is unlikely to create a good result for those who must actually live with the results.

Food deserts are a result of market forces being channeled through bad regulation. If the government wishes to change how people eat, it would be better off ending farm subsidies and inviting supermarkets into the cities. More generally, we as food consumers should recognize that what’s on the shelf is not just a product of poor consumer choices, but of poor government policies as well. 

ASSOCIATED ISSUE

September 2014

ABOUT

STEWART DOMPE

Stewart Dompe is an instructor of economics at Johnson & Wales University. He has published articles in Econ Journal Watch and is a contributor to the forthcoming Homer Economicus: Using The Simpsons to Teach Economics.

ABOUT

ADAM C. SMITH

Adam C. Smith is an assistant professor of economics and director of the Center for Free Market Studies at Johnson & Wales University. He is also a visiting scholar with the Regulatory Studies Center at George Washington University and coauthor of the forthcoming Bootleggers and Baptists: How Economic Forces and Moral Persuasion Interact to Shape Regulatory Politics.

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