Ontario Agricultural College Podcasts

The Economics of Food: How Feeding and Fueling the Planet Affects Food Prices. Transcript Brady Deaton: Today my guest is Dr. Patrick Westhoff, and we will be discussing his book, The Economics of Food: How Feeding and Fueling the Planet Affects Food Prices. This book was published in 2010 by the FT Press. Dr. Westhoff is the Director of the Food Policy Research Institute at the University of Missouri in Colombia. He's had an active role in both academia, as well as in the legislative setting in the United States. Welcome, Pat   Patrick W.: Hi. Thanks for the opportunity.   Brady:  Pat, tell me a little bit about what inspired you to write this book.   Patrick W.: Well, during the summer of 2008, food prices were very much in the news. I was getting lots of calls from reporters around the country and around the world, trying to explain what was actually going on in those food markets. An editor gave me a call and asked if I wanted to try put those thoughts into a book, and I thought it might be a good opportunity, so I took advantage of it.   Brady: Now, your book focuses on the economics of food, but it orbits around the change in food prices between 2005 and 2009. Give me a little bit of background about food prices over the last little bit.   Patrick W.: Well, we've seen food prices increase in US over the last several decades at an average rate of about two and a half percent per year. For most of the last a couple of decades, food prices really weren't that much in the news. It was a relatively stable set of things going on in those food markets, and meant that food price inflation was very similar to overall inflation in the economy. But then came 2007 and 2008. We had big run ups in the prices for a large number of American cultural commodities, and a sharp increase in the overall consumer food price index in the US, and concerns about food prices around the world. It definitely got lots of folks' attention and then just in time for everybody to get excited about the really high price of food in 2007 and 2008, we had the global recession that made things go the opposite direction a year later.   Brady: Talk to me a little bit about it. When we talk about food prices, where that information comes from, where the data on food prices and commodity prices how do ...? We talk a bit about this in your book but where is this information coming from?   Patrick W.: Well, in the US the Bureau of Labor Statistics estimates consumer food price inflation by a variety of categories every month. We can find out what the average price of food was this month versus last month or versus a year ago. Every few weeks we get new information about that. [inaudible 00:02:28] can be more of a challenge to get information about consumer food prices in particular countries but individual countries do have their own statistical services putting out this information. In contract commodity markets are probably easier to follow. We have lot of information about futures markets for grains, oil, seeds, meat, sugar and a variety of other agricultural products where it's very easy to get information on a daily basis about what people think is going to happen to the price of those commodities.   Brady: I want to talk a little bit about why we are concerned, or the general public is concerned about these changes in food prices. I want to just back off a bit and talk about, economists usually look at changes in prices as really important to coordinating the market system. If prices go up then it may induce incentives to plant more corn if for example the corn price increases or, if price would go up we may conserve on food, or it may induce investments and importantly it will allow for local decision making. If a farmer wakes up, and he's learned that the price of soybeans is gone up then he may plant more soybeans. We are concerned about food prices. What are those concerns?   Patrick W.: You're absolutely right that the prices play a vital role in the agricultural economy, and the economy as a whole and helping folks decide what's the appropriate set of things to try to produce and what are the appropriate set of things to consume in any given point in time. Concerns of course come from the fact that food is such a vital part of people's standard of living. Consumers in some countries spend a very high proportion of their income in food each month. In some of the poor countries lower income folks can spend half or more of their income on food at any given time. When there is a big change in the price of food it can very directly affect their standard of living. A higher price for food can make it much harder for a low income family to be able to meet their basic needs. Of course, you have [inaudible 00:04:26] food is also a very big source of income for lots of people around the world. Higher income countries in Europe and North American and elsewhere the number of people directly involved in agriculture is relatively small and so the number of people directly affected by food prices in terms of their income is relatively modest. When you're talking about a lower income countries, developing countries around the world, quite often a very significant portion, some places as much more than half of overall population may be involved directly in agricultural production. The price of food can be important for them in terms of their incomes as well.   Brady: How does your work experience in Guatemala inform your understanding of that issue?   Patrick W.: Yes, I was a Peace Corp Volunteer in Guatemala a long time ago. It was very good to get the exposure to people who have much more limited means and a very different set of things that drive their daily decision making. The typical person I was working with may have only owned or operated a couple of acres, one hectare of land, which might just barely be enough to feed their own family, maybe not even enough to feed their own family. They would use the land that they operated to provide some of their basic needs for corn and for beans and then would have to rely on outside employment for whatever income they were going to have to be able to buy other necessities in life. For those people a change in the weather, a change in market prices could have a big impact on their standard of living.   Brady: Now, when you've talked about the change of food prices, you've directed your attention to a number of specific issues that you thought were important. I don't know that we'll have time to review all of them today, but I thought I would name them, and we can begin to discuss some of them. You mention of course biofuel production, energy prices, government policies, the weather, economic growth and changing diets and there is a focus a bit on India and China here, speculation and the changes in the value of the US Dollar. Of that list, is there any one of those or a couple of those that are more important?   Patrick W.: Oh I think over the long haul what's happening to the global economy is probably as important as anything else in determining where we're going to see food prices evolve to over the next several years and over the next several decades. Yet, the global economy is growing at a rapid pace. We're going to see more rapid increases in demand for meats and other socio products that people tend to consume when they have higher incomes. That's especially important in countries like India and China where we're seeing diets change very rapidly in recent years. If Chinese consumers for example are going to be consuming more meat and other high valued products in the future, that means that we're going to need to have more grain to feed those animals and that's going to have an effect on the global system. Likewise, global economic growth will affect the price of petroleum and other major energy inputs. As the price of petroleum changes it affects not only the cost of producing crops and livestock products that will be turned into food that people eat but it will also affect the demand of bio fuels and their demand for biofuels of course has risen very sharply in recent years, caused by a variety of factors, [inaudible 00:07:39] policy and the overall economy. Again, if I had to pick one thing that's really important for the longer haul in terms of determining food prices I'd probably say it's the general economy.   Brady: What about for the short run, the period between 2005 and 2009 that you focus on?   Patrick W.: Right. If you had to pick one thing that was really important during that period of time and continues to be important today, I'd say it's probably the weather. People who are involved in agriculture know this but, some folks who may not deal with agriculture production every day don't really understand to what extent agricultural producers are at the mercy of the weather. If we have a favorable set of figure conditions, we can have very large crops, larger than expected. Those large crops can have a major effect in driving down food prices in any given year. Supplies exceed the immediate need to consume that grain or those other products. On the other hand if we have a short crop caused by floods, drought, disease, or whatever we can have a very sharp increase in food prices as available supplies may come short of what desired levels demand might be. In 2006 and 2007, we saw crops that weren't quite as big as they'd been in 2004 in particular. That caused a draw down in the overall level of grain and other foods that were in storage to eventually we got to where the level of grains available for consumption were getting really, really tight relative to what demands were going to be. People got concerned about that and helped drive up the prices very sharply. Then, in contrast we got the 2008 and 2009. We had much bigger crops than we'd had the previous couple of years. That helped to restore global supplies of those commodities and aid prices fall back again.   Brady: One of the inter

Dr. Busch argues that standards play a central role in constructing reality. Transcript Brady Deaton: My guest today is Dr. Laurence Bush. He and I will be discussing his forthcoming book titled Standards: Recipes for Reality. The book will be published by MIT Press. Laurence Bush is university-distinguished professor in the Department of Sociology at Michigan State University and co-directs the Center for the Study of Standards in Society. Larry, thanks so much for joining us.   Laurence Bush: Good morning, Brady. It's a pleasure to do so.   Brady:  Larry, after reading your book, I saw in every newspaper I picked up the issue of standards, and I found it was particularly relevant to the area of agriculture economics, but before I focus on those issues, I'd like to just start off broadly, and ask you about what you mean by the idea that standards are the way and the means by which we construct reality.   Laurence Bush: Yeah. The thing about standards is that they very, very quickly become taken for granted objects, whether they are texts, or they are physical objects, like for example, weights and measures. These things take on a taken for granted character, and as a result, become part of the reality that we expect. For example, if I get in a car that I've never seen, the cars are sufficiently standardized, and I can very quickly figure out how to drive that car. It doesn't require any special training. Once I've learned how to drive a car, I can drive any car.   Brady: In your book, you have a number of examples that are fascinating, and I wonder if you might just talk about some of the ways that we encounter standards that we might not think have found your discussion about time, and railroads, and the albino rats in the laboratory experiments particularly compelling. Could you pick a couple of those examples, and just discuss them?   Laurence Bush: Sure. Let's talk about the ones you mentioned, and maybe we'll move on to some others. If you take the example of railroads, obviously one realizes immediately that in order to have a system of railroads that crosses your entire country, you have to have the same track gauge. That part actually didn't occur in the United States until the 1880s, and was largely the result of building the transcontinental railroad, and deciding that a particular gauge was going to be used for that, and then gradually moving towards that being the standard gauge for all railroads. More complicated than that, and equally important, perhaps maybe even more important, was the fact that until something that used to be called railroad time, and that we today call standard time was developed, riding on trains was an extremely dangerous affair. Let me give you an example. Most railway tracks were single track lines, so that meant that if a train were to leave one end of the line, it had to arrive at a crossing somewhere, where there would be a siding. It would pull off, and wait for a train coming the opposite direction to go past. Since you didn't have standard time, that is to say, every little town had its own time, what that meant was that it was very difficult to predict where those two trains were going to come to the crossing point, where they have to go past each other. The result was an enormous number of head-on collisions. There were several ways to solve that. The most obvious way to solve that was to build two tracks, but to build two tracks was quite an expensive proposition, especially if there wasn't sufficient freight on the line to justify a second track. The ultimate solution was the creation of standard time, which allowed a given train to leave at a particular time that would be immediately knowable to people on the other end of the line and thereby to ensure that the trains would manage to pass each other at a point where there was a siding, and wouldn't collide head-on. I think that's just a few of the standards, but to that we would of course have to add that there needed to be standards for the track bed, so that trains that were heavier wouldn't sink into the mud. There had to be standards for bridges. There had to be just an enormous array of standards for the railways, and they had to be distributed across an entire nation, at the very least across an entire nation. In Europe, of course, they had to be distributed across many nations. Even today, there are several European nations that have standards that are not compatible with the most common standard, so Spain, for example, accepting its high-speed trains that have just recently been put in, all of the other lines in Spain are simply not compatible with the standards in the rest of Europe. You literally have to get off a train at the border, walk across, and get on another trainer. Obviously rather time-consuming and clumsy kind of thing to have to do. One of the other cases where you find standards is in science itself, so for example, in order to produce rat studies, of which there are literally tens of thousands now, you had to have standardized rats, and starting in the 1930s, it was a major effort to create standard rats. Standard rats were not your typical sewer rat. That would probably be rather nasty. It would be of enormous genetic diversity, would have a rather poor diet, and an enormously variable diet, and the idea was to produce rats that had a standard diet, had a standard amount of exercise, had a standard genetic base, and that were relatively gentle in their demeanor, and would not resist human care. Doing that required the actual production of a detailed manual that went through everything from cage size to the position of water dispensers in the cage, to the kinds of specific nutritional elements that needed to be in the feed, and specific genetic types that were desirable. Today, if you are a scientist who uses rats in the work, you will have to go and buy those rats from one of three or four companies that produce particular rats that are designed for particular kinds of scientific studies. Picking the rat that you find out of the sewer would actually make your results rather useless.   Brady: I think what's so compelling about those two examples is that if standards play a central role in coordinating our understanding of time, and developing our knowledge, i.e., the albino laboratory rat is central for scientific study, it's not surprising that we're seeing the role of standards in all of the issues that we're addressing. What this word standard, how is it ... How do you differentiate it? How is it associated with other similar words, like regulation, or law?   Laurence Bush: I think there's undoubtedly an irreducible ambiguity there. Standards, for example, may be produced. A good example would be building codes. The standards that are used in building codes are developed by the private sector. They're developed by architects, plumbers, electricians, and so on, and those are then adopted by government agencies and turned into law. There's a rather ambiguous border between standards and laws, but of course most standards are not legally required. That is to say, they're not written into law. They are at least in principle voluntary, although avoiding those standards is often nigh impossible, or extremely difficult and expensive. Even if the standard is not a legally regulated standard, it is necessary to pursue it. I think, again, I don't think there's any way you can clarify this. This is an ambiguity that's built into our behavior, so at certain times, certain things are seen as standards. For example, until recently, whether or not smoking was allowed in a particular restaurant was up to the owner. These days, in most cases, smoking is legally prohibited in restaurants, so what was a private standard, what was a voluntary standard, becomes a law. The reverse, of course, occasionally occurs, although that tends to be relatively rare, where things that were in law are deleted, and left to the product sector. The other point I would emphasize here, too, is that given the enormous amount of technology that's constantly being developed, enormous number of products, processes, services that are constantly being developed, that there is a continuing and extraordinarily important need for new standards, without which these things literally can't function. A good example would be all of the IT information that ... I'm sorry, all the IT products that are available, which require literally thousands of standards. If I developed a new super duper computer that could do many, many things that are currently unavailable on existing computers, but I couldn't plug that into the larger system, so I couldn't connect it to the internet, I couldn't make it talk to other computers, I couldn't share files and so on, it would be essentially useless. It's all those standards that allow compatibility, and what in the computer science community is known as interoperability, that make that kind of stuff possible. These are constantly changing, constantly being updated, constantly being modified as new technologies arrive.   Brady: Do you see that the role of standards has changed over time? Are there more of them, or are they changing in character, or have they always been this essential means by which we construct order in the economy, or amongst relationships between people?   Laurence Bush: I think there are two parts to the answer to that question. First, I think there's no question that over time, the number of standards has increased markedly. That's partially a function of the production of, mass production of various kinds of goods and services that starts in the 19th century. Once you start to produce things en masse, you wind up producing things that are in some sense standardized. Late 19th century, you see a huge movement to create publicly available standards, to do things like, for example, reduce the number of different kinds of screw threads, to reduce the number of track types that are used

Ray Bollman discusses terms, trends, and policy issues relevant to understanding rural Canada. Transcript Brady Deaton: My guest today is Ray Bollman. He and I will be discussing issues related to rural Canada and policy. Ray has been the focal point in Statistics Canada for rural research and analysis since the 1990's. He initiated Statistics Canada's rural and small town Canada Analysis Bulletins in 1998 and there are 62 of these bulletins now available. We'll provide a URL to them on the website. Before his retirement, he was the Chief of the Rural Research Group at Statistics Canada. Hi Ray and welcome to FARE Talk.   Ray Bollman: Yeah, thanks for calling.   Brady:  Ray, let me begin by asking you, how should we think about rural? What is rural?   Ray Bollman: Well different people, we do it differently. I'm an economist, so I would look at the price of rurality and I would look at distance, density and the distance to density. And that's sort of the way the World Bank Rural Development in 2009 on Reshaping Economic Geography clearly stated the issue of regional geography as in density and distance to density. And so density then is the advantages of glomerated economies and the distance to density, there's economic distance, price and time to get there, but there's social distance and psychological distance to density. So I look at it as distance in density. Some people will talk about is as identity. So if you feel rural, even if you're living in a city, you might behave differently. I would say gee, you're facing the same relative prices in the city, whether you feel rural or not, so I don't think you'd behave differently. Maybe that's an empirical question.   Brady: So for some folks, when you talk about glomeration effects being associated with the density character of urban and then lower density in rural, what are we talking about? A glomeration effects occur in urbanized areas ...   Ray Bollman: It's because it's a lower cost of people living together and working together. Firms, if they're beside each other, in much the same industry have lower cost because they have better access to specialized labor force. Their employees would go to the same church, or drink at the same bars, or curl at the same curling rinks, and over the conversation just exchange of tasset knowledge. They would just exchange tidbits on how things are done in their particular occupation or their particular industry. And if that firm was in a more remote area, that exchange of tasset knowledge's could not take place. You could read on the internet the written knowledge but the embedded or tasset knowledge that the specialized workers have, that they do not write down, just cannot be exchanged over the internet, you have to do that at the elbow of the master, if you will, and that's a big advantage of a glomerations and having both people and firms being close together.   Brady: So, I guess, part of the idea, is if you're in an urban area, if you take the same person, or the same firm, from a rural area and move them to an urban area, they may be more productive. Because of the exchange of this tasset knowledge and the interactions with experts in the area.   Ray Bollman: Yep.   Brady: Yeah.   Ray Bollman: Yep. More productive or lower cost unit output, same thing. That's right.   Brady: Okay so that's part of the density issue of rural. And the distance, can we think about that, and you mentioned this is cost, takes longer to transport good and information to rural areas.   Ray Bollman: Yeah, to rural areas and from rural areas. So in some sense, the high price distance is an advantage for some rural firms, cause they have a distance tariff and so you might be able to set up a business in a rural area because it's too expensive to import that service, or that facility, yeah that service from an urban area. So the distance is a nice tariff barrier. But the other side is, if you're producing something in a rural area, it's going to cost you something to ship it to the urban market. And it's going to cost you something that you're gonna have a harder time finding out how that niche, or that product, or that market, is developing and how you should change your product. If you're living in the middle of the market, you have an intuitive feel how that market is changing but if you're living away from the market and shipping it to that market, you have harder time just being with the market and I don't know ... what color you have to do, what your promotion should be, how fast you have to change your good or service. So it's just not being aware of the changing market if you're at a distance and so there's a bit of higher cost on the market research side.   Brady: Now I notice in a number of your writings, and we'll makes these available on our website, but you make the point, I think it's a really important one, that rural is not necessarily low density and remote, sometimes it can be high density and remote. And talk to me a little bit about those two issues.   Ray Bollman: Yeah well, and one of the papers you might reference there set up a little grid, and so two by two table, and you could be, if we think of rurality as density and distance to density, so on the table, one dimension is from high density to low density, so as you get to more low density or more rural. But some of those low density places, those small villages, could be in the commuting shadow of a big city. So some of us, if we took our spouses to these small villages that are within the commuting shadow, they would see a cow out the front window and say gee, this is really a rural place. And your kids would probably go to a fairly small school and have the benefits of a small school, but maybe the cost of a small school. But there might be benefits of a small school. If you wanted to become the editor of the school newspaper, I'm sure you could get on the committee at least. And if you wanted to play basketball, I'm sure you could get onto the team. And but your spouse would have access back to the big city for a big city job, you know brain surgeon, NHL trainer, or whatever. So if you're a small community, small density, low density community, within the commuting zone of a big place, you have the benefits, if you will, of low density, and the advantages of short distance to density. So you could go the other way on that grid, from high urban, that's big places, to high rural, which would be long distance. So you could be a long way from a metro center and have a pretty dense town or city. And maybe you think Dawson, Manitoba, or Mattawa, Ontario, or places like that 6, 7, 8. 9,000 people, you might have two high schools in those places that are very competitive basketball teams, and you'd have trouble making the teams. But it's a rural, and small town economy, a small town labor market and there'd just be no jobs there for your professional [inaudible 00:07:34]. And if you became the teacher or the principal of the school and your spouse was a dentist, there's probably already one dentist in that town and there'd just not be a job for your spouse. And they'd be too far away from the metro area to commute. So there's a fairly high density place, looks a bit urban in some sense, but no distance, long distance to a metro job. So you can have small towns close to areas, or you can have big towns away from metro areas, two different types of rural places and different types of options, different types of opportunities, I guess different types of policy options too.   Brady: I think that's really important point. When I was working, in Central Appalachia from 1995 to 1997, I was confronted with this issue, that there were pockets of real dense housing in relative rural areas. And this was particularly challenging, because the issue that we were working with was trying to address sewage runoff into the river. And the primary way that was being thought about how you deal with this in rural areas, is to put in septic tanks. But in this area of Central Appalachia, where there were pockets of very dense housing, as a result we refer to them often as cole camp areas where houses were developed, basically row houses in a rural area, to house workers that were working in the mines, there wasn't the kind of space to put in a septic tank.   Ray Bollman: Right, right.   Brady: And when you met, often times, with people that were involved in it, their approach to the problem was, oh well this is a rural area, and the way you deal with a problem is to put in septic tanks. But the density was such, within this rural area in the sense it was remote from major cities, that the density was as challenging as any urban area.   Ray Bollman: Exactly. And the general rural observation is if you seen one small town, you've seen one small town. And they're all different. And if you're sitting in the 13th floor of the metro center worrying about rural policy, the capital city worrying about rural policy, rural areas are so heterogeneous that you just can't say, well if it's rural, obviously it's low density and sparse and therefore septic tanks. Because it's just a lot of differentiation out there. But trap sets the first law of statistics, right? The within variability is always than the between variability, so the between variability between urban and rural, on average, is not very big. But the variability within rural is big, and of course the variability within urban is big. Which is to say within variability is always bigger than between variability.   Brady: And I think it's also important to note, and you note this elsewhere, that if you go and you talk to residents of a quote unquote rural community, they will reflect that variation of understanding in their own discussion. So you might be in what you think is a rural community, and ask them what rural is and they'll refer to a different place in their own county as rural.   Ray Bollman: Okay and it's all perception. You could be th

Dr. Murray Fulton and Dr. Brady Deaton discuss the Canadian Wheat Board (CWB) Transcript Brady Deaton: Welcome to FARE Talk where we set out to provide enduring discussions on contemporary topics relevant to our economy with particular emphasis on food, agriculture and the environment. My name is Brady Deaton Jr. Of the Department of Food, Agriculture and Resource Economics at the University of Guelph. I'll be your host. Today, Dr. Murray Fulton and I will be discussing what's going on with the Canadian Wheat Board. Murray is an agricultural economist and a professor in the Johnson-Shoyama Graduate School of Public Policy at the university of Saskatchewan. He has a long interest in Agricultural policy and in marketing systems. He is the co-author of a report by the Economic Council of Canada titled, Canadian Agricultural Policy and Prairie Agriculture, and has extensively studied the structure and behavior of the agricultural marketing systems. Murray, thanks for being with us.   Murray Fulton: Oh it's a real pleasure.   Brady: Murray, what's going on. How do we start this. How do we start to understand what's going on with the Canadian Wheat Board. Keep in mind there'll be people tuning in who aren't aware of the current situation.   Murray: Good starting point Brady. Here's what's going on. What we're seeing in Canada over this next year, I mean, by next summer, we will have in place in Canada a completely different marketing system for wheat and that includes Durum and Barley for human consumption, malt and barley. When I say a completely different system, I mean that in the strongest sense. What is happening is the replacement of a marketing system that, while it's evolved in some considerable ways, has retained the major fundamental structure that it acquired back in the 1930s and the 1940s. That's a mixture of an administrative and market system with Canadian Wheat Board playing a key role in that grain handling and transportation system for those grains, wheat and barley, in Western Canada. What we're going to have by next July is some kind of much more market oriented system without the Wheat Board, at least without the Wheat Board as a compulsory marketing agency, which has been the case since the 1930s. There is still a question, I'll come to this at some point about whether or not a voluntary Wheat Board might be in place. But regardless of that central role, that the Canadian Wheat Board was playing, will no longer exist. There is considerable discussion going on by farm organizations, the industry participants, these are the railways, the elevator companies, the millers, as to exactly what kind of rules are going to be put in place come next July and August.   Brady: All right. One of the terms that's often used this Single Desk Selling Authority. My understanding is that that ensures that the Canadian Wheat Board can basically purchase all of the wheat and barley for export or human consumption. Is that for all of Canada or just particular provinces.   Murray: The Wheat board only applies to the Western wheat growing area. This includes the grain growing areas in [inaudible 00:03:40] Saskatchewan, and Alberta and up into the Peace River area as well. Wheat growing in Ontario does not for instance, does not come under the auspices of the Canadian Wheat Board. You're right the term that is used is the Single Desk Selling. This is actually key to that central role that the Canadian Wheat Board has been playing. Just very quickly what this Single Desk means is that all farmers in the [inaudible 00:04:14] Wheat Board area are required by legislation to deliver their wheat or durum or barley for human consumption to the Canadian Wheat Board. The Canadian Wheat Board then on behalf of the farmers then markets that grain, both domestically and internationally. What the board then .... This is an additional element in its, it's not strictly connected with the Single Desk though it's grown up with it. What the Wheat Board has done for the most part then is take that grain, all the receipts from that grain that it sells and offers back to farmers a single pool price. All farmers, basis the export position get the same price. Regardless of whether the grain that the farmer delivered to the Canadian Wheat Board was sold in November at a particular price or in May at a different price or even sometime in the middle of July at perhaps at a third price, all farmers would get exactly the same price. Now, what I need to say is that, that's adjusted, the price that an individual farmer will get will be adjusted for where that farmer is located in the grain growing region. The reason is that, off of that price that the Wheat Board provides, has to come the cost of grain transportation and grain handling. Depending upon where you are and the kinds of distance you are to port, or the degree of competition that there might be between grain elevators, farmers will end up having a different deduction, one from another.   Brady: Okay, I want to work through, maybe a simple example of that, but I also want to then talk a little bit about the change that's coming because as I understand the change actually hasn't happened yet. I think there's some interesting nuances there. First let me just make sure I've got it straight. If I'm a wheat farmer right now, under the Single Desk Selling Authority. Say, I've harvested my wheat crop, walk me through really quick, how I'll work with the elevator and the price that I'll receive. Again building off of what you said abstractly but say, I'm done with harvest, what happens to me now.   Murray: What farmers will have done and I won't give you all the gory details, but what they would have done in spring is signed a contract with the Canadian Wheat Board indicating roughly what their planting intentions were going to be so that they said, "Well, I'm going to be roughly seeding this much wheat, this much durum, for instance and malt and barley if that's what they were doing. The Wheat Board has an indication of the amounts of grain roughly that are going to be out there. They adjust these planting intentions of course for yields that are occurring. The Wheat Board, if you like, has a basic idea of how much grain it has. It keep pretty good track of the quality that's coming in, if there is an early frost in a particular area, they know that that grains maybe marked down to a Number 2 or something like that. As the Wheat Board, as their customers come forward and say, "We need grain of a particular type." They will go out to farmers and ask the farmers to deliver on those contracts that they had signed back in the spring. They may come and say, "In November, we want you to deliver 25% of that contract that you had signed." Farmers then would deliver that grain. Here's where it's interesting. The farmers now have complete choice as to which elevator company they would like to deal with. What's happening at the same time is as the board puts out these calls to the farmers for grain, they, at the same time approach the elevator companies and have the elevator companies bid on the right to fulfill those contracts. For instance, Viterra, the largest grain handler may decide to bid on a particular amount and it is then up to Viterra to make arrangements with the railway to have sufficient cars in place. Now, the railway also has to coordinate with the Canadian Wheat Board and I'll come back to that in just a second. At the same time the elevator company has to go out and make sure it's offering the right kinds of incentives to farms to get that grain delivered, in this case to the Viterra elevators rather than to a competitor elevator. You have, what I'm calling a mixture of an administrative system with the Wheat Board providing the broad demands that the system needs to meet and then having bidding going on or ordinary market competition to actually get the operational components to fit to those macro demands. Let me just continue on that. A farmer will then say, "okay, I'm going to deliver to Viterra." They may for instance have a trucking subsidy in place that has encouraged them to go to Viterra, rather than to say one of the competitors. The farmer would deliver that. They would get, what's called and Advance Payment that pays them some proportion of what the wheat board anticipates will be the final payment due. The reason the board doesn't pay out the entire amount is that the board has to keep that contingency in place, in case the market should tank sometime in the future, the board would not be able to meet its obligations without incurring a deficit. This procedure occurs over the year, with farmers getting their Advance Payment. At the end of the crop year, at the end of, sometime in July, the board totals up all the revenue that it had obtained, divides that through roughly by the amount of grain. This is done by various classes. You'll look at a top grade versus dropping down to a second grade and so forth and each of those will be done separately. They will take that total revenue, divide by the total number of bushels or tons that were sold and come up with that average price. The farmer then will get the difference between that final price and the initial price that they had been paid. Now, often the board knows or has a pretty good sense part way through the year that they are going to be able to pay out a final price. They'll have some interim payments to farmers that get a little bit closer to that final price. Now, meanwhile, the farmer also then has to pay the elevator company and the railway for the grain that they are hauling. They will have a bill that they will pay at the elevator that will break out the amount that the elevator company is collecting for storage and handling as well as the amount that the railway has charged the elevator company to haul that grain to port. At the end of the day, the farmer gets that average kind of world price, which is the price at

Dr. Glenn Fox and Dr. Brady Deaton discuss Glenn's longstanding interest in property rights and his recent publication in the Canadian Journal of Agricultural Economics. Transcript Dr. Brady Deaton: Welcome to FARE Talk, where we set out to provide enduring discussions on contemporary topics relevant to our economy with particular emphasis on food, agriculture, and the environment. My name is Brady Deaton, Jr., of the Department of Food, Agriculture, and Resource Economics at The University of Guelph. I'll be your host. Today, Dr. Glen Fox and I will be discussing his long-standing interest and research on property rights. Glen is an agricultural economist at the University of Guelph. He was recently honored as a fellow of the Canadian Agriculture Economic Society and his fellow address, recently published in the Canadian Journal of Agriculture Economics. This address will be linked to this podcast. Glen, welcome to FARE Talk.   Dr. Glenn Fox: Thanks Brady.   Brady: In your paper, you point out the many long-standing controversies in agriculture and natural resource policies are really debates about the nature of property rights. That's the issue that I want to tackle in today's podcast, but before I do, I wonder if there's some kind of story or anecdote that you can give that kind of sets the stage for our listeners.   Glenn: I started working on this topic about 20 years ago, actually, Brady, with one of my master's students named Mike Ivy. And Mike and I were interested in a topic which had become sort of visible or had emerged in importance in the late 1980s, in the early 1990s on the question of when or under what circumstances does a regulation become so costly or so burdensome to a landowner to become the equivalent of a taking, to become tantamount to expropriation. And so we started to read legal literature, economic literature, read some case law, and we very quickly were confronted with a paradox. And the paradox was that most of the literature, whether or it was being written by economists or by lawyers or by political scientists or ethicists, dealt with a small number of cases typically that had gone to the U.S. Supreme Court. They used apparently the same words and concepts, but when they got to the punchline, this critical question, does regulation constitute a taking, the answers were all over the map. And we had a great deal of difficulty figuring out why when there's only so many cases and they appear to all be using the same words, that the interpretations or the conclusions could be so divergent. And after staring at this for a while, we realized that there was something else behind the scenes. And the something else behind the scenes was that each of the authors was invoking a different theory of property rights. And initially we identified three different theories of property rights. Subsequently, we've refined that and now have a list of five theories of property rights that I think exist in work that economists do, but also that legal theorists do. And the five are: classical liberalism, pragmatism, utilitarianism, legal positivism, and then modern libertarianism.   Brady: Now in the regulatory [inaudible 00:03:10] situations in the United States there's this reference to the Constitution. So, the Fifth Amendment of the Constitution. In the Canadian context, is there something like the Fifth Amendment there?   Glenn: That's a good point. The reason that this word "takings" came up, the reason it's in this literature is because of the one clause referred to as the "takings" clause in the Fifth Amendment to the U.S. Constitution. There is no equivalent to a "takings" clause in Canadian constitutional law. There is another paradox and this is still something that puzzles me today and I don't have a good answer to this is that while there is a "takings" clause in the U.S., there is not a "takings" clause in Canadian constitutional law. The practice has generally been in Canada, when regulations have been found to be excessively burdensome that property owners were compensated whereas the practice in the United States under "takings" clause has been generally that property owners have not been compensated when they've subject to certain types of regulations. So that's a bit of a mystery to me, but -   Brady: I mean I think one of the [00:04:18] in our area, one of the things you hear referenced a lot is this Crow rate subsidy. And that's an example of where farmers or landowners were ultimately compensated for the fact that their guarantee of basically lower shipping rates was taken away by an act. Is that something that comes up in your understanding of this topic and kind of contrasting the U.S. situation with Canada?   Glenn: I think that's a related development, but it's really somewhat different from the regulatory takings. In the case of the Crow rate, which were these grain transportation subsidies off the prairies, those subsidies meant that the price of grain at the farm gate in the prairie provinces was higher than it otherwise would be because essentially those farmers were price takers so whatever price they got was the world market less the transportation cost. If the transportation was subsidized then their price went up. So grain farmers had a higher price. Livestock producers in the prairies were at a disadvantage because their feed costs were higher. So when the decision was made to phase out these Crow rate subsidies, there was compensation ultimately that was paid to farmers because of this sort of entitlement that had emerged, particularly to grain farmers. They had that built into their cost structure and really, I think for sort of reasons of political expediency, the government said, "We need to get away from this policy and we recognize that there are people whose livelihood has been helped by this policy and who will be hurt when we take it away. But we're going to take it away so we'll compensate them for that. The regulatory takings issue is really something quite different and maybe an example of wetland policy, might be an example. So you think of a farmer who's got a wetland or a marsh on his or her property. Then there's some policy measure that designates that as some sort of protected area under a wetlands protection policy. Once that designation is imposed, then that restricts what the farmer could do. Up until that point, maybe the farmer could drain the wetland and turn it into a mock gardening agricultural operation. Well, now that option's off the table and the farm is arguably worth less than it would have been, because the option to do that has been removed. And so the farmer might say, "My farm was worth a million dollars before and now it's worth half a million dollars. I need to be compensated for the imposition of that regulation to protect the wetland on my farm.   Brady: So just to make sure I've got it straight. In Canada, if the government compulsory takes the land, actually takes it, then there's the tradition of compensation. But if the question or the line that you've been kind of working on is when you change the economic value or the market value of something through regulation, then at what point does that constitute something that should be compensated for? And of course that's the big debate in the U.S. literature examining Supreme Court decisions. And it's still [inaudible 00:07:35] your observation of things that are going on in Canada. Let's take a couple of cases that you think - That you cover a number of actually applied situation in the Canadian context to examine the origin of property rights and how that helps illuminate the controversy around different natural resource issues. Let's take a couple of those and maybe just illuminate this idea of the origins of property rights being very helpful in illuminating aspects of that controversy.   Glenn: Well, one of the examples that I understand you've done a previous podcast on this subject already, but- One of the long-standing controversies in Canadian agricultural policy has to do with the Wheat Board. And under the framework developed by federal legislation for the prairie provinces, producers of certain types of grain had to sell that grain to the Wheat Board. It was called a [inaudible 00:08:30] selling agency. It was the monopoly buyer that was then tasked with the job of marketing that grain, particularly to export markets. There are numerous sides to that debate, but I think two of the sides that I think illustrate these different property rights are on the one hand, some farmers and some agricultural economists and some people at the Wheat Board argue essentially a utilitarian theory of property rights. And the utilitarian theory of property rights says that an arrangement, a policy, an institution is a good policy or a good institution if it maximizes the sum of utilities in some net sense, it maximizes the net benefits for everybody that's affected by the action. So the utilitarian pro-Wheat Board argument would be that farmers on net gain, even though they've had this restriction on their ability to sell grain to any customer that they choose because of the operations of the Wheat Board. Because of counter[inaudible 00:09:41] market powers or economies of size or scale or whatever. And so there's a net gain even though some individual farmers might be disadvantaged. And so that would be the utilitarian perspective.   Brady: You know, in the previous podcasts we discussed this a bit and we look at our own profession, agriculture economics and its debate about whether or not the Wheat Board was able to increase net returns to farmers. And so that would be an example of our literature, would you characterize as being kind of utilitarian in origin?   Glenn: Yes, and when I'm saying that there are these different theories of property rights, it's not to say that there aren't what I'll call "intermural contests" within each theory of property rights as to whether or not a pa

Jennifer Stevenson and Dr. Brady Deaton discuss farm succession planning. Jennifer is the Business Finance Program Lead with the Ontario Ministry of Agriculture Food and Rural Affairs (OMAFRA). Transcript Brady Deaton Jr.: Welcome to FARE Talk, where we set out to provide enduring discussions on contemporary topics relevant to our economy with particular emphasis on food, agriculture, and the environment. My name is Brady Deaton, Jr. of The Department of Food, Agriculture, and Resource Economics at The University of Guelph. I'll be your host. My guest today is Jennifer Stevenson, she works for The Ontario Ministry of Agriculture, Food, and Rural Affairs as The Business Finance Program Lead. She is very involved in supporting farm tax and business seminars, as well as ongoing efforts to enhance the capacity of farmers to develop succession plans. Jennifer, welcome to FARE Talk.   Jennifer S.: Thank you.   Brady: I recently heard you speak in Fergus about succession planning, particularly as it relates to the agriculture sector, and it was really interesting to me. I hadn't read that much research on it, but I was aware of the issue, and I was hoping that we could explore that in today's conversation. So, just to kind of get the ball rolling, talk to me a little bit about your role with the ministry in looking at succession planning?   Jennifer: Actually it's a recent role that I've taken on, as one of my colleagues went to a different role. But what I'm seeing in talking with producers and producer groups, is that succession planning is definitely top of mind. There's a lot of concerns, and there's concerns most on the technical side, because there's obviously some tax implications, but also on the human dynamics side. A lot of people have, shall we say, a reluctance to talk about the human dynamics problem. So what I try to do is demystify that, bring it right out on the table, let's talk about it, and having them recognize that they all really share the same kind of problems, and also to find some solutions, maybe sometimes some out of the box solutions, to those problems.   Brady: Breaking down this whole idea of succession planning, when I hear it talked about and when you talked about it, there always seems to be two kind of components to it. The succession planning, which is about the business of farming, and passing that to the next generation, and the estate planning. Are those important or what do I need to understand about those two?   Jennifer: Yeah. I don't know if you remember when I actually gave that seminar, but one of the things I said right off the top is you've got to separate wealth from income, because the thing about farming is that most farmers actually live where they work. So, their wealth is actually tied up into their business, as well as their home, and a lot of that wealth has been accumulated on what I call an emotional basis. Meaning, that's where you've raised your kids, that's home, that's comfort. So, what you have to do is be able to separate the business assets from those emotional or home type assets. Look at what's really generating income, as opposed to what's accumulating wealth over the course of the business? If you take a look at farm wealth in particular, I mean let's be honest here, we'll talk about land assets. They have tended to appreciate to a higher degree than has the S&P 500. So, there's been a fair accumulation of assets within the agricultural community. So, you're talking about a substantial amount of wealth that's been accumulated, so when you're looking at the next generation coming in, you have to ask the question, "Are they ready to take over the wealth? Are they capable? Are they able to get financial backing?" Let's say from a traditional source, let's say from a financial institution like a bank or whatever. If they're not, what do you do? Are you able just to gift it? Or, do you have to look at some other scenarios? I think that's the big problem out there.   Brady: Right. So, I mean, and then that probably gets into the emotional sensitivity. If you think about a farmer thinking about a succession plan, but also thinking about how they're going to deal with their estate, or bequest their estate, and they're looking at land as you mentioned, as one of the big, if not the biggest item, they're often dealing with children that are both active potentially on the farm operation, but then often times a lot of children that aren't on the farm.   Jennifer: Well also, what you're talking about is protecting assets, because we take a look at the divorce rate of being 50%, they're also looking at protecting assets from divorce. I mean, let's be honest. If you've built up this emotional capital that you've put a lot of blood, sweat, and tears in over the years, it's really hard to envision that this is going to come apart. So, you're absolutely right. There's a lot of investment, a lot of thinking, and some people just don't even want to deal with it. They just want to avoid thinking about it. But understanding that avoiding doesn't make the problem go away, so we have to try and think of a way to get people at the table talking about these issues honestly and openly. And also bringing their stakeholders within their family, and the potential stakeholders, so that they can put these issues or ideas in a gentle sort of way, but one that will get everybody not at a perfect result, because I understand that succession planning is not a perfect process, but at least something that a compromise that everyone can live with.   Brady: One of the issues that was brought up there was a great site and I'll provide a link to it. I'll provide a link to your sites on OMAFRA as well, as links to the site I'm about to mention, which is the [Burmont 00:05:43] Extension Program, but they talk about one important aspect of farm succession planning, is these farm business agreements which in one way or another have to account for the five Ds. Death, disaster, disability, divorce, and disagreement.   Jennifer: Absolutely. Farmers have a tradition of, "My handshake is my word" so a lot of it is changing the culture to recognize that, hey, this is a business. You are the CEO of your business, so we have to make things formalized. The nice thing about formalizing an agreement is it takes the emotion out of it. So, putting things on paper, having people sign agreements is a way to be able to secure your assets, in terms of you know exactly what your rights and responsibilities are, as well as the other person's rights and responsibilities. Again, it comes down to getting that culture shift in people's minds.   Brady: Well, let's take a scenario that I imagine is out there where a farmer is in a sole proprietor situation, but they have several children. One of them who may have a handshake or an informal agreement, that they'll get the farm. If that isn't written down, and the person were to die without say a will that guaranteed the land to the individual, then I imagine that person is no longer, despite the fact that there was an informal agreement, that that informal agreement is not the formal agreement that actually occurs, and that person's in a whole heap of trouble.   Jennifer: Oh, yes, yes, yes. When I give any kind of workshop on succession planning, I say, "Hear this. If hear nothing else, hear this, that if you die without a will, what you're doing is handing over control to a person you've never met to make financial decisions on your behalf." So, it's extremely important to have a will. Also, if you're planning on bringing kids into the business, why wait? Bring them in as soon as you possibly can, and bring them into financial discussions. Bring them into the bank, bring them in when you have a discussion with your accountant. It's incredibly important to have that level of commitment and allow them to establish a level of commitment in the business.   Brady: I know land is interesting to us both, and land is so expensive, and in a lot of places in Southern Ontario, its value is not only reflective of its farm productivity, but also of its potential future non-farm activity, which makes it hard for the next generation to actually maybe afford the land at its market price. How do people account for that in their succession planning?   Jennifer: Yeah, I mean you're talking about extrinsic versus intrinsic value, and again, it comes back to wealth versus income. You've got to make sure that you can provide yourself with an income before even looking at your business plan. Make sure that the idea at the end is that there's going to be enough income to be able to provide for your wants and needs. The other thing to remember, too, is that we've been I think lulled into a certain level of complacency that the level of interest rates right now are so low that looking at the future, are they going to be this low in the future? Might not be, right? Just looking at the past, and in fact, I was talking ... Sorry, I was listening to Dr. David Kohl who had a presentation yesterday about this issue. Said that what he called normal interest rates were only about 6 or 7%. So, if you had for instance, a mortgage at 2%, and it went to 4%, you're actually doubling your interest expense. So, I think a lot of kids coming in, or young adults coming into farming right now have to recognize that these interest rates that we're seeing right now are not "normal" interest rates, and that if they go to refinance in 5-10 years, they have to consider what that interest rate will likely be.   Brady: So, in terms of succession planning, I guess there's two ends to this. The first end is if you're the current owner looking into the future, trying to either asking yourself what you're going to do with your land, whether you're going to give it to your children or whether you're going to sell it, one of the challenging is how are you going to provide for yourself in your retirement? That's the one end, so

In this podcast Jeremy Leonard and I discuss a paper that he and his colleagues - Mohammad Shakeri and Richard S. Gray - recently published through the Institute for Research on Public Policy. The paper is titled, "Dutch Disease or Failure to Compete? A Diagnosis of Canada's Manufacturing Woes," and is available for download. Transcript Brady Deaton Jr.: Welcome to FARE Talk where we set out to provide enduring discussions on contemporary topics relevant to our economy with particular emphasis on food, agriculture, and the environment. My name is Brady Deaton, Jr. of the Department of Food, Agriculture, and Resource Economics at the University of Guelph. I'll be your host. Today my guest is Jeremy Leonard. Jeremy is a research director at the Institute for Research on Public Policy. He and his co-authors, Mohammad Shakeri and Richard Gray, have just recently released a study titled, Dutch Disease or Failure to Compete, A Diagnosis of Canada's Manufacturing Woes. Jeremy, welcome to FARE Talk.   Jeremy Leonard: Good to be here, Brady.   Brady Deaton Jr: Jeremy, before we start, talk to me a little bit about the Institute that has published this study.   Jeremy Leonard: Sure, I'd be pleased to. The Institute for Research on Public Policy is a national think tank based in Montreal, Quebec. We're just celebrating our 40th anniversary this year. We were created in 1972 as an independent think tank. We don't have members and we do not have supporters. We're supported by an endowment fund, which basically allows us to produce studies that are evidence based, and try not to take ideological or political sides in debates. Our role is really to inform and spark debate; pose the questions before we come up with the answers. We study a diverse array of issues including economic issues like the one we're going to talk about today, as well as more social issues like immigration, aging, and a whole host of other issues.   Brady Deaton Jr: All right, and I should say that we will link the listeners up to your site so that they can download this study if they want to read it more fully. Let's start off just by impacting your question. The paper's question, Dutch Disease, or Failure to Compete. What generally is prompting this question?   Jeremy Leonard: What's prompted the question is two facts over the past several years that are undeniable. One is the fact that the Canadian dollar has strengthened considerably over the last five to six years, going from about 60 to 65 cents to parity today. That's a fact. Another fact is that the manufacturing sector has been shrinking in Canada over the past five, six, seven years. That shrinkage started happening well before the recession, and it happened at the same time as this appreciation of the currency. There's a natural question because the issue of the Dutch disease is really just that. The one, appreciation of the currency, causes the other, problems in manufacturing. We're clearly seeing these two things happening at the same time. We thought it was important to sort of dig a little bit deeper on the question, is one really causing the other or are they both happening at the same time for some other reason that we haven't taken account of.   Brady Deaton Jr: One of the things that I was trying to work through in kind of preparing for this podcast, was a better understanding of exactly this term, the Dutch disease. When you first hear it, it sounds like it's something that's damaging to the economy overall or having some kind of miserating effect on the economy. But, in wading through it, and I'd like to get your thoughts on this, it seems more like an effect than a disease. What are your thoughts about that?   Jeremy Leonard: The term Dutch disease comes from Holland as the name suggests. There were discoveries of natural gas off the North Sea off the coast of Holland, and that created tremendous demand for those energy resources. That energy demand can be a good thing for an economy because it brings in dollars; it increases exports; and a whole host of other things. One of the things it also does it that the people who are interested in buying these resources are using Dutch currency to do it and it causes an appreciation in the Dutch currency which did raise the cost of exports to Dutch manufacturing exporters. And, in fact, the Dutch manufacturing sector did decline considerably. You could argue that the term Dutch disease is really an effect of something which can at the base have some positive effects. Since then, the Dutch disease has come to be a convenient shorthand to say, it's the exchange rate that's causing problems in the manufacturing sector. In some sense, in Canada, you can say the same thing about the developments of the oil sands. People can have different opinions about these aspects of it, but one thing that's absolutely clear is that it has brought very large amounts of money and economic resources into the country from the many other countries who are demanding these energy resources. That still leaves us with the question that we try to address in this study, which is, to what extent does that boom and those economic good times for the energy sector by force mean economic bad times for the manufacturing sector. That was really the goal of the study.   Brady Deaton Jr: Right. So, it's not, isn't bad for the economy. The whole idea of your paper as I read is really focused on this effect on the particular sector, in this case manufacturing. So, is there a negative relationship between a resource boom and manufacturing output. That's really what's going to drive the research that we're going to talk about. Talk to me a little bit about the theory, the abstraction, that drives the argument for there being a negative effect between a resource boom and manufacturing output.   Jeremy Leonard: Yeah, sure, and I touched on it a little bit, but we can go into it in a little bit more detail. The issue really boils down to the effect that there are some goods in the economy that are tradable and some that are not tradable. What happens when you have a boom of any sort, whether it's a natural resource boom or any other kind of boom, is you have a sector where there's very rapidly growing demand for services and production. That tends to bid up wages because the higher your demand is, you need to hire more workers, and anyone who has studied Economics 101 knows that in those conditions wages are going to rise and they can rise rapidly. So you'll have upward wage pressure in the booming sector, which is then going to trickle over into other sectors. People will be drawn into the energy sector, that will mean fewer people wanting to work in the non-energy sectors. The main result is you have this upward pressure on wages. This upward pressure on wages causes problems in industries that are exporting goods. Their costs are going to go up and they will not be able to raise their prices. Essentially what it causes is an increase in the terms of trade, which causes problems for exporters. We see this has manifested itself in a rising currency. That's sort of a very complicated way of explaining it, but it really has to do ... It's much more than just about dollars floating around the economy and whether the Central Bank is creating too much money or not creating enough or issues like that. It really has to do with some pretty fundamental economic effects that come about from this resource boom. We know the economic forces at play and the question then becomes, what's driving those economic forces, and then there are a number of things that can effect that. That's sort of the theory behind it. It's very well developed and you can look at it in terms of how flexible sectors are. In other words, how much labor mobility there is in sectors and things like that. Invariably what you find is that there's a possibility that the manufacturing and trade intensive sectors will be adversely effected, but it's not a necessity. In other words, you can certainly envision scenarios where you can actually see a resource boom and you wouldn't necessarily see an adverse effect. Given that the theory doesn't give you a definite answer on whether a resource boom is going to cause problems in manufacturing, we decided we needed to look at the actual numbers in Canada to try to answer that question.   Brady Deaton Jr: All right, so let's get into this. As you pointed out earlier, Canada's energy sector has experienced a boom; oil production has increased; gas has increased; Canadian exports have increased. We've got the first part. Talk to me about how you examine then how this effects manufacturing.   Jeremy Leonard: What we did was we basically did a two stage process. The first thing we wanted to get a handle on was to what extent is the strong Canadian dollar being driven by energy prices. There are many, many things that can affect the exchange rate besides energy prices. It can be prices of other commodities. It can be the stance of monetary policy. For instance, if interest rates are higher in Canada than they are in the United States as they have been for quite a few years, that's going to encourage investors to invest in Canada, which will also put upward pressure on the exchange rate. So the first stage was to examine the extent to which energy prices are associated with high exchange rates. The answer is that there is a linkage there, but the interesting finding there was that it's not just energy prices that are driving this exchange rate. It's also prices of other commodities like wheat; other commodities that Canada produces like industrial metals. So there is a partial effect. Stage one was simply to establish what piece of the strengthening of the Canadian dollar could be attributed to rising energy prices.   Brady Deaton Jr.: Before you get to the second stage, first stage you're basically just saying what is the relationship between the Canada and U.S. exchange rate and energy pri

In this podcast Chief Robert Louie and I discuss the management and control of First Nations Land. Chief Louie is the Chief of the Westbank First Nation. He is the chairman of the First Nations Lands Advisory Board since 1989 and a member of the Order of Canada. Transcript Brady Deaton Jr.: Welcome to FARE-Talk where we set out to provide enduring discussions on contemporary topics relevant to our economy with particular emphasis on food, agriculture, and the environment. My name is Brady Deaton, Jr. of the Department of Food, Agriculture, and Resource Economics at the University of Guelph. I'll be your host. Today Chief Robert Louie and I will be discussing the management and control of First Nation's land with particular focus on the Framework Agreement on First Nations Land Management. Chief Louis is the Chief of the Westbank First Nation. He is the Chairman of First Nations Land Advisory Board since 1989 and a member of the Order of Canada. Welcome to FARE-Talk, Chief Louie.   Chief Louie: Thank you very much Brady. It's a pleasure to be here.   Brady Deaton Jr: I want to begin by mentioning something that's on the Land Advisory's Board website and have you kind of discuss it; and there's a statement there that's very powerful. It says, "For the first time in history of First Nations, we'll gain a window of opportunity to have the power as a Nation to manage its reserves, lands, and resources, and eliminate the bureaucracy of Justice and Indian Affairs." Talk to me a little bit about that.   Chief Louie: Well, it's extremely important for First Nations across this country that First Nations be recognized with inherited right to manage their own lands and resources; and for us this land management process and the implementation of land codes does exactly that. It recognizes the jurisdiction. It recognizes that First Nations are the lawmakers on their own lands, that they have the power to make laws over their lands and their resources; and that's fundamentally important. And it is the first time in the history of Canada, that such an accomplishment has occurred. First Nations were historically self-governing before the Europeans came to Canada, and now with Land Codes and with the Frame Agreement initiative, it recognizes that First Nations again have the jurisdiction to look after their lands and their resources.   Brady Deaton Jr: I think there's two big terms that will probably be used a little bit interchangeably, but I wouldn't mind if you could just unpack them a little bit. There's the Framework Agreement, and there's the First Nation Land Management Act. The Framework Agreement, of course, come into being in 1996. And the Land Management Act is in 1999, I believe. Talk to me a little bit about the difference between those, and how they came into being.   Chief Louie: The Frame Agreement is a government to government agreement that was negotiated by the First Nations and with Canada. And that Frame Agreement, back in the 1996 timeframe, at the time of signing, sets for principles that recognizes First Nations to have the inherited right to do such things, as manage their lands and resources. It talks about principles to protect lands, so reserve lands cannot be sold. It recognizes that third party interests are going to be protected. Principles of that nature. It's a fundamental document that set for strategy and set for the process, so that government could eventually pass its legislation, and that legislation was passed in 1999, the First Nation Management Act. By Canada passing that legislation, it ratify the Frame Agreement. What's unique about the Frame Agreement and the First Nation Management Act is very simple. It says and it recognizes that unilateral changes cannot be made without the consent of the other party. That's fundamentally important from the First Nation perspective, specially when we're looking at how laws are developed and the negotiations that took place to put forces [inaudible 00:03:54]. That's very, very important and it's very unique in Canada.   Brady Deaton Jr: The process leading up to the Framework Agreement it's quite interesting. It's something that emphasized discussions of the First Nations Land Management Act. The Westbank First Nation was one of the original signatories, what was that process?   Chief Louie: In the early 1990's, and even going back to the late 1980's, there was a movement by First Nations at ... We had to see the recognition of the inherited right of First Nations recognized. We had the constitution that was passed prior to that. It's spoke of, in section 25 and section 35 in that constitution, spoke of the inherited right of First Nations, but it wasn't implemented. This was a very serious contention by First Nations. When government look at, and it was about time of the changing government, it was the election process in the early 1990's that led to the liberal government, who wanted to come into power. They said to First Nations in their background, in the election process, saying that we would want to have First Nations recognized with certain inherited rights. We capitalized on that. Our process was "Let's do that", to do that we needed to get ourselves out of the Indian Act. We worked with the government when it became government and we negotiated the Frame Agreement. That really was the starting point to say, "Yes, there is a process, and if the government says they would support it, then, let's see the reality of it." The reality of it was the Frame Agreement and the eventual passage of the First Nations Land Management Act legislation. Of course, since then we have been [inaudible 00:06:09] First Nations who have passed land codes, who were now self-governing to the extent that they can now manage their lands and their resources.   Brady Deaton Jr: How many First Nations have opted in to the Framework?   Chief Louie: Right now we have 37 First Nations to actually become operational, that have passed land codes and are fully operational. We have 25 that are in the developmental phase today. We have a total of about 83 First Nations on the waiting list to become involved. When we add up all those figures, it boils down to about one in six First Nations in Canada are either involved or want to be involved in the Land Management.   Brady Deaton Jr: What are the steps if a First Nation wants to basically enter into the Framework Agreement? What are the steps by which that would be done? I wanna talk in a minute about the Indian Act, because I think that's important. If you wanna to move out of the Indian Act into the Framework Agreement what generally are the steps that First Nations would undertake?   Chief Louie: The First Nation that is interested in this process first of it has to have the genuine interest. And that interest would normally, and usually comes from the council of the First Nation. It has interest, it's heard of the Land Management initiative through one process, step, or another. It says and it feels, "Yes, this is something that could work for our community", that First Nation would then look at passing a bank council resolution to set the process, to say, "We have interest, we'd like to become involved, we have interest here, accept our resolution saying that we have that interest, it's signed that we wish to proceed." Now, in the recent years, last couple of years, government of Canada has said, "well, that's fine, but now we have to go through a process, you're going to have to fill out some application forms and let's take a look at all of the varies things that have to now be considered. Are you in third part management for example, do you have economic development needs, do you have any environmental issues or matters of serious concern, are you [inaudible 00:08:30] Canada?" Questions of that nature. Then Canada, once it has that application, will make a decision. It has the control, if you to will, to accept or reject the First Nation now coming into the process. If it accepts that First Nation, then that First Nation is recognized "Yes, you will now have an opportunity to participate when the funds and when time permits." Recently, in the Spring of 2000, the minister of Indian Affairs accepted to have that [inaudible 00:09:07] of First nations, another group, 18 new First Nations, from coast to coast, were then agreed upon to enter into the land measurement process. That opened the doors for those 18 First Nations. They're now in the developmental phase of their land code development. We still have many other First Nations for waiting. You can appreciate that cost money to have First Nations in developmental process. Canada has to set aside those [inaudible 00:09:38] and has to budget it. Right now, we're under certain budget constraints. Even though that we have KPMG studies, and studies of that nature, that suggest and support the fact that if a First Nation becomes operational, we can show and demonstrate through past history and review of the economical findings that that First Nation is going to bring a return to the investment into that First Nation going into developmental phase. It's been estimated that at least 10 times the return on that investment. By Canada investing into the First Nations to support them to become operational. Once it becomes operational, 10 times the return of the investment. And those investment returns grow every year.   Brady Deaton Jr.: Do the First Nations vote on whether they want to accept the new developed land codes? How is the community participation in this process?   Chief Louie: The community is very, directly involved. To [inaudible 00:10:40] the process is one thing. Then the First Nation, once it's gained entry into the developmental phase, it has to go through an internal process of ratification by its members of their land codes. Land Code is the laws that the community sets that follows the principles of the Frame Agreement and follows the legislation. That has to a

In this podcast Barrett Kirwan and I discuss his research on two issues crucial to understanding agricultural policy and rural economic development in the twenty-first century. Transcript Brady Deaton Jr.: Welcome to FARE Talk, where we set out to provide enduring discussions on contemporary topics relevant to our economy, with particular emphasis on food, agriculture, and the environment. My name is Brady Deaton, Jr. of the Department of Food, Agriculture, and Resource Economics at the University of Guelph. I'll be your host. Barrett Kirwan is an assistant professor in the Department of Agriculture and Consumer Economics at the University of Illinois. Barrett, welcome to FARE Talk.   Barrett Kirwan: Happy to be here.   Brady Deaton Jr: I think the issues that you are examining, ag subsidies and the effective quota, are really critical to understanding both the historic and the future effects of ag policy. I want to start by discussing your first article, which was published in the Journal of Political Economy.   Barrett Kirwan: Okay.   Brady Deaton Jr: Which examined the incidence of US agricultural subsidies on farmland rental rates. You make a point that a primary goal of US agriculture policy is to support farmer income. Why does it lead you to examine the issue of rental rates?   Barrett Kirwan: The traditional theory, the story that I've always heard was that the subsidies get capitalized into the land value. I grew up on a farm in Idaho where we rented most of our land and so the idea that all the subsidies were getting capitalized into the land value meant that the subsidies was going to the landlord, who was not a farmer. It got me thinking about why are we giving all this money to landlords? I naturally looked at rental rates.   Brady Deaton Jr: I think the idea of that the public wants to support farmers is generally accepted, but the idea that that support could be going to landowners, many of whom are not necessarily farmers, that may be an issue of more debate. Were you surprised when you started looking into the data on farmland ownership, farmers versus non-farmer owners of farmland?   Barrett Kirwan: I was. In fact, I didn't realize that there were so many non-farmer owned acres. It turned out that during the time period that I'm looking at, about 45% of the farmland in the US is not owned by a farmer. It's owned by a non-farmer. I was surprised that the number was that big. It seemed to make the issue much more important.   Brady Deaton Jr: Why then ... Let's talk a little bit about the theory. You mentioned that you had heard this story that the value of any increase in farmer income would get bid into the, or capitalized, into the value of farmland. Break that story down for me a little bit. How do economists generally make this argument. Why is that a story that you heard before?   Barrett Kirwan: This I think was something I heard growing up just talking, listening to farmers, but then getting into economics, it was probably one of the very first theories that I learned that if you have an input into production and that input has no elasticity, it's unresponsive, but will the rents will ultimately go to that input. I think it may have been in my very first semester of microeconomics that I learned about Ricardian rents and this idea that ... Farmland was the example that was given and this idea that the more productive farmland that is given, earned, returns above what's the average land would earn. This idea that any productivity that the land has gets capitalized into this value, and if you think about subsidies, it's just, in terms of value, it's just adding to the value of what's being created from the land. Because the land isn't [inaudible 00:04:23], the subsidies get captured by the landowner.   Brady Deaton Jr: When you were reviewing the literature on this, did you find a lot of empirical work that had researched this question? There was a theory here that if I have a more productive farm and I'm renting that out, that I'm going to charge more for it. I'm going to get more money for it, and if you have a policy that provides more profits, than I'm going to capture the value of that policy, but had there been a lot of studies that empirically examine this question?   Barrett Kirwan: Surprisingly there haven't. There are a couple very early studies that actually looked at tobacco quotas [inaudible 00:05:05] a subject that [inaudible 00:05:07] we're going to talk about today, but they were looking at tobacco quota in terms of, as an asset, does the value of a quota get capitalized into the value too. The subsidy gets capitalized into the quota itself. Based on that early work, it confirmed what economists had presumed and it's funny, but it seems like that was about all they needed. From then on, it was just everybody knew that some, almost all of the subsidy would go to the landlord, and the amount of empirical research on it though was really quite small. It was a little bit surprising.   Brady Deaton Jr.: It's somewhat surprising also that policies that were designed to help farmers would persist in light of that theory, especially when we started to understand that so much, nearly 50%, or you say 45%, of the farmland wasn't owned by farmers. I wonder if people just didn't understand the degree of non-farmer ownership of farmland or whether they really accepted that basic tenet.   Barrett Kirwan: Yeah. I'm not sure. I think that was one of the things that was most disturbing to me, and even before I knew the extent to which the farmland was rental land, it just didn't seem right to me that ... It seemed liked decades you had agricultural economists testifying before Congress, telling them that these subsidies are ineffective, they go to the landowners, and Congress never really responding. I wanted to dig into that. Either way, because the theory is not true, that's interesting. If it's because the theory is true and somehow the landowners have more political power, and that's what's driving policy, that's interesting too. That was one of my key curiosities in getting into it.   Brady Deaton Jr.: All right, what do we need to know? Now you study different policy periods. It seems to me the one you describe, and maybe you could just give us a basic overview of those policy periods, but it seems to me that in each case, you're concerned about explaining whether or not the landlord and the tenant could anticipate the amount of subsidy that would be paid and maybe you could describe that subsidy, and also the magnitude of that subsidy.   Barrett Kirwan: Right. One of the big issues during this time period was the decoupling, as they've called it, of farm payments where it went from a period where the subsidy was dependent on the price of the commodity. If the price was low, the subsidy would be high, and vice versa, if the price were high. They turned it into a subsidy that was not dependent on the price and not dependent on production. The idea was that there's this niche timing in terms of you sign a rental contract in the spring, but you don't really know the price or the subsidy that you're going to receive until the fall. In the beginning when there was this uncertainty about the price, it wasn't clear that you would actually find ... The empirical result would actually be valid because you didn't know what the farmer was anticipating. As time went on, as the subsidy became less dependent on the price of production, it became much more certain to the farmer in the spring and to the landowner what the subsidy would be. Over time, you could see that the likelihood that the subsidy would get bid into the cash rental rate would have increased because the farmer would've been more certain about the subsidy that was going to be paid at the end of the year. Trying to I guess "fix" that problem at the beginning, and then using later periods to verify that that fix works, that was part of the work into the paper.   Brady Deaton Jr.: Right. Just [inaudible 00:09:47] maybe one example, in the 1996 Federal Agricultural Improvement Reform Act, before that, how would a landlord ... What would a landlord and tenant have known about the subsidy, before that reform act of 1996? What would they have known about the subsidy that the operator or the farmer actually working the land would have gotten?   Barrett Kirwan: Probably the most important, in my eyes, the most important thing that they would've known in the ... Not only was the subsidy dependent on the price, but the subsidy was attached to a specific acre of land, and the subsidy also depended on the productivity of that land. Before 1996, they might have a general good idea about the price based on future prices and their expected bases [inaudible 00:10:49] may have been able to form some pretty good expectations that way, but in terms of the analysis, knowing that you have a more productive piece of land that ... As a landlord, your more productive piece of land is being rented out. Not only can you charge more because it's more productive, but you could charge more because the subsidy is a function of that productivity. The subsidy's going to be even greater on the production land than it is on the less productive land. Being able to control for that actually, being able to account for the fact that a lot of the variation we see in the subsidy is caused by the productivity of the land. Early on, that was I think one of the key insights into answering this question.   Brady Deaton Jr.: Right. For those listeners, there's a lot of effort in this paper given to the technical aspects of measuring them, and I'm sure we're not going to do it justice in this podcast, but there will be a link to this paper and the second paper we're going to discuss. It's worth taking a look at exactly, for those of you who are interested exactly how Barrett tries to take into account of these differences. After 1996, it was a little different, right? After the

In this podcast Dr. Tom Flanagan, myself, and students from the University of Guelph discuss Tom's research examining First Nations and private property rights. Transcript Brady Deaton Jr.: Welcome to FARE-talk where we set out to provide enduring discussions on contemporary topics relevant to our economy with particular emphasis on food, agriculture, and the environment. My name is Brady Deaton, Jr. Of the Department of Food, Agriculture and Resource Economics at the University of Guelph. I'll be your host. Tom it's my pleasure to welcome you to FARE-talk. Tom Flanagan is professor of political science at the University of Calgary. He is the author of numerous books, many of which have won prizes. The book that we'll be discussing today he co-authored and the title of that book is Beyond the Indian Act, restoring aboriginal property rights. Tom, welcome to FARE-talk.   Tom Flanagan: [inaudible 00:00:53] good to be here.   Brady Deaton Jr: I should also for those people who will be listening to this podcast, this is a bit of an experiment. We're doing this podcast with Tom over video in a classroom setting where students from Land Economics will be participating in the podcast discussion. Tom, just to get the ball rolling, give us a bit of a background of property rights on First Nations and the consequences that have motivated your interest in this area.   Tom Flanagan: Yeah. Well I think many of the problems that people point to that First Nations have - low incomes, bad housing conditions, various social pathologies, high rates of alcoholism and drug abuse and family breakdown and so on - a lot of these things have deeper causes in the absence of property rights. To give an example today is National Housing Day and Shawn Atleo the grand chief of the Assembly of First Nations published an editorial in the National Post this morning talking about the sad state of First Nations housing. He says there's a shortage of 85,000 homes for First Nations people on reserves. He also cites the Statistics Canada figure that 42% of existing housing is in need of repair. Now that's an astonishing figure, over 40% of housing is, and we're not just talking about a new coat of paint. Statistics Canada talks about needing repair they're talking about more serious structural features. Well, why is that? Well surely one of the main reason is that all the land on the Indian Reserves is owned by the government. Indians don't own the land, either collectively or individually. They can own a house but most don't. The houses are mostly provided for them by [banned 00:02:53] governments. There's never enough supply of housing and what there is, is not well maintained, in contrast to the larger society where shortage of housing is sometimes an issue, but pretty much a marginal issue. There's maybe 1% of the Canadian population at large that don't have safe, warm housing. So you can talk about housing as a problem, but the underlying problem is an absence of property rights which would enable a housing market to operate. It's housing markets that give us owner occupied or rental housing in the rest of the country, but those housing markets don't operate on reserves. So there's one example of how standard of living is impacted in a very real way by an absence of property rights.   Brady Deaton Jr: So, if we were to look at the lay of the land on First Nations reserve areas today, what would we see in terms of those underlying property rights? There's leases, what other ...   Tom Flanagan: Well there are some, there are sort of quasi property rights. There's very little of free holder or fee simple land of the kind that is the main property right off reserve in Canada. Fee simple does exist in a few special cases like on the [Iska 00:04:08] Reserve. But it's pretty marginal. So there are three types of existing property rights. One is customary rights which are widespread, but nobody really knows how widespread. Nobody keeps a complete record of them. But these are just based on occupation of land, often for generations, by families who may have houses or may have farmed it. But it's never been approved in any formal way by Band Council or the Minister. It's not enforceable in court. It may be recorded. Some bands keep registries of land, but if it hasn't ever been legally approved, it's not enforceable in court. Nonetheless, there's a lot of it and many people lives are based on it. Second form is the certificate of possession, which is formally approved by the Band Council and the Minister. There are about 44,000 certificates of possession in operation now on reserves. So that's a lot. And some reserves are almost entirely certificated like the First Nations, Six Nations Reserve close to, not that far from your university. And certificates are enforceable in courts. So they are a pretty strong form of title. The main limitation on them is that they can only be sold to another member of the same band. So there's virtually no market for certificates of possession. So that means that if you're on a reserve where certificates are accepted, you can get one and you can perhaps build a home on that piece of land, and you might even be able to get a mortgage if you can get the Band Council or some other third party to guarantee the mortgage. But the home doesn't become a savings vehicle. It's a place to live and you can leave it to your heirs. And that's good but it's - for most of us the home is the best investment we'll ever make because your wealth grows in it as the price of housing increases. But that doesn't happen where there is no housing market. And then the third form of property right is the lease. And the Indian Act has several provisions that underlie leasing arrangements. Certificates of possession can be leased and that's the basis of the prosperity of the Westbank Band in British Columbia is leasing of certificated land by individuals. Or the band can lease band land for major projects. There's lots of examples of that in Canada. It could be to casinos or hotels for golf courses, shopping centers, industrial parks, or residential housing developments. The lease is in some ways the strongest form of property, because once it's signed it's tradable in the market. It can be sold. And so there is a re-sale market for leases, so they don't have the weakness of certificates of possession. However the weakness of the lease is by definition it's time limited, 39 years, 49 years, 99 years, whatever. It's not as strong in that sense as fee simple ownership. The best guess is that under good conditions a 99-year lease might be worth about 80-90% of the value of fee simple ownership. But conditions aren't always that good. Some leases are written only for 39 or 49 years and they are worth quite a bit less than the fee simple value of the land would be. So anyway, these are the three existing forms of property rights on First Nations land. So the suggestion of our book is that the fee simple ownership should become a fourth option. Nobody would be forced to adopt it but ought to be possible for First Nations who want to, to have that chance.   Brady Deaton Jr: Just for some of the listeners who might be listening in. When you think about fee simple, how do you define that or what's the kind of lay version of what you mean by that?   Tom Flanagan: Well, fee simple ownership like any form of ownership is the right to use the land, have the right to exclude others from use of it and the right to dispose of it through sale or gift or lease or whatever. So it's a complete ownership restricted only by the laws of general application such as zoning laws or environmental laws, nuisance laws and things like that. That's the normal form of ownership of land in the rest of Canada so all the students I'm looking at probably - You're probably too young, most of you to own your own home but I suspect in most cases your parents own homes. And that would be fee simple ownership. And so it hasn't been available to people on First Nations land up to this point. So we would like to make that available as an option because it's a more flexible form of ownership. It's a better store of value. It appreciates over time because you can have a resale market for it. You can get a mortgage based on it. You can build a home on a reserve if you have a customary right or a certificate of possession but the bank won't give you a mortgage to do it unless some third party guarantees the mortgage because they can't seize the land because no outsider can own the land. But if the fee simple regime were introduced a bank would be able to seize land for non-payment of a mortgage as it would for anybody else because under that regime an outsider would be able to own land on an Indian reserve, which is presently impossible.   Brady Deaton Jr: Alright. I'm going to turn it over to students for questions in a minute. But before I do that let me just ask you to maybe state the essential elements of the reforms that you and your co-authors are suggesting.   Tom Flanagan: Well, the first step would be to pass legislation and that legislation is currently being drafted. It's called the First Nations Property Ownership Act. At one time we were hopeful that it might be introduced by the end of 2012. Now I think probably early 2013 is more likely. But anyway, the government is working on it. Once the legislation was passes that would make it possible for First Nations to opt into that regime. And that would mean opting out of the Indian Act with respect to the various land provisions in the Indian Act, which is a big part of the act, not the whole thing but it's a big part of it. So First Nations could choose to come under the new legislation. If they did that the first thing that would happen is that they would get a collective fee simple ownership to all of their reserve land, which at the present time is owned by the crown and held for the use and benefit of the people who live on it.

In this podcast David and I discuss the U.S. farm bill. He reviews the history of U.S. farm bills and the current political setting surrounding efforts to pass a farm bill in 2013. Transcript [0:05] Brady: Welcome to FARE Talk, where we set out to provide enduring discussions on contemporary topics relevant to our economy, with particular emphasis on food, agriculture and the environment. My name is Brady Deaton Jr. of the Department of Food, Agriculture and Resource Economics at the University of Guelph. I'll be your host. [0:22] [Music fades out, ends.] [0:25] Brady: Today I'll be talking about the U.S. Farm Bill with David Schweikhardt, professor of agricultural, food and resource economics at Michigan State University. David, welcome to FARE Talk. David: Thank you. [0:37] Brady: David, I want to talk about the current setting and the current dynamics around the U.S. Farm Bill, but perhaps before we start that, for this audience, tell us a little bit about kind of what the Farm Bill is and where are it's origins. David: Well, modern farm bills are rather large pieces of legislation. We give them the name Farm Bills as if everything that's in them had to do with farm policies directly at the farm level. But over time, farm bills have become very comprehensive in that they include a lot of different programs. They do of course include commodity programs, price supports and other programs for farmers. They include conservation programs for farmers that make payments for certain conservation and resource preserving practices. But it also includes a wide variety of other topics, all the way from nutrition programs such as the supplemental nutrition and assistance program, SNAP program, used to be called to Food Stamp program which is basically an income supplement for lower income persons. That was added in 1973. You have programs like Women, Infants and Children which is a nutrition program aimed at pregnant and mothers, pregnant mothers, and at children and infants. We have school lunch programs, which are aimed at feeding of school aged children. We have some elderly feeding programs, we have farmers' market programs. Much of it is related to food but it actually encompasses many different parts of what we might call the food system, which includes everything from the input supply level all the way up to the retail level. And so there, we call the Farm Bill basically is a historical shorthand, but we, it encompasses much more than simply the farm level. [3:00] Brady: Alright, and these, you know, the origin, this is a twentieth century, in the 1930s this emerges, or? David: Right. The first Farm Bill was passed in 1933. It included basically two elements, price support programs for farmers and supply control, acreage control programs. And it had one simple objective; it had the objective of increasing farm income. That was the start of the policy, that was the end of the policy. So it was entirely focused around the farm. That continued basically through the late 1960s. In 1973 we had a significant change, we still had the programs for farmers, they were converted into income support payments rather than price supports in 1973, but the 73 farm bill was the first farm bill that included the food stamp program on a national basis, which again, is the forerunner of today's SNAP program and it's an income supplement essentially for lower income persons. So, in 73 we combined farm programs and nutrition programs. Then in the 80s we added several environmental and conservation programs aimed at a variety of environmental problems associated with agricultural production. Then in the 90s we added even more programs ranging from, you'll see amendments in the 1996 farm bill dealing with a variety of animal welfare issues. Crop insurance then in the 2000s began to replace or exist alongside price supports for farmers. And so, over time, this thing evolved basically in the same direction as society evolved. We added policy targets because society added policy targets. The first policy target back in 33 was a simple one, increase farm income. By the 2000s it had become increase farm income, but don't have too much effect on consumer prices, support incomes and food consumption for lower income persons, deal with a limited set of animal welfare issues. In economists' lingo, we added an increasing number of policy targets. Now there's an old rule in economics called the Tinbergen rule, and the Tinbergen rule says that you have to have at least as many policy tools as you have policy targets. That no one, that if you have more than two policy targets you cannot hit both targets any more than you can hit two birds with one stone. And if you get to the 2000s where we have 5, 6, 10 or more policy targets, you're going to have a larger number of policy tools and it becomes a much more complex piece of legislation. So over time this has been a matter of legislation that has gotten larger in its scope because the problems that society cares about have gotten larger. [6:57] Brady: Alright, and so normally these bills are passed every five years, but we're not in normal times now. What's going on right now? David: Well out last farm bill was in 2008 and it was a 4 year bill, and as you noted, we usually write these bills for four or five years. So it's a four year bill, and so we were supposed to rewrite it in 2012. In 2012, the Senate agriculture committee passed a farm bill, and the entire Senate then took that bill up and passed it largely unchanged from what the Senate ag committee had passed. So the Senate got their job done in 2012. The House agriculture committee passed a bill in the middle of 2012 and the leadership of the House, the Republican leadership of the House never brought that bill to the floor. Why that was, we can go into a bit later, but they never even brought that bill to the floor for votes. So as we reached December of 2012, Congress passed a one-year extension as part of a larger budget package. We called it the fiscal cliff back in December of 2012. So there's a one-year extension. That brought us into 2013. In 2013, the Senate once again passed a bill. The House voted on what was essentially the 2012 House bill and it was defeated when a large number of Republican members voted against the bill because they considered the cuts in nutrition programs, especially cuts in the SNAP program to be too small. After that defeat on the House floor, the House leadership brought back to the House floor a bill which includes only farm programs, did not include any nutrition component. That bill passed on a very narrow vote, vote of about; I believe it was 216 to 208. Virtually no Democrat, very few Democrats voted for that bill, a handful of them did. So it's basically along party lines. So where we stand now is the Senate has passed a Farm Bill that includes both farm programs and nutrition programs. The House has passed a bill that includes only farm programs, does not include any nutrition programs. Now normally when both Houses have passed a bill, they then go to a conference committee that works out the differences between the two Houses, and they produce a final bill that is sent back to both Houses for final vote. That conference committee formation has not occurred and Congress is on vacation until after Labour Day. Speaker Boehner is saying that the House will take up a nutrition bill immediately after Labour Day. I have my doubts that that will happen, but we can talk about that later. [10:47] Brady: I want to get into some dimensions of this gridlock we talked about when we were recently together in Washington, D.C., about your thinking about a way of characterizing this gridlock. But before I do, just give me an idea of what we're talking about in terms of size of the farm bill. Do you know roughly about, you know, how much money are we talking about here? David: Well over, they score farm bill over a ten year period even though it only, legislatively, exists for a five year period. And, the House version, the version passed by the House ag committee and the Senate version both cost in the range, of say, 950 billion dollars over ten years [Brady: Okay]. So, we're talking about, Department of Agriculture budget then that would be somewhere in the range of 100 billion a year. [11:51] Brady: Alright, and let's compare that to maybe the budget, the defense budget. I imagine it's much smaller than the defense budget. But how does it, so I'm just in order to kind of put it in some perspective, it's smaller than the defense budget, but it's bigger than or comparable to, what budget might it be comparable to? David: Right. Well, if you look at the U.S. budget it's actually pretty simple. Defense, social security and entitlement programs such as Medicare take up about 75% of the U.S. budget. Everything else the government does is about 25%. If you look at farm programs, commodity programs plus crop insurance, that equals maybe 20 billion a year. Now that 20 billion a year, in addition to that 20 billion a year, then you'll have about 80 billion dollars mostly for the food stamp program. That's roughly the way the budget breaks down. If we look at that 20 billion we spend on farm programs, that is significantly larger than the entire budget of an agency like the EPA, the environmental protection agency. It's significantly larger than the budget of the Federal Bureau of Investigation, the FBI. So we're talking about a significant amount of money here in comparison to a lot of other agencies in the government. We're talking, it is small relative to defense or social security or Medicare, but it's large in relation to a lot of other things the government does. Like I said, that, you take away the big three of defense, social security and Medicare, and you've got about 25 percent of the budget left for everything else the government does, and agriculture is still a large chunk of that 25 percent. [13:59] Brady: Alright

Dr. Jayson Lusk and Dr. Brady Deaton discuss Jayson's most recent book - The Food Police: A Well-Fed Manifesto About the Politics of Your Plate, and his concern about government led efforts to promote local food, tax soft drinks, and diets in a particular direction. Transcript [0:05] Brady: Welcome to FARE Talk, where we set out to provide enduring discussions on contemporary topics relevant to our economy, with particular emphasis on food, agriculture and the environment. My name is Brady Deaton Jr. of the Department of Food, Agriculture and Resource Economics at the University of Guelph. I'll be your host. [0:25] Music fades out, ends. Brady: Today I'll be speaking to Dr. Jason Lusk about his recent book The Food Policy: A Well-Fed Manifesto About the Politics of Your Plate. Jason serves as Regents Professor and Willard Sparks Endowed Chair in the Department of Agricultural Economics at Oklahoma State University and also serves as a Samuel Roberts Nobel Distinguished Fellow at the Oklahoma Council of Public Affairs. Jason, welcome to FARE Talk. Jason: Hi Brady. Thanks for having me on. [0:53] Brady: Let's start off with just talking about who are the food police and what are they doing that concerns you? Jason: [Laughs] Well, I kind of like to think about them as the back seat drivers when it comes to food. So it's sort of group of people that think they know better about how you and I should be eating, how farmers should be farming and, you know, it's not a huge group of people, but they've been incredibly influential in affecting how our cultural, how our nation thinks about food and recently also having some impact on public policy or at least public attitudes about public policy. And I think the challenge is, both, from my perspective, is the mis-characterization that is fostered about production agriculture on the one hand, and then also the sort of lack of recognition of what the economic research, and not just economic research, but science in general says about some of the policies that are being advocated. And I think that the unfortunate reality is that many of the policies that are advocated are going to be more costly than they are beneficial and sometimes do more harm than good. [2:05] Brady: That's, before we get into some of these specific policies, which I do want to serve as the fulcrum, really, of our conversation, one of the things that I noticed at the start of your book is that their characterization, or who you termed the food police, a group of people that are commenting somewhat pejoratively about the current state of agriculture in North America, is very different from your own perception of contemporary agriculture. And I was wondering if you could draw that out a little bit. Jason: Right, so you know, the sort of popular narrative that most people have about food is that, it's been fostered by these folks I'm calling the food police, is that, you know, sometime in the 50s or 60s something went wrong. And that thing that went wrong, often the finger is pointed at agribusiness, and various technologies that agribusinesses developed and that led to this process of farmers becoming bigger. They claim there's corporatization of farming; small farms are being run out of business. Farmers can't get a break; they're being manipulated by these big companies. And at the same time, the consumers are getting fat, we're not eating as healthily as we once were, and this is all a result of this out of control, sort of corporatization of agriculture and it's also a result of the farm policies that we have, subsidizing these big corporate farms and agribusinesses. Now that's the story that's told, and that's sort of the characterization that many people have about our food sector. And part of what I'm doing is pushing back against that a little bit. Some of that is true of course, but I think a lot of it overlooks some really important facts and misses some really important benefits. So, just to take a step back, you know, they, to read these popular writings about food, everything is bad with food. We have all these terrible environmental consequences, these terrible social consequences from small farmers going out of business, and then also these terrible health problems. And so, part of what I'm doing is saying, "Well let's just look at what is actually going on out there," and I think when you look at a lot of the statistics about the state of food and agriculture in this country, and in Canada, what you see are really positive signs. And now I'm not claiming that there aren't any problems, or that there aren't things we need to think about, but what I am saying, is that we need a sort of accurate picture of the world that surrounds us before we start advocating all kinds of changes. So, just to give some examples, you know, one is that life expectancy is increasing, it's been dramatically increasing over the past 100 years, but even in the last 20 years alone, while there's been all of these supposed health problems, life expectancy has continues to rise. In addition to that, and I don't know the statistics on Canada, but in the US there are actually more farms today than there were 10 years ago, there are more small farms today. The farms that do exist are making more money than they once did. It used to be the case that being a farmer was an occupation of a popper, but today the median income of farmers far surpasses the median income of, you know, regular households. That's not to say anything about the assets that those farmers hold too. So, financially, farmers are doing well off, and small farmers are also doing relatively well off. I'm sure they wish they were doing better [laughs] but they're doing well. And I think whenever we look at even other things like food safety, it's also getting better. The, you know, for example, the number of confirmed cases of E. Coli, for example has gone done significantly over the past decade or so. People in the US are eating more fruits and vegetables than they were in the 70s. Women are spending much less time in the kitchen than they did in the 60s. I think there is some shocking number, like 80% less time in meal clean-up and preparation women spend today than they did in the 1960s. Now I know some people like Michael Pollan, in his recent book Cooked, he's trying to get everybody back to the kitchen. I think that's a fine thing to suggest, but I think if you actually looked at the lives many of our grandmothers led, you know, it was not all that romantic [laughs] and to feed that family, they had to spend a lot of time in that kitchen. They didn't have microwaves, they didn't have easy to prepare meals, so it really did take the bulk of a day getting ready for a meal and cleaning it up. And I think that's, of course there are a lot of reasons for this, but one of the reasons many women today can now enjoy working outside the home is because a lot of the tasks you used to have occupy a lot of the time for women are now obsolete, and I think that's a great thing. So, you know, I could go on and on but I think the overall picture that I'm trying to paint here is that the state of food and agriculture in our society is great, it's never been better, and it's never been better in the history of humankind. I mean the biggest challenge for humans, historically, has been finding enough food to eat. And yea, we have some problems now about maybe eating too much, but in my opinion, that's the lesser of two evils. We might need to think about ways we can get better at that but in a lot of ways, I think we're really enjoying absolutely amazing abundance [laughs] of food both variety and quantity and quality that's never been witnessed in human history. [7:24] Brady: In a previous podcast that we did with David Schweikhardt, we looked at the history of farm bills in the United States. And this history starts in the 1930s and contemporary, what we call the contemporary food system as you know, has built a lot of government policies, some which we might be more critical of than others. But in its initial, in its starting point, Dave Schweikhardt mentions in the podcast that really the main goal was to raise farmers income, that is was decidedly less than others and it was perceived as a social goal. And that sort of motivated many of these initial government policies, and that was the starting point. When I read the book, and I looked at a lot of the policies that you were critical of, it seems, perhaps unlike where we were in 1930s, that you just aren't buying the starting point of what the appropriate role for government should be. In other words, in the 1930s when these farm bills started, the objective of supporting farmer income might have been something that was generally perceived as an appropriate role of government. But that's something different from the set of policies like local bands on certain food groups, and fat taxes. You seem to be saying this isn't an appropriate role for government. Is that a fair characterization of the difference between, you know, the role of government historically in supporting agriculture and the set of policies that you tackle? Jason: Yea, I mean I think I would be critical even if some of those policies with the goal of supporting farm income back in the 30s. So, you know, in general some of those are sort of philosophical issues about what is the appropriate role of government. You know, should the government be involved in, sort of, redistributing wealth to those people who sort of, you know, out of economic favour with the times. And you know, some of those things are sort of philosophical issues that are a little hard to argue with but I think one of the things that I try to point out in this book is that once you kind of go down that road as it happened with farmers, it's hard to get out of it. And indeed, I think that's what we've seen is we have these policies and they might have addressed a, you know, a need

Barry Goodwin and Dr. Brady Deaton discuss Barry's research on the effect of U.S. subsidies on U.S. farmland values and rental rates. They focus their discussion on the effect of U.S. agricultural subsidies on rental rates. Transcript [0:05] Brady: Welcome to FARE talk, where we set out to provide enduring discussions on contemporary topics relevant to our economy, with particular emphasis on food, agriculture, and the environment. My name is Brady Deaton Jr., of the Department of Food, Agriculture and Resource Economics at the University of Guelph. I'll be your host. [0:23] Music fades out. Brady: Today, Barry Goodwin and I will be discussing his research on the effect of US government subsidies on US farmland values and rental rates. Barry is William Neal Reynolds professor in the departments of economics and agriculture and resource economics at North Carolina State University. Barry, welcome to FARE Talk. Barry: Thank you Brady. Good to be hear. [0:45] Brady: I should note to listeners that today's discussion will orbit around a paper that Barry and his colleagues have written, and the title of that paper is The Buck Stops Where? The Distribution of Agriculture Subsidies, and a link to that paper will be made available. Barry, I love the way you start this paper, and I'm just going to throw the question that you pose to your readers, a question that you took from a news report, and I think it's an interesting way to start this podcast. And the question is, what do former basketball star Scottie Pippen, publisher Larry Flynt and stockbroker Charles Schwab all have in common? And what's the answer to that question, and why is it important? Barry: Well they're all beneficiaries of farm program subsidy payments, so, and they're not, you know, individuals that we would associate as being involved in production agriculture. You know, makes for an interesting news story, to find these different individuals that are very wealthy and very influential, and yet are receiving farm subsidy payment cheques. [1:55] Brady: And somewhat related to this, is I was looking at Paul Barkley's centennial history of the American agriculture economics association, and he's talking about four running meetings that four runners of the association, in particular looking at the economics society, and he talks about a session that was put together to examine the rapid increase of the system of land renting, the absorption of small holdings by wealthy land owners, and the abandonment of farms. But what's interesting about that is that it was a session that was put together in 1897 [laughs]. Barry: Wow, that's fascinating, yea. I have seen that but it's, I Believe the farm ownership peaked at some point there back in the early part of the last century, so the number of farmers and that sort of thing has been sort of on the downward trend ever since, so. Brady: Now the numbers, one aspect of this question is, it turns out that a great portion of farm land in the US and I believe the phenomenon is relatively similar in Canada, is owned by people that wouldn't be considered farmers, or non-operators. Barry: Yea, that's right. I mean it's, and even more fundamental to that is the fact that such a high proportion of farm land is operated by a tenant not the owner, and you know, I think in the US now it's approximately 40%, but if you go into some of the main production areas like the middle of the corn belt, I think it goes even much higher. So, it's, you know, an increasingly prominent feature of agriculture in developed countries, in the US, I know it is very similar in Canada. And so, there's that part of it, and then there's the question, well who are these landlords? Are they other farmers? Or I think what we generally think of, you know, sort of think of a anecdotal story that you might be familiar with, it's some retired farmer that's living in the area and renting out their land to their neighbours, but USDA did look at this back, I believe it was about 98 or 99 in one of their land owner surveys, and the found, you know, some really interesting findings that a lot of landlords are retired farmers, but an awful lot of them don't live near the farm, they're not retired farmers, they're you know, retaining ownership of this land that may have been in the family, but they are not involved in production agriculture to any tangible extent at all. So, you know, some very interesting questions. [4:34] Brady: We did a survey actually in southern Ontario trying to figure out that question to, and we found very similar results. Clearly widows and widowers are, that's a big category, and retired farmers. But there's a lot of people, particularly in southern Ontario that are what are identified as residential land owners that may live on the land, but aren't kind of actively farming, and maybe commuting to another job. Barry: Exactly, yea. Brady: So this is a big question, and, you know, there can be pros and cons, I guess, in a variety of ways, but you are really looking at the transmission of the agriculture subsidies to the land owner as well as the tenant. And, I guess, talk to me a little bit about what the debate is, or what the kind of thinking, the general thinking of that, and then we will kind of go over maybe some of your general results and then move into the more specifics of your paper. But what would be the expectation of how that would play itself out? Barry: Yea, so, you know, just to start with, land value, like any other asset, land arises value from the stream of incomes that it is going to earn in the future, and there is some uncertainty associated with those incomes and one thing we do look at in this paper and some others that we've done is really just to consider the fact that different sources, different policies, different types of income may have a, you know, different degrees of uncertainty associated with it, so how they're going impact asset values could differ as a result of that, but you know, the big concern right now, whether it's a concern or just a, you know, a feature of agriculture, is the fact that high prices have driven up land values tremendously. You know, it's just been in the last five to ten years we've seen just a real increase in land values, and that's of course, a capital gain to the land owners, it's, you know, a cost to somebody who's wanting to get started in agriculture and acquire this land, but there's a lot of issues that relate to the fact that these assets have continued to gain value. And then there's also the question of who are these policies really intended to provide benefits to? The legislation requires, in the US, that if it's a cash lease, that the subsidy cheque goes to the operator, the tenant if it's a tenant operator, and because they're technically the ones who are holding all of the production risk, that's the way it's always done and has been done. And, if it's a share lease, which is becoming less common in most areas in the US, but if it's a share lease, then the subsidy cheques would be divided according to the terms of the share. But, you know, one important question is, if the cheques, the cash leases, which are the most prominent way land is leased, if the cheque is going to the tenant, does that mean that the landlord is not benefitting from that? And the fact that so many landlords really are quite far removed from production agriculture now, is that the intent of the policy? Or is that just, you know, a consequence of the way the policies are distributed? It's an important question as to really, if it's a cash lease sort of arrangement, does the landlord essentially raise lease rates to capture some of those additional benefits when policies change. And we believe we do, and I think the literature is pretty clear on that. The debate is over how much of that dollar of subsidies stays with the operator and how much goes back to the landlord. [8:28] Brady: Right. So, the land owner is sitting there, and they become aware of a government subsidy that is going to the tenant. I guess the question is, do they capture that full subsidy or to what extent is it shared? And you kind of, your research focuses not only, in this paper, on the total effect of say government subsidies on farm land values and rental rates, but also you're able to break apart the different ag programs and see if there's differences in these ag programs on how they affect rental rates and land values. I think that's pretty interesting. Barry: Yea, and again, that goes back to, and we have another paper back in, oh I can't remember, 2003. [Brady: 2003, I think. Yea, the H.A., yea] Yea, looking at the, really how we've modelled these, you know, land value determinants and that sort of thing. And what we look at there is the fact that, it's several different things. but different sources of income, if they have different risk associated with it, and certainly policy carries its own risk in terms of whether it will be eliminated, I think, you know, we've seen some pretty big adjustments to the fact that direct payments are gonna, very likely be eliminated if we ever do get a new farm bill in the US. But if something is very uncertain, and the operator is risk averse, then they're going to discount that, value of that, going into the future with a higher discounting rate, and it's going to have less of an impact on land values. What we've looked at is the fact that if you don't recognize that your models of land value, and the degree that benefits are capitalized into asset values are really going to be flawed, you know, because different policies will have different effects, essentially, so. [10:32] Brady: You emphasize in your paper, over and over again, that these land values, for example, are based upon these expectations, and these expectations may vary, not along across what the market returns are, but also with respect to this sort of different portfolio government payments that come in. So, what

Dr. Thom Jayne and Dr. Brady Deaton have a conversation focused on economic development strategies for Sub-Saharan Africa and contemporary issues regarding land use and land ownership in Africa. Transcript [0:04] Brady: Welcome to FARE Talk, where we set out to provide enduring discussions on contemporary topics relevant to our economy, with particular emphasis on food, agriculture and the environment. My name is Brady Deaton Jr. of the Department of Food, Agriculture and Resource Economics at the University of Guelph. I'll be your host. [0:24] [Introductory music fades out] [0:24] Brady: Today is August 28th, 2014 and I will be speaking to Dr. Thom Jayne about agriculture, land pressures, and economic development. Dr. Thom Jayne is a widely respected and well-published professor of international development in the Department of Agriculture, Food and Resource Economics at Michigan State University. Thom, welcome to FARE talk. Thom: Hey Brady, glad to be with you. [0:45] Brady: Thom, you and your colleagues, Derrick Heady and Jordon Chamberlain, recently edited a special issue for the Journal of Food Policy, and the title is Boserup and Beyond: Mounting Land Pressures and Development Strategies in Africa. Generally speaking, what motivated you into this area of research and what in particular is motivating this issue? Thom: Mhmm. That's, Brady, if I, there's sort of a proximate reason, and um, there is a more long standing set of motivations. So if I will maybe start with the longer one, it kind of goes back to how I got into this business working on Africa and agriculture. I was a peace core volunteer after I got out of graduate, undergraduate school in the early 80's and I had an interest in seeing how two-thirds of the rest of the world lived. So, I got my fill of that for two years in a rural village in Ghana, and I was there to help them with agriculture but it became quickly apparent that they knew so much more about agriculture in the tropics than I did. One of the things that really impressed me from my two years there was how their people working in communities, how their hardest efforts could be undermined by a politician in the capital city just by the stroke of a pen. And that's sort of what made me realize that any attempt to do something useful for, you know, to deal with problems of hunger and poverty in Africa, I felt anyway, that I needed to get back into a, sort of a, position where I could speak to policy makers. And that's how I ended up getting into graduate school. But the observation that I came up with after two years in Ghana was that well, I think our textbooks and conventional wisdom about Africa, rural Africa anyway, is that these communities are fairly egalitarian and that land is relatively plentiful. It's not like Asia where you have these really densely populated areas. What it, even in the 1980's, I could see that there wasn't, that really wasn't true. People were constrained in the amount of land that they had, and it seemed to affect their potential to really expand and grow and so forth. You know, sort of the more proximate reason of that, is that having looked at almost every nationally representative data set in Africa, spanning 10 or 12 countries, now that I have really delved into, in every single one of them, we see this huge heterogeneity in land holding size. So most small holder households in Africa may have a hectare or less, whereas a small proportion of households may have 5 to 10 to 20 hectares. And, almost all of the marketed output will come from that top ten per cent of households, so much so that maybe two-thirds of African households sell almost nothing and many of those households are actually net buyers of food in the sense that they may sell something, but they end up buying back more than they sell. And, all of these indicators of welfare, asset wealth, consumption, incomes and so forth, very much seem to be correlated with variations in farm size. And another one of the kind of paradoxes that got us into this work, Jordan and I have talked about this at length before we actually started setting up the special issue, is that when you fly over Africa, and land in one of these capitals, and you look down and there is so much unoccupied land, it looks like it is so sparse. And yet, again, rural households often tell us in surveys that their limiting factor of production is land, and that they can't seem to expand or get access to more land. So there is this paradox of land scarcity amid the apparent abundance. So those are some of the motivations that we had getting into this special issue. And of course, there has been so much done on this, you know, previously, and we wanted to give a nod to Ester Boserup and the seminal work that she has done, and she kind of hatched a cottage industry of subsequent work on this by some of our luminaries in agricultural economics and the economics field including people like Hans Binswanger, Prabhu Pingali, you know, so many other people have done work on trying to explain how land intensification and you know, changes with population growth. [6:20] Brady: And who was Ester Boseup, why is she in your title? Thom: Mhmm. Okay, right. So, in 1965, Ester Boserup wrote a piece that took on Thomas Malthus. And you know, Thomas Malthus seems to have a bad name these days because of his, you know, his pessimism about the fact that population growth would outstrip the ability of the world to produce food, and so there would be these dire consequences down the road as the world became, you know, more populated. So what Ester Boserup tried to turn that around and said, well it's true, that as population density rises it's going to increase the demand for food, but she pointed out that communities tend to respond, much like the induced innovation theories of Vern Ruttan and so forth, and Hayami, communities respond to rising population pressure by intensifying on the scarce factor of production. And so as farm sizes shrink because there is subdivision and more allocation of land, and you know, you reach the land frontier. So Ester Boserup was saying that people would apply more fertilizer, they'd put more labour per hectare on the ground, they'd get more weeding done, so there would be certain forms of intensification that would allow food production to keep pace with population growth. So, that's been widely accepted and empirically validated in most areas, but we start to see that at very high levels of population density, that relationship seems to plateau, this relationship between population density and productivity. So, we're noticing that yes Boserup premises seem to hold, up to a certain threshold. And then beyond then, she never really explored whether this could go on at infinitum, could population density just continue to increase, or, you know, would something else have to happen? And actually, she did sort of talk about the need for off-farm employment to sort of kick in and transform these economies from agrarian societies into industrial ones. So I think most of her writing sort of assumes that once population density gets to a certain point, you're going to have people migrating into urban areas to sort of relieve the pressure. But, you know, one of the defining features of Africa, over the past, you know, 20 or 30 years or so, has been that the industrial non-farm growth has been very limited. And so this is you know, probably discouraged people from leaving rural areas and going into urban areas, even though urbanization is proceeding at a very rapid pace, it would probably be much greater if urban areas were experiencing more rapid employment growth in the non-farm sector. So, anyway, what we're finding is that beyond population density, rural population density of about 500-600 persons per square kilometer of arable land, we see that there's signs that intensification does not increase, and in fact, in some areas it declines. This may be related to over mining of soil, degraded soils, we're noticing that in many densely populated areas fallows have basically disappeared. In Malawi for example, southern Malawi, one of the more densely populated areas of Africa, there are no fallows anymore. So farmers are just intensively, year after year after year, cultivating their plots, and they're putting the same crop, they're not even rotating their crops very well because they have such small farm sizes and they need to grow their staple crop, which is maize in that area, to feed themselves. They end up, year after year, putting maize on that one hectare of land, so there is something like a social trap going on where in the short run, households are doing what's in their best interests, which is, you know, growing as much food as possible on their small plots, but the long run consequences of this are declining systemic productivity, you know, of the whole system which certainly, you know, does not bode well for kind of, future scenarios, unless there's major growth in the non-farm sector. You know, which, you know, there is some signs in recent years, that this, you know, could be picking up. But these are the scenarios that we are trying to address and deal with in this special issue. [11:52] Brady: One of the, one of the really interesting things that you mentioned that I wouldn't mind expanding on a little bit is the, that you have this concern about population densities, and in many other countries, despite the general availability of land throughout Sub-Saharan Africa, for most of the countries, and in particularly in some of the regions within those countries, population is very dense, and so you are really, the land constraint, or the problems associated with the land constraint that you mentioned, are pronounced in those areas. Is that correct, and if so, what are some, you mentioned this in the beginning but, let's go back into some of the issues that are also influencing the land pressures, including some of t

Dr. Richard Vyn and students at the University of Guelph in Dr. Brady Deaton's 4th year course in Land Economics, discuss Dr. Vyn's recent journal article, "The Effects of Wind Turbines on Property Values in Ontario: Does Public Perception Match Empirical Evidence?" Transcript [0:04] Brady: Welcome to FARE Talk, where we set out to provide enduring discussions on contemporary topics relevant to our economy, with particular emphasis on food, agriculture and the environment. My name is Brady Deaton Jr. of the Department of Food, Agriculture and Resource Economics at the University of Guelph. I'll be your host. [0:24] [Introductory music fades out] [0:26] Brady: Today is November 18th, 2014, and we will be speaking to Dr. Richard Vyn about his research examining the effects of wind turbines on property values in Ontario. Dr. Richard Vyn is assistant professor in the Department of Food, Agriculture and Resource Economics at the University of Guelph at the Ridgetown campus. Rich, welcome to FARE Talk. Richard: Thanks Brady, happy to be here. [0:50] Brady: Rich has written an article recently that has appeared in the Canadian Journal of Agriculture Economics examining this issue, and for those of you tuning in, we will be doing this podcast in a different way, in the sense that we are in a classroom at the University of Guelph, looking and talking with students about this issue, and they will be asking the questions to Rich about his research. So let me begin by handing over the microphone to one of the students who will begin asking the first question. [1:24] Student: Hello Richard. Before we focus on the effects of wind turbines on surrounding property values, can you give us a general background of wind turbines in the province? Richard: Sure, yea. The wind energy industry in Ontario has been developing at a fairly rapid pace, and that has come about for a couple of reasons. One of the main push, the primary push behind this would be the Ontario government with the Green Energy and Green Economy Act and that sort of spurred the push to get more energy from renewable resources. So we have seen a considerable expansion in the wind energy industry as a result. This has led to a number of issues, and we have seen this most recently, there was a study that was put out just last week by the government that looked at the impacts of the wind turbines on health, and they didn't find anything significant there in terms of some obvious linkages between health issues and the wind turbines. But, there still are some concerns. They raised the issue of the annoyance factor. Either way though, this has certainly led to a lot of controversy in Ontario. There is a lot of local residents that have complained about the impacts, either on health or on property values, on the inability to sell properties. Which, all of the issues are kind of linked. But ultimately, it has led to this escalading controversy about what the impacts of these wind turbines are. Added to the mix is the fact that a lot of places where wind farms are put up, the municipality can't really reject it. They can be called unwilling hosts, but ultimately it is up to the province to decide whether or not a wind farm application is going to go through. So that's sort of a bit of the background that's led to these concerns about the potential impacts on not only health, but also on property values and that's sort of led to my interest in this subject area too. To see, we have all of these concerns that have been raised, and you look at any story in the popular press, there's a lot of concerns that are expressed there, so what is actually happening? That's kind of what I wanted to take a look at. [3:41] Student: Can you tell us a bit about why your study focused on the Melancthon township? Richard: Yea, the Melancthon Township, yea. That's where I started because that is what I had data for. It was data that included farm sales and rural residential sales. The time that I did the study I didn't have data for anything beyond that township, at least in terms of where a wind farm was actually sited. I do now, and so that's kind of what I am looking to do in the coming months, is kind of expand this research. But for the current study that we are looking at, yes, it was just for the Melancthon Township. It was one of the first industrial wind farms that went up in the province of Ontario, and kind of made a good place to start in terms of assessing the potential impacts of the turbines on property values. [4:29] Brady: Now Rich, correct me if I am wrong, but when you are talking, Melancthon township would be a township in Dufferin County [Richard: Yes] kind of bordering Grey, is that right? Richard: Yes, Grey country is next and also bordering Wellington County. Brady: And this is primarily an agricultural, rural township? Richard: It is primarily rural, yes. There is, the wind farm itself is situated pretty close to a small town but there are no large urban centres anywhere within visibility of the wind farm. [5:00] Student: Sorry. Your paper reviews previous research on the effects of wind turbine on property value. So our question to you is if you can review any of this previous research to us. Richard: Sure, yea. There has been a number of studies that have been conducted, looking at the same issue in other jurisdictions and the results of these studies have been largely mixed. We haven't seen any particular trend that has tended to occur amongst these studies. Some studies have found evidence that yes, there are significant impacts of wind turbines on property values, where others have not found any significant evidence. So, we have seen, yea, a fair bit of mixed results in the literature, and because of that, it becomes necessary to conduct research on specific wind farms if you kind of want to have an idea as to what the impacts actually are. You can't just rely on results of other jurisdictions, just because those results, you know, with both positive and no significant impacts, it is hard to tell what exactly the results might be, for in the case, the Melancthon wind farm. [6:03] Student: The, some of the previous research used willingness to pay as one of the methods of analysis. Before you get into your method, the hedonic method you used, would you be able to shed some light on the willingness to pay method? Richard: Sure, yea. The willingness to pay is basically more of a survey approach in many cases, where they'll go to local residents, and they will ask "What has been the impact?" or "What do you perceive to be the impact of these turbines on your property value?" or just to the general public, they may ask, you know, "If you were to be sited next to this wind turbine, what do you think the impact would be?" So this approach looks more at, what people think is the impact, rather than looking at any sales data. Now if you go back to the previous question, looking at the results of previous studies, there is a difference in the results when you compare certain types of studies. So, you mention the willingness to pay studies. Those studies are more likely to produce evidence of a significantly negative impact on property values, whereas studies that use sales data tend not to find evidence of impacts on property values. So there is that difference in previous studies. [7:25] Student: Hi Dr. Vyn, My name is Vanessa Cipriani. My question to you is, can you explain the method that you used in this particular study, in order to find out the effects on property values? Richard: Sure. I used the hedonic method, which is a regression approach where you basically make the price a function of the set of attributes that the property has. So, you know, if you have a house on the property it would take a whole bunch of the individual attributes of that house, you know, the square footage, number of bathrooms, number of fireplaces, look at the size of the property itself, the value of any other buildings on the property, sheds and so on. Basically, you take as many possible attributes and it basically determines how much value each attribute contributes to the total value of the property. So that is an approach that has been used for a lot of different valuation studies. It tends to be a fairly effective approach in identifying what the value is associated with a specific attribute. So in this case, I am looking at not only the attributes of the house itself, also the location, you know, how close is it to a city, and then also how close is it to a turbine, or trying to find some attribute that accounts for the potential impacts of turbines. So this approach has been used for other types of studies where you are trying to find, for example, the impact of living close to toxic waste sites, if you are living close to high voltage transmission wires. A whole bunch of different amenities, or perceived disamenities, to determine what the impact might be of living close to those types of sites. [9:15] Student: Were any of the attributes you chose particularly unique to your study, versus other wind turbine studies? Richard: Well, the method I used to account for the turbines itself was a little different than had been performed in previous studies. Typically the previous studies looked at either the distance to turbines, or distance from the turbine to the property in question, or they looked at the visibility. I kind of came up with a metric that combined those two, because if you think about it, well, the distance to a turbine might affect the impact that it has on the property, but on the other hand, if the landscape is such that you can't actually see the turbine, than conceivably there wouldn't be as much of an impact relative to a property just as close where you can see the entire turbine. And then, similarly, if you can see the full turbine, but you're 3 kilometers away, likely the impact would be greater for a property than can see turbine that is just 1 kilometer away

Dr. Rene Van Acker and Dr. Brady Deaton discuss GM crops. The podcast develops an understanding of contemporary and historic issues associated with the first "wave" of GM crops. They also discuss contemporary controversies and institutional issues associated with GM crops, as well as the future of GM crops. Transcript Brady Deaton: (0:04) Welcome to FARE talk where we set out to provide enduring discussions on contemporary topics relevant to our economy, with particular emphasis on food, agriculture and the environment. My name is Brady Deaton Jr. of the Department of Food, Agriculture and Resource Economics at the University of Guelph. I will be your host. [Music ends] (0:26) Brady: Today is March 11, 2015 and my name is Brady Deaton of the Department of Food, Agriculture and Resource Economics. Today I will be speaker with Dr. Rene Van Acker about GMOs in agriculture. Dr. Rene Van Acker is professor and associate dean of the Ontario Agriculture College at the University of Guelph. He is the Department of Plant Agriculture. He has published over 100 peer reviewed works. His research focuses on the co-existence of GM and non-GM crops, which makes him a perfect guest for today's discussion. Thanks for being here Rene. Rene Van Acker: Thank you very much for having me. Brady: (1:04) The other day, at Environmental Symposium, I heard you answer a student's question, and the question was, "If I walk in a grocery store, what products are GM products?" Rene: Yea, and that's a very good question, and the reason I think it is a good question is because, I think people are unsure as to what is GM or not GM in terms of food. Brady: And I should say, when I say GM, we are talking about genetically modified. Rene: Right, genetically modified organisms or genetically modified crops that are then used to make foods, or genetically modified crops that are ready to eat foods. And on that later point, the vast majority of GM is in field crops. So things like corn, soybeans, in the case of Canada, canola for example. Those will be the key GM crops. Sugar beet would be another one. Very few of the items in the produce aisle would be GM, so papaya, perhaps, papaya sourced out of Hawaii would be GM. Perhaps some squash, although not all. Perhaps some sweet corn, although not all, and that would be about it. There is a pending deregulation of a GM apple, a non-browning apple, which has been deregulated in the US but not in Canada. So that may, in the future, appear on grocery store shelves, but not currently. So, the items that would be derived from GM crops would be things like margarine based on soybean or canola oil for example, or processed foods that contain some element of corn. Those would all be derived from, ingredients from GM crops. And consumers are sometimes wondering about that, and I think they have a perception driven, I suppose, by the media, that everything in the grocery store is GM, and that's not true. And an interesting point, in fact, is that none of our cereals, other than corn, if we consider that a cereal, are GM, so wheat, barley, oats, none of those are GM, rice is not GM, yet. So I think that also sometimes surprises people, they think everything is GM, just GM. Part of that confusion might also be that people know that varieties are bred to superior in some way, disease resistance, better yield, etcetera, and bred varieties, or cultivars, are not GM per se. Genetic modification can be used as a tool in breeding, but it falls under breeding, it is not breeding, and so I think sometimes that confuses people too. Brady: (3:48) Well that's a good point. So genetic modification is some form has been going on for some time. What really distinguishes the way we talk about GMOs starting in the 1990s, with I guess [Rene: Right] the first GMO product was the tomato [Rene: Right] was it the tomato [Rene: Flavour Savour tomato], Flavour Savour Tomato, which didn't make it [Rene: Didn't make it very far, no] but not because of the response to GMOs right, more because it just wasn't Rene: It just wasn't, yea, it just wasn't as effective a product as they thought it would be. Brady: But so, something happened in the 1990s, that was kind of different from the kind of changes in genes that have been going on in agriculture I imagine for some time. Can you walk us through that a little bit? Rene: Yea, and I think that's a very good point, and fundamental to why people are concerned about GM or not. So we have been selecting for bio-types or selecting for cultivars, in agriculture for a long long time. One might argue, you know, for over ten thousand years, since we have been farming, since the human race has been farming. But selecting and traditional breeding is different from GM or genetic engineering. And when we talk about GM, colloquially, genetic modification, we are referring to genetic engineering. And genetic engineering, we take to mean, recombinant DNA technology, and that is a very specific technology that was developed in the 70s, in the US, University of California, San Francisco, in fact, and what it does, it is technology that allows for discreet pieces of DNA to be isolated from one organism and then moved into another. It allows us to move DNA, pieces of DNA, across species boundaries. With traditional breeding, you don't have that ability. One of the traditional definitions of a species is that you, there is central compatibility among individuals in that species, and so you can cross-pollinate to use a colloquial term. With genetic engineering, we are not bound by that. So we can take a piece of DNA from a soil bacteria for example, and then transfer it into a plant or take a piece of DNA. The classic proof on concept was in the mid-80s, where they transformed a tobacco plant with genes from a fire-fly that allowed the tobacco plant to glow in the dark. It wasn't useful, but it was a very compelling demonstration of the power of that technology, and that's the key, is that it is a very powerful technology that allows us to move pretty much any piece of DNA from one species into another. So that opens up the possibilities in a way that we could have never imagined before, and it allows us to go way beyond traditional breeding. Plant breeders are excited by this, because they are always looking for genetic variation, to try and achieve certain ends, let's say disease resistance, for example. So if they can find genes in another organism, beyond the species they are working with, to help them to achieve that, they think that's great, and it can be great. People who worry, worry because we have never done this before. This may happen in very rare cases, in terms of this kind of broad crossing over of DNA from one species to another, maybe it could happen from soil bacteria, for example, into plants, very rare. So if we do this commonly, people start to ask questions like, "What are the unintended effects? What are the things we don't understand about doing that?" And so, you know, there is fear around that. To counter that, we have quite a bit of empirical evidence now, that shows that there are no apparent unintended effects of doing that, as we have been doing it. Brady: (7:54) I think it is interesting to work through, maybe, for listeners, the first, what is often referred to as, the first wave [Rene: Right] of GM seeds, or GM crops. [Rene: Yep]. So, would you mind that and [Rene: Yea] and then talking about that a little bit, thanks. Rene: Yea, so, and that's a good point. GM technology also changed the business, the seed business, because suddenly, in the seed industry, our technology developed in the industry, in agriculture became much more interested in plant breeding because of this new possibility. They also became much more interested in it because, with GM technology came the possibility for absolutely identifying your product. With recombinant DNA technology, development in the 70s, by the late 70s, there had already been a patent put onto a genetically modified bacteria. And so the possibility was there for patenting genetically modified organisms, and so the seed industry became interested in that. And that also drove the first wave of traits, the nature of those traits, because the seed industry understood that the customers were farmers. And so the first wave of traits were traits that would interest farmers, and so they were agronomic traits that provided operational benefits for farmers. And the two that are still, essentially, the predominant GM traits we have out there, almost the only GM traits we have out there are, would be insect resistance and herbicide tolerance. So the Bt trait is an insect resistance trait, and then, the Round-up Ready trait is a herbicide tolerance trait, glysophate resistance trait is also a herbicide tolerance trait. Those are the primary traits out there. Brady: So just to get back to [Rene: Yea] your notion of what makes GMOs distinctly different [Rene: right] from the cross-breeding techniques that used to go on, Bt has I understand it is a bacterium Rene: from bacillus genus bacterium, and so they extract the gene that then codes for what is called a cryo-protein, that resides in the gut of the insect, and in short, kills insects of a certain type, Lepidoptera. For example, the Round-up Ready traits was also derived from a bacteria, soil bacteria, genes that conferred resistance to glyphosate herbicide, common trade name Round-up, and so we were able to achieve those things, we were able to achieve those things using genetic engineering techniques, that they could not have done in other ways. But the traits were relevant to the direct customer, which was the farmer, and there was a rapid adoption of those products by the farmers, because they did offer real operation benefits. Brady: (11:04) Let's talk about that. So with this first wave, it's widely adopted in countries like, with soybeans and corn, countries like the United States [Rene: Canada and

Dr. Cynthia Scott-Dupree and Dr. Brady Deaton discuss the science that informs understanding of the relationship between bees and neonics - a pesticide that has recently been made subject to new restrictive regulations in Ontario, Canada and elsewhere. Transcript Brady Deaton: [0:04] Welcome to FARE Talk where we set out to provide enduring discussions on contemporary topics relevant to our economy with particular emphasis on food, agriculture and the environment. My name is Brady Deaton Junior of the Department of Food, Agriculture and Resource Economics at the University of Guelph. I'll be your host. [music ends] Today I'll be talking to Dr. Cynthia Scott-Dupree and we'll be discussing the science that informs our understanding of the relationship between bees and neonics, a pesticide that the Government of Ontario has recently made subject to new restrictive regulations. Cynthia is the Bayer CropScience Chair in Sustainable Pest Management in the School of Environmental Sciences at the University of Guelph. For the sake of full disclosure I note that Bayer produces neonics, I also note that Cynthia is a well-published researcher in the broad area of pest management and in the specific area that we are going to discuss today. Cynthia, thanks for coming and joining me at FARE Talk. Cynthia Scott-Dupree: Thanks so much for inviting me. Brady: [01:02] You're welcome. Alright so let's see if we can just kind of delve in and I'm not sure the best place to start but maybe we'll just talk about neonics and try to break that down and then we'll talk about bees and then let's try to talk about the science, so we'll have some of our terms. So, neonicotinoids and neonics, can we use those interchangeably? Cynthia: Ah yes, neonics is much easier to say than neonicotinoids or neonicotinoids or whatever you want to say, so let's just call them neonics. Brady: Alright then even within neonics there's three of them that are typically talked about and they have pretty complicated names too. Is it important that we understand that there's more than one kind of neonic out there? Cynthia: [01:41] There's certainly several different neonics and there's actually different families of neonics and within those families their toxicity to bees can vary a lot, so again just within the neonicotinoid or neonic family it's complicated, but the ones they speak of most are imidacloprid, which has been around the longest and I would dare say that most of the research studies that anyone wants to read on them has been focused on imidacloprid. The second generation or newer neonics that are also seen, talked about in these research and other articles is clothianidin and thiamethoxam. But instead of just talking about those today I think we'll just talk in general about neonics. Brady: Okay but even in the headlines I probably read I probably could have been referring to a study that was looking at a particular one of [Cynthia: Yeah] those neonics rather than all and that could be important to [Cynthia: Yes] some of those differences. Cynthia: [02:45] It's true they have different toxicities but I think the more important thing here is to understand some of the basic characteristics of neonics and how they are used in an agricultural setting. For example, neonics can be used as a foliar so they can be sprayed on a crop. They can be used in furrow so they can be sprayed in the furrow when the seed is planted. They can be used as drenches, but more commonly they are used as a seed treatment and this is because neonics have a special characteristic. They are a group of systemic insecticides and this means that when they are applied to the plant they move upwards through the plant so they are in all parts of the plant tissue, and in the sense that we are today talking about impacts on bees, what can also happen is that these neonics will then become concentrated in the reproductive parts of flowering plants and that would be in things like the pollen, and certainly also the nectar because that's what bees will forage on. So you'll get residues moving to these sites, and that's the interface where these beneficial insects can be exposed to the toxins. Brady: Alright, just step back a minute. You know we think about bees providing honey and they also are an important pollinator and that's an important input into agriculture production, but so is pest management, right? [Cynthia: Certainly]. Since the plagues of Moses we know that to have food we have to control pests and so [Cynthia: Absolutely] neonics are an insecticide that do that. What came before? How long have neonics been around? Was there another pesticide that they replaced? Is that important to the story? Cynthia: [04:36] I think agricultural pesticides as we know them today were introduced after the Second World War. A lot of the chemicals we now use in agriculture were developed in terms of chemical warfare, and then afterwards after the Second World War they realized the potential use of them in agricultural applications, and so there's a whole raft of classes of insecticides specifically or pesticides that have been introduced over the years. We won't get into those, but the more recently introduced group since about the 1990s, early 1990s, would be the neonics, and as I say the characteristic of systemicity or being systemic is quite unique to them. I won't get into a description of the particular characteristics, but the fact that they move through the tissues is valuable. Another form of applying chemicals, pesticides to crops is seed treatments, and I think I should spend a bit of the time talking about seed treatments I don't think a lot of people will understand this. Brady: Yeah let's do let's talk about the seed treatment, because that adds the value right, to... Cynthia: [06:04] Yeah. Well, seed treatments I've been a proponent of seed treatments for a long, long time because what you do with the seed treatment situation is you take a tiny little seed and you actually apply the treatment on the coating of the seed, and as the seed grows into a plant the insecticide, the neonic, moves through from the coating on the seed into the tissue of the plant, and therefore it's there from the beginning, so if you have insect pests that attack those plants from the time they germinate and they're just tiny little seedlings when they're very, very vulnerable they will be protected, certainly an advantage. The other thing is that when you utilize the seed treatment versus a foliar treatment where you're spraying a lot of product with water all over the crop and everywhere else, a seed treatment uses a tiny, tiny fraction of the amount of active ingredient that would be the toxin. And so it's advantageous in that way because the environmental impact is much reduced and certainly the people applying these treatments are much safer with a seed treatment than a foliar application. Brady: Okay so I want to hit that back again make sure I understand it. So prior to this ability to treat the seed I guess if I all of a sudden saw a pest that was threatening my crop then I would have to go out and spray a foliage application and that had a different set of environmental implications. This way pre-emergent I can coat it and [Cynthia: It's protected] deal with the pest ahead of time, so it's almost an insurance policy. Cynthia: [07:50] It is an insurance policy that in itself makes it a difficult situation because the whole entire seed treatment industry is a complicated one. A grower needs to buy treated seed in the year prior to planting, so by October of this year for example, growers would be buying treated seed to plant in the spring of 2017. So it's really difficult to predict what kind of pest you're going to have in 2017, we don't have this kind of crystal ball, although a lot of growers and pest management people wish they did, so it is an insurance policy [Brady: I see] because you do have to buy it well in advance and the cost of buying them is quite small in terms of the total amount it will cost to put a plant in per hectare. So it's insurance and it's difficult to understand how that fits within a pest management concept, but it's an important application technique in terms of seed treatments and we really need to figure out how to manage it better than we do because it's too valuable to lose. Brady: Alright well before you go we'll talk about the science behind all of this but now let's turn and talk about bees a little bit. Bees, what I am talking about honeybees typically in these studies but it looks like wild bees come into this discussion, bumblebees. How should I think about bees in this discussion? Cynthia: [09:32] Well I would say that a lot of the information people hear about is focused on honeybees because they are our domesticated honeybee the beekeepers have kept for thousands of years, and they are often associated with the pollination of cultivated crops, vegetable crops, fruit crops, any kind of crop that flowers bees will be attracted to and are likely beneficial to that plant in some way shape or form, so the bulk of our information is focused on honeybees but that's not to say that there aren't a lot of other bees out there that are really critically important to agriculture and lots of other ecosystems, not just agriculture, but natural ecosystems. When you go to Algonquin Park or some park and you look at the flowers blooming you will find bumblebees and other bees, bees other than honeybees. Not to get into too much science here, but the Latin name for honeybees is Apis mellifera, and so we call it an Apis bee and all the other bees are called non-Apis bees, just to really divide this quite easily. The non-Apis bees encompass bumblebees, leafcutter bees, orchard bees, stingless bees, there are a lot of bees out there that people just wouldn't even recognize because they don't all look like honeybees or bumble bees. I would say in terms of the non-Apis bees, peop

Dr. Valerie Tarasuk and Dr. Brady Deaton discuss the meaning and measure of food insecurity in Canada and the United States. Transcript Brady Deaton: Welcome to FARE Talk where we set out to provide enduring discussions on contemporary topics relevant to our economy with particular emphasis on food, agriculture and the environment. My name is Brady Deaton Junior of the Department of Food, Agriculture and Resource Economics at the University of Guelph. I will be your host. [music ends] In today's podcast I will be discussing household food insecurity in Canada with Dr. Valerie Tarasuk of the Department of Nutritional Sciences at the University of Toronto. She and her colleagues have been doing cutting-edge research on food insecurity in Canada. Valerie welcome to FARE Talk.   Valerie Tarasuk: Thank you I'm happy to be here.   Brady:  In your research on food security in Canada what is generally meant by the term food insecurity? And give us just a starting point, idea of how prevalent it is.   [00:57] Valerie: What we mean by that term is inadequate or insecure access to food because of financial constraints so it's very, very specific to problems of affording enough food, you know putting food on the table for yourself and your family and the root of the problem being financial constraint. We've been measuring this problem in Canada for years but in 2005 we adopted the Household Food Security Survey Module that's been used for many, many more years in the United States to monitor food insecurity in that country. So the most recent national data we have is from 2012 and in that year 12.6% of Canadian households reported some degree of food insecurity, and to translate that into perhaps a more common unit of measurement that translates into something over 4 million Canadians living in a household that was affected in some way by food insecurity.   [01:53] Brady: You mentioned that this survey has been conducted in the United States as well. Are we able to compare how Canada fares relative to United States?   Valerie: Yes and that's actually a really interesting thing to do because we're using an identical survey module and in both countries this problem is monitored on a population representative survey. Although we code the module differently in Canada and the United States and we apply slightly different labels, but in our research program we apply the USDA's thresholds in order to categorize food insecurity so that we've got perfectly comparable numbers and what we can see is that Canada is somewhere between two and three times lower in its rate of food insecurity than the United States. [02:36] Brady: What why is that? Do you have any thoughts?   Valerie: There was one study done when this common metric started being used in Canada. There was one study done actually by Mark Nord from Economic Research Services Division of the USDA and it is very interesting. I mean there probably needs to be more research in this area but what he found was, I mean part of it is that our populations are different, but another part of it is that amongst particular population subgroups there appears to be higher rates. I think probably to put it in broad strokes overall in the United States I think there is a higher rate of poverty and food insecurity aligns quite closely with poverty so that's part of it, but there are also worse and the subtle differences in terms of the relationship between food insecurity and whether a household had children or not, things like that. So it's an area where we need to do more to really figure out what's going on, but it looks like part of it is about the nature of the policies in this country and the nature of our economic circumstances.   [03:34] Brady: So the conversation we're going to have in general about the methods of figuring out food insecurity are comparable to the United States. How does this metric that you've been using compare to measures of undernourishment and hunger that's used by the FAO? We're part of the millennium development goals in terms of trying to reduce undernourishment in the developing world. Is this a different measure than that?   Valerie: Yes, yes it is and it is important to keep these things separate. We can't assume in an affluent country like Canada we can't assume that what we're looking at when we look at food security is, you know frank undernourishment or malnutrition. When we look at the relationship between food insecurity and dietary intakes, or nutritional adequacy in Canada we can see definitely differences where people report struggles to put food on the table and less probability of having an adequate diet, but the differences are not anywhere near as stark as we would expect to see another in other places. So yeah it's important to keep those things separate. Recently, I guess in April of this year, FAO produced a report that was an attempt to compare food insecurity rates across all kinds of countries using a simpler measure based in some ways on the 18 items that are used to monitor food insecurity in Canada and United States but much, much briefer, I think maybe 8 or 10 questions, and they administered the questions through, well it was administered by the Gallup Poll, so it was a telephone survey I think most higher-income countries and a sample of 1000 so accrued you know quick and dirty kind of measure but it's interesting there to see the differences and it's exactly as you'd expect. Higher-income countries tend to have lower rates than lower-income countries do and then again interestingly we can see the distinction between Canada and the US with Canada coming in at a lower rate but some European countries coming even lower. It's interesting so it's the only example I know of where there's been an attempt to take the idea and move it systematically across the globe, but going back to your original question for sure we would want to distinguish between food insecurity as it's measured in and understood in North America and these notions of undernutrition.   [05:48] Brady: So when we sort of are looking at sort of the world's developing populations roughly the prevalence is I think it's around 13% as well of the population is under nourished that wouldn't be comparable [Valerie: Not at all] to what we're going to talk about so we can make comparisons to the United States but the FAO measures we're talking about something different. Are we talking about the key difference being that one is more of a subjective measure and the other is an attempt to kind of assess whether someone has enough calories to live an active and healthy life? What would be the best way of making the distinction between what we're doing in North America and in the developing world?   [06:36] Valerie: I think that yes, in some ways there are apples and oranges, right? One absolutely is a subjective measure, it's a reflection on a household circumstance over a 12-month period. There is within the survey module there is an ability to strip out levels of deprivations so if someone would answer affirmatively to all 18 of the questions on this module I mean at the end of the day they would be telling us they had gone whole days without eating. If we had very many people with such extreme levels of deprivation we would expect to start to see associations between such extreme deprivation and the protein and calorie malnutrition, or undernutrition. But thankfully in our country we don't see that many people at that level of extreme deprivation, so part of what's happening with measures of undernutrition is they're trapping a state that is an extreme level of deprivation that endures over a significant period of time and that's not what we're getting here. We're looking at a subjective assessment of the household circumstance over a 12-month window where very few members of our population are so extreme as to be reporting absolute food deprivation day after day after day.   [07:54] Brady: You mentioned this and I think this is important. Let's go through the nature of the survey and how it lends itself to gradations of food insecurity so when we've been talking so far about food insecurity we've been lumping and, correct me if I'm wrong, three groups three measures I guess that build on each other: marginal, moderate and severe. So maybe one way to do it is to just talk about what it would mean if someone was marginally food insecure and that's about 4% of the 13% that we're talking about.   Valerie: So those are households where people only affirmed one item on the 18 and typically in this list of questions I mean the questions vary in severity from the most mild level being "do you ever worry about running out of food or have you in the last year ever worried about running out of food and not having money to buy more" on through to questions about compromises in the quality of food intake and then compromises in quantity. So someone who's, or a household that's classified as marginally food insecure would have said yes to probably only one question and that question typically would have been that question about worrying. So they're expressing some concern about their ability to make ends meet but they're not saying that they have systematically compromised the quality of their dietary intakes or those of their children because of a lack of food or money for food and they're not telling us that they skip meals or gone without eating. So they've said enough to indicate that they are different from other Canadians and that they are worried about not being able to manage or they have been worried in a serious way about not being able to manage and that's a very significant distinction but it's not at the level of them telling us that they've actually not been able to eat.   [09:47] Brady: And then as we move to say moderate they would be somebody who was both marginal but had answered a different type of question. Is that right?   Valerie: When we classify people as moderately

Students from the University of Guelph and I discuss issues regarding land-use regulation and affordable housing with Emily Hamilton. Emily is a policy research manager at the Mercatus Center at George Mason University. Our discussion draws from a recent paper that she, and her co-author wrote titled, "How Land-Use Regulation Undermines Affordable Housing." Transcript Brady Deaton: Welcome to FARE talk where we set out to provide enduring discussions on contemporary topics relevant to our economy with particular emphasis on food, agriculture and the environment. My name is Brady Deaton Junior of the Department of Food, Culture and Resource Economics at the University of Guelph. I will be your host. [music ends] Today is November 17 and we will be speaking to Emily Hamilton about her research on land regulation and its effect on affordable housing. Emily is a policy researcher at the Mercatus Center at George Mason University and she has written on this topic widely and we will actually be looking at a paper that she and her co-author Sanford Ikeda have written. A link to that article will be made available to you on the FARE Talk website. For those of you listening in, we will be talking because we are doing this podcast with Emily in a land economics course at the University of Guelph. Emily welcome to FARE Talk. [01:14 - 02:25] Emily Hamilton: Thank you very much for having me. Brady: Emily, I just want to begin, a lot of the listeners may not be familiar with the issues that we're going to talk about today and part of our challenge is to kind of work through them, but if you got in an elevator with someone you didn't know and you had let's say three floors and they said ÒWhat's your research about? What's this paper that you've written about?Ó What would you tell them in general? Emily: Sure. I'd say that a lot of well-intentioned regulations such as our minimum lot sizes and maximum density roles as well as newer smart growth regulations like urban growth boundaries or green belts all restrict the supply of housing over what we would see in a freer market, and the effects of this supply restriction of housing is felt most harshly by low income people and in our research we look at the regressive effects of these regulations, how they hurt low income people and how they reduce income mobility. [02:25 - 03:23] Brady: Alright, now sometimes I get in an elevator and I might be with a planner and if I've said something like that my guess is the pushback would be, ÒWell, but land-use planning is important, it stops conflicting land uses, it helps perhaps planning for urban infrastructure in those areas and it raises values because it makes places better to live in. What's you're kind of general, now you're going down the elevator and you've got two floors. Emily: Yeah, I would say that there are plenty of justifications for many of these types of regulations. People need places to park their cars, so planners require that landowners set aside areas for parking. Plenty of these regulations have benefits, but their costs are often not considered or not considered sufficiently, so in this environment we tend to see overregulation over what we'd see in an environment where planners consider the costs of these roles in addition to the benefits. [03:23 - 04:59] Brady: Alright I should say we are going to be talking about affordable housing, most of your examples take place, in the paper that you've written, most of the literature you're reviewing are examples that take place in the United States, in Canada we might define affordable housing as spending about 30% of your or 30% or less of your income on housing. Is there a similar definition apply in the United States or is it? Emily: Yes, that is a widely considered rule of thumb in the United States and when housing is required to be affordable for a certain income level, the 30% rule is what cities use to define affordable housing. Brady: And in terms of thinking about this differences among income groups, do you have a general sense of say what the of the poorest 20% pay in terms of housing versus say the richest 20% or? Emily: So typically in the US when city planners are looking at whether or not housing is affordable they look at what's called the Area Median Income and so that's the median income defined typically at the ZIP Code level so it varies very widely of across parts of the US and across cities, so in some places households earning over hundred thousand dollars per year would be eligible for affordable housing because their income level is low relative to others in their immediate neighbourhood. [04:59 - 06:05] Brady: I was looking at some of the data on this in Canada, just kind of preparing and I found, and I'll provide a link to this as well because seems quite high, but the Global News was reporting that, and I think I'll get this about right, that the poorest 20% in Canada pay more than 50% of their income on housing and of course there's a drastic difference for the reasons you mention in terms of the wealthiest 20% pay about 16% of their income on shelter, so the issue affordable housing and the effects that we're about to talk about really do matter perhaps differently to different groups. Emily: Definitely. Brady: What we're going to do now is I'm going to turn the questions for the remainder of this podcast over students and we're just going to try to walk through initially just understanding some of the specifics. One of things that I really enjoyed about the paper was all the specific examples of land regulation and zoning and so I'm going to turn it over to the students who will ask a question, there will be time for a follow-up and we'll just proceed like that. Emily: Great. [06:05 - 07:33] Student: Hi Emily. In your paper you mention exclusionary zoning. Could you give us a bit of an example or a background on what this is and its effect on housing affordability for low-income households? Emily: Sure. Exclusionary zoning is a term that people use to describe zoning rules that are implemented with the intent of limiting who can live in a neighbourhood. So for example rules that prevent any multifamily housing like apartment buildings being built within a neighbourhood could be considered exclusionary zoning if households can't afford to rent or purchase a whole house then they'll be excluded from a neighbourhood entirely. Other types of exclusionary zoning rules include minimum lot sizes and this was probably the first type of exclusionary zoning rule that was labeled as such and New Jersey townships have been some of the most studied areas for minimum lot sizes and some townships they are actually implemented minimum house sizes that were larger than the current average house size, so they're basically saying in the future only people who are on average wealthier than we are here are going to be able to move in, preventing low-income people from moving into the townships with those rules. [07:33 - 09:50] Student: Good morning Emily. I was interested in your discussion of inclusionary zoning. Could you briefly explain and describe what inclusionary zoning is and your findings regarding its capacity to address affordable housing challenges? Emily: Yeah. Inclusionary zoning is a policy that's in the US has been tried in many different types of municipalities and it varies how it's implemented, but in general developers are either incentivized to provide housing that's at a below market rate by either subsidies or changes in regulations that allow them to build more housing if they include inclusionary zoning in their project and what it does is it sets a price cap on the cost of housing, but only for some units within a development. So for example an apartment building of 100 apartments might be required to have 20% of those apartments affordable to people who are earning say 50% of the Area Median Income. And inclusionary zoning sounds like a great idea because it's making housing more affordable to people who make less money than many of their neighbours and it also can make neighbourhoods more diverse than what they would be in a completely free market, which many people argue benefits everyone to have a diverse neighbourhood, but the problem with inclusionary zoning is that it changes what type of housing is going to be built. So if 20% of the apartments in a new building have to be rented at a lower than market rate the other 80% of those apartments are going to tend to be very expensive luxury apartments so that the developer can subsidize the below-market apartments with those high rents on the other apartments. And another problem with inclusionary zoning is it typically provides very few units of affordable housing so inclusionary zoning alone is certainly not enough to address the affordability problem in many expensive cities. [09:50 - 12:23] Student: Hi Emily. You touched already a little bit on minimum lot size zoning. Is there any way that you can explain exactly what minimum lot size zoning is and how it affects housing prices and specifically housing affordability? Emily: Great question. So a minimum lot size rule might say that for example every house in a neighbourhood has to be built on at least a quarter acre of land, so that's setting of a floor on how much housing how much land must be dedicated to each house. So, if land is expensive it's going to directly make housing more expensive as compared to allowing houses to be built on say in eighth or a tenth of an acre of land. Student: Morning Emily. I found your discussion on the effects of parking requirements to be thought provoking. Could you give us a brief summary of your findings as well as the research pertaining to it? Emily: Sure. So in the US the vast majority of cities and municipalities require developers to build a certain amount of parking with their development whether that's housing, retail or commercial development, and the justification for this is tha

Dr. Daowei Zhang and Dr. Brady Deaton discuss his thoughts about the contemporary and historic trade dispute between Canada and the United States regarding softwood lumber: i.e., "The Softwood Lumber Wars." Transcript Brady Deaton Jr: Welcome to FARE Talk where we set out to provide enduring discussions on contemporary topics relevant to our economy with particular emphasis on food, agriculture and the environment. My name is Brady Deaton Junior of the Department of Food, Agriculture and Resource Economics at the University of Guelph. I will be your host. [music ends] Canada and the United States have been engaged in a long and enduring trade conflict with respect softwood lumber. Today my guest Dr. Daowei Zhang of Auburn University will be discussing his book, "The Softwood Lumber War: Politics, Economics and the Long US-Canadian Trade Dispute". Dr. Zhang welcome to FARE Talk and what's currently going on? Daowei Zhang: Well there are litigations going on on this case. The Department of Commerce is supposedly to rule, make a preliminary ruling on April 24 for the countervailing side and early May on the anti-dumping side, so it's in litigation right now. Brady: Just for some of our listeners who might not know what is softwood lumber, what is it that we're talking about? Daowei: There is a scientific definition of softwood versus hardwood, but in laymen's language softwood is basically the species, lumber made from species like spruce, pine and firs and commercially hardwoods are made from oak, maple and beech, these types of species and the softwoods they have much stronger characteristics therefore can be used for construction where the hardwoods are mostly used for furniture and flooring and so on and so forth. [01:58 – 03:06] Brady: So the Canadian softwood that goes into the United States is it mostly used for housing or? Daowei: Correct, it's for housing. Brady: Which provinces in Canada are the big suppliers of softwood lumber to the United States? Daowei: The big supplier is BC and the second largest is Quebec and the third I think is either Quebec or Alberta and those four provinces roughly supplies the US with we're talking about 95 or 96 percent. BC takes the lion's share of the Canadian's, it's way over half of the Canadian softwood lumber supply to the US. Brady: Roughly how much money are we talking about on an annual basis in terms of the value of softwood lumber that moves across? Daowei: The Canadian dollar varies over the years, I mean on average we are talking about like six to eight billion Canadian dollars, five to seven billion sometimes depending on the exchange rate, US dollars annually. [03:06 – 04:15] Brady: And so that's a fair amount of money, that's a fair amount of importance to currency values but I suppose it's also important to particular groups with vested interests, so like homebuilders in the United States but also certain specific communities that rely heavily on forestry in Canada. What other key constituents really have vested interest in this issue? Daowei: Absolutely. It's very important. You mention a couple, the homebuilders in the US are the big players over in the US and also the US lumber producers, to some degree the US landowners the property landowners and their managers. On the Canadian side obviously you have the Canadian producers in the various provinces and the provincial government, on top of that you have the federal government responsible for international trade, so those are the players. Again on the US side you also have the US government as well. [04:15 – 07:15] Brady: In your book you point out that this you know what they call the softwood lumber war, which is a trade dispute between Canada and the United States, has been going on for well over 20 years. One of the very fascinating points that you raise in the beginning of your book, it's kind of a puzzle and I'll just read it to you for those listeners this is on page five of his book and Dr. Zhang says, "One of our first puzzles is that there's been increasingly free trade for most goods and services but not for softwood lumber." Why is that? Daowei: Well that's very true and if I could correct me that number one nowadays it's going on for more than 30, 35 years now. Brady: OK. Daowei: When I wrote this book it was more than 20 years. Brady: That's right. Daowei: But it's fascinating. If you look at the book, basically the US they admit for all of the imports, like 70 percent are duty free. For the duty for goods it's like four and five percent. If you do it with average of the tariff rate of all the goods and services that come to the United States it's about one, one-half percent. Lumber we're talking about sometimes 15, 20, even preliminary we got even 27 percent. So it's a puzzle, it's something so interesting that's my interest in this book – it rises. So, why is that? I mean, why is that? I mean we talk about, why free trade or freer trade for other goods and services, but not lumber? It's a long story. In my book I listed several factors, but if I could summarize quickly, basically I outline three factors for this longevity issues. One is economics. We talk about the endowment of softwood lumber resource in the two countries it's just too much different. If I could share with your audience the graph in my book, look at the softwood stocks in Canada and the US, basically that's referred to as Figure One. The US as a country as a whole has about 14 billion cubic feet of lumber stock, softwood timber stock. Canada as a country has 20 billion, so that's a big difference just between those two countries. If you use … we're talking about resource endowment, every Canadian has 667 cubic metres where in the United States it's only about 51 cubic metres per person. [07:15 – 9:42] Brady: For listeners out there, we will make these figures available and they're really compelling. That's interesting okay. Daowei: Yes. It's not only interesting, but it's not reported in most of the media, it's overlooked. I mean we in economics we think about the absolutely a comparative advantage of those two countries and it's just enormous. One story – I made the seminars 10 years ago in my school. The Department of Economics say well jeez the Canadians just look at this figure: the number one they do not … is their lumber produce and number two are they charging too much? And that's just, I mean, I was interviewed by the many radio stations and newspapers, publishers and they all pointed this out, they said "Jeez, we did not know this." Brady: Let's go over those points again if you don't mind. When economists talk about absolute advantage and talk about that's this idea that you can produce this softwood lumber at the lowest cost and the comparative advantage we bring in the idea of opportunity cost. Daowei: Correct. Brady: So in the in these cases what specifically is the difference in the opportunity? It's clear I think, if I'm following you, in terms of the graph Canada has the absolute advantage, it can produce softwood lumber the cheapest, but the story is a little different in terms of the comparative advantage. Can you just walk us through that a little bit more? Because it is fascinating. Daowei: Yes, well absolutely the amount, Canadians produce more and also in term of opportunity cost of producing lumbers the Canadians are are much more I mean compared look at the resource endowment. For example, the computer industry in the United States is leading the world, it's way more advanced. Canadians' computer industry relatively sized compared to the US does not have some kind of a comparable advantage, but in lumber, Canadian does, it's a huge difference in opportunity cost being produced in lumber, in softwood. [09:42 – 12:40] Brady: So Canada has both an absolute advantage in a comparative advantage in this? Daowei: Absolutely. Brady: OK. And so then how does that translate into your thoughts about whether or not, and I guess one of the big issues in this enduring softwood lumber wars you point out that's been more than 30 years ongoing is this issue of whether Canada subsidizes its softwood lumber. Daowei: Well, you are moving to the second factor now. If we think about economic factors, the second factor of the softwood lumber war is I call this institutional factors. In the United States you have a presidential systems, you have Congress and so they are subject to the influence of some of the special interest groups, and most importantly one institutional factor is that in this lumber dispute the consumer, which is mostly homebuilders and home dealers, those peoples under the US legal systems, they are not part of this dispute. Let me rephrase. They do not have legal standing in the legal fact. So legally, they are put at a much disadvantage compared to the producers the US lumber producers. So this is what I called the institutional factors, the second factor, in this long dispute. Brady: So Canada has a comparative and absolute advantage but there are key stakeholders with differing interests. This really comes out nice in your book, and I guess let's maybe go through them. That's fascinating. One of the stakeholders is the US consumer who presumably benefits from lower prices but they don't have legal standing in this debate, one of the other stakeholders is the US producer and they do have standing and they don't, I take it, they would prefer the less volume coming in from Canada. Is that right? Daowei: Correct. That's correct. And for example the US consumers they are not at the negotiation table. When Canada and the United States try to make a deal there were three deals over the years and there was no presence of the US consumers so anyways they were complaining but under the US legal system … they are not a part of it so that's the second factor I am talking about. [12:40 - 14:45] Brady: Well somebody out there might be in the United States or in Canada might be out there wondering well does Ca