NE-165 PROJECT PROPOSAL

Objective 2 Procedures

The organizing principle and end goal of work under each Objective 2 procedure is to provide road maps of policy options and consequences.

Procedure 2.A: Consumer Risk Perceptions, Behavior, and Food Demand

Subprocedure 2.A1: Risk Perceptions and Information

Subprocedure 2.A2: Effect of Risk Perceptions on Consumer Behavior, Food Demand, Willingness to Pay for Safer Food, and Societal Welfare

Procedure 2.B: Risk Assessment and Benefit/Cost Analysis

Subprocedure 2.B1: Risk and Economic Valuation Data

Subprocedure 2.B2: Economic Methodologies Associated with Foodborne Hazards

Subprocedure 2.B3: Public and Private Benefits and Costs of Alternative Risk Reduction Strategies

Procedure 2.C: Incentive-Based Regulation/Information

Procedure 2.D: Operation of International Food Quality Systems

Procedure 2.A: Consumer Risk Perceptions, Behavior, and Food Demand

Subprocedure 2.A1: Risk Perceptions and Information

Key Questions: How do consumers form risk perceptions about food products? What characteristics of a risk are most important to consumers?

An empirically verified theory of consumer risk perception is essential for understanding consumer demand for food safety, behavior toward food safety, and effects of food safety information programs. At this time, there is no well developed general theory of foodborne risk perception. The construction of such theory will be a goal of collaborative research by van Ravenswaay (Michigan), Douthitt (Wisconsin), Zepeda (Wisconsin), and Grobe (Oregon). They will identify the major dimensions of risk perception (mean probability, ambiguity, elements of harm) and how risk perception is affected by contextual factors such as safety information, perceived effectiveness of personal risk management strategies, trust in public risk management strategies, and personal characteristics such as health status, gender, age, and income.

While consumer surveys do ask about risk perceptions, there is no consensus on the validity of existing measures. The goal of researchers will be to develop and validate these measures in several contexts. Consumer perceptions of risks from microbial pathogens in several types of food will be measured by Lin (Florida), Crutchfield and Roberts (USDA/ERS), Fox (Kansas), and Bailey (Arkansas). Fox, van Ravenswaay, Douthitt, Zepeda, Grobe, Bailey, Fletcher (Georgia), and Anderson, Wessells, and Gates (Rhode Island) will measure consumer perceptions of risks from production processes (e.g., irradiation, pesticide use, biotechnology, aquaculture vs. harvesting wild seafood).

Empirical measures of the contextual factors and estimates of their impact on risk perceptions do not exist. Researchers will develop measures for each of the contextual factors and examine their effect on risk perceptions for several types of foodborne risks. Risk information measures and perceptions for fat, cholesterol, and other nutritional attributes will be developed by Chern (Ohio) and Douthitt and Gould (Wisconsin) and for food-related biotechnology by Douthitt, Zepeda, and Grobe. Fox, van Ravenswaay, Douthitt, Zepeda, and Grobe will examine the effect of media coverage and trust in government risk management on risk perceptions.

Anticipated Results: Application of risk perception and information modeling to a set of important food characteristics will yield an improved understanding of how perceptions are formed.

Timetable: The Project will target a major conference in this procedure area early in the Project in 1997 because this information is a building block for other Objective 2 procedures. Follow-up principal paper and symposia sessions are targeted for 1999-2000.

Participants: Arkansas, Florida, Georgia, Kansas, Michigan, Ohio, Oregon, Rhode Island, Wisconsin, USDA/ERS

Subprocedure 2.A2: Effect of Risk Perceptions on Consumer Behavior, Food Demand, Willingness to Pay for Safer Food, and Societal Welfare

Key Questions: How much are consumers and society willing to pay for safer food? What does demand for safer food depend upon? How much would society's welfare be improved by a safer food supply?

The purpose of this research is to improve both the theory and methods for measuring the welfare impacts of reducing food safety risks. Welfare impacts of safer food have to be considered in a broad theoretical framework that encompasses all consumers' choices: changing household production practices (e.g., better kitchen sanitation), changing consumer behavior (e.g., choosing less risky foods, such as well-done hamburgers), being willing to pay a premium price for safer food, and exerting political pressure as taxpayers to change regulatory policies. Van Ravenswaay (Michigan) will provide leadership by developing a total economic value framework for identifying the benefits of food safety policy. Measures of personal risk management strategies will be developed by Douthitt, Zepeda, Grobe, Chern, Wessells, and Lin (Florida).

The impact of risk perceptions on food demand will be examined by a number of researchers, who will perform parallel case studies for particular food groups after consulting on the design of the research methodologies. The impact of perceived risk from rbGH on milk demand will be estimated by Douthitt (Wisconsin) and Zepeda (Wisconsin). Bailey (Arkansas) will examine the impact of perceived risk on demand for processes that reduce perceived risk from food consumption. Fox (Kansas) will examine the impact of perceived risks from pathogens and pesticides on a variety of different foods. The possible long-term effects of food scares on food demand will be studied by van Ravenswaay (Michigan). The Project members will bring results from studies of particular food groups together to compare methodologies and results, and assess whether findings are consistent across studies.

Coordinated measures of willingness to pay for specific risk reductions will be contributed by Project members Crutchfield and Roberts (USDA/ERS), Lin, and Bailey (Arkansas). A method of estimating willingness to pay for policies to avoid perceived risks of certain food biotechnologies will be developed by Douthitt and Zepeda (Wisconsin), and Grobe (Oregon). Willingness to pay for policies that reduce risk and ambiguity from pesticides will be conducted by van Ravenswaay (Michigan) and Antonovitz (Iowa). The Project will use Internet discussion groups, seminars, and conferences to standardize methodology and compare research results.

Anticipated Results: The on-going work of the Project will provide improved estimates of the benefits of improving food safety. These estimates will be used by the federal government in policy-making and by food companies in designing products.

Timetable: A major conference on benefit/cost analysis is targeted for 1998 or 1999. Project members will present symposia and policy briefings throughout the life of the Project.

Participants: Arkansas, Florida, Iowa, Kansas, Michigan, Oregon, USDA/ERS, Wisconsin

Procedure 2.B: Risk Assessment and Benefit/Cost Analysis

Subprocedure 2.B1: Risk and Economic Valuation Data

Key Questions: What are the risks posed by unsafe foods? How many people become ill and from what sources? How will changes in production and consumption practices change those risks?

Building on the foundation developed in the earlier NE-165 Project, USDA/ERS Project members, Fox (Kansas), Williams (FDA), and Steahr (Connecticut) will work collaboratively to improve risk and economic valuation data to implement new models developed under this Project. Examples of better risk data include identification of high-risk foods, subpopulations, and production and consumption practices. Economic valuation data will be developed by Fox, Lin (Florida), and Roberts (USDA/ERS) as they collaborate on their National Science Foundation project—a result of NE-165's "free session" at the American Agricultural Economics Association's 1992 annual meeting. These will include measurements of preferences for public versus private risk reduction strategies which may vary by age, income, cultural, or other factors. The value of precise data will be examined for its ability to refine risk estimates by Jensen (Iowa) and Roberts (USDA/ERS). These data are crucial to building risk models to identify high-risk vs. low-risk production and consumption pathways for specific foods.

NE-165 members led by Roberts (USDA/ERS), Williams (FDA), and Jensen (Iowa) will facilitate sharing of information across disciplines and the creation of integrated food safety databases by: 1) setting up new Internet exchanges for food safety data, 2) fostering interdisciplinary interaction through professional associations, 3) analyzing and comparing existing medical databases on human illnesses caused by foodborne pathogens, 4) establishing a clearinghouse to set data standards and facilitate data collection, 5) serving on expert committees, and 6) evaluating alternative criteria for setting food safety priorities.

Anticipated Results: The collaborative work of Project members will provide improved information on risk and risk reduction strategies. This information will improve decision-making because currently little is known about most of these issues.

Timetable: Work from this procedure will be presented as part of a major conference on benefit/cost analysis to be held in 1998 or 1999.

Participants: Connecticut, Florida, FDA, Iowa, Kansas, USDA/ERS

Subprocedure 2.B2: Economic Methodologies Associated with Foodborne Hazards

Key Questions: When we estimate the benefits and costs of reducing foodborne hazards, how sure are we of the accuracy of our estimates? What factors influence our ability to provide reliable estimates?

Project members will cooperate to improve calculation and presentation of the underlying uncertainties in benefit/cost analysis, including uncertainties in estimates of baseline foodborne risks and reduction of those risks. They will focus on improving methods for dealing with model uncertainty such as the choice between 1) willingness to pay for morbidity reduction versus cost of illness approaches and 2) between direct consumer valuation versus expert valuation of risk reduction. The NSF grant team (ERS, Florida, and Kansas) and Williams (FDA) will provide leadership for the development of methodologies to explore the tradeoffs between public and private risk reduction efforts while considering consumer valuations of each.

Methodological advances in valuing risk reductions in other areas, such as labor and environmental economics, will be systematically explored and applied to valuation of food related risks. Members will consult with each other to develop standardized procedures aimed at producing more reliable and useable benefit/cost analyses. Sensitivity analysis will be used to examine the relationship between the valuation estimates and the specific assumptions used to generate them. Guidelines for measuring societal willingness to pay for both morbidity and mortality risk reductions will be developed. Measurement issues include valuing premature death versus life-years saved, selecting discount rates for health, and including altruism and household impacts in valuations.

This effort will also develop methodologies to compare different kinds of food-related risks and to prioritize those risks using different criteria such as food, type of hazard, or subpopulation affected. For example, it will investigate consumer valuation of tradeoffs for reducing incidence of foodborne disease versus reducing the severity of disease. Kuchler (ERS) will examine the relation between income and health to assess the unintended health consequences of government intervention.

Anticipated Results: Project members will contribute significantly to improving benefit/cost estimation through improvement of research methodologies.

Timetable: Research will be reported in a major benefit/cost conference to be held in 1998 or 1999. Project members will contribute analysis on an on-going basis to regulatory decision-making (e.g., benefit/cost analysis of HACCP systems to control foodborne pathogens).

Participants: FDA, Florida, Kansas, USDA/ERS

Subprocedure 2.B3: Public and Private Benefits and Costs of Alternative Risk Reduction Strategies

Key Questions: What are the private and public benefits and costs of alternative methods of reducing health risks posed by food? How do food companies and regulators choose the most cost effective means of improving safety?

Project members will develop a coordinated framework for conducting benefit/cost analysis of alternative risk reduction strategies. Initial work will focus on Hazard Analysis Critical Control Point (HACCP) systems as a risk reduction strategy being widely adopted or considered by regulators and firms. The HACCP system is an approach to identifying and controlling food hazards. It is now being adapted to control pathogens at various points in the food chain from the farm to the consumer, in both U.S. and international markets.

Research will focus on producing reliable measures of the private and public benefits and costs of adoption of HACCP. Project members will consult in designing studies to refine existing estimates of the economic cost of different HACCP systems and how they vary, depending on the nature of the process, the target level of pathogen reduction, firm size, and industry sector. Cooperating in this effort will be Roberts, Crutchfield, and Handy (USDA/ERS); MacDonald (Ohio); Lin (Florida); Morales (North Carolina); Williams (FDA); Unnevehr (Illinois); Antle (Montana); Wessells (Rhode Island); Anderson, Martin, and Zarkin (Research Triangle Institute); Henson (Reading-UK); Fox (Kansas); and Caswell (Massachusetts). They will use Internet discussion groups, seminars, and conferences to cooperate in integrating economic principles into the HACCP concept. For example, they will develop a simple algorithm to determine when a hazard warrants being included in a HACCP plan, when testing should be done, or when a Critical Control Point is needed. Marginal benefit/cost analysis of pathogen reduction will be used to assess the net benefits to society of using HACCP as a regulatory tool. At the same time, such analysis will illustrate the private incentives or disincentives to adopt HACCP. Henson, Caswell, Unnevehr, and Antle will also compare the strategic responses to this type of regulation by affected industries in Europe, the United States, and other parts of the world.

With the HACCP work as a prototype, Project members will apply the economic methodology to evaluating other control options. This will include conducting benefit/cost analyses of other pathogen reduction options, such as irradiation of foods, consumer education programs, and labeling (to reduce risks through food consumption choices and improved food preparation practices), or government certification of reduced-risk products for sale in the marketplace. Fox and Lin will design a study to determine the relationship between the value to consumers of a specific risk reduction strategy and the technology employed (e.g., HACCP, irradiation, or HACCP plus irradiation). An important question is how the value of risk reduction changes with ex ante versus ex post control options. Project members from USDA/ERS led by Vandeman will contribute the development of economic indicators of food safety to track performance in the United States over time and to compare it to the performance of other countries.

The overall goal of this procedure will be to apply methodologies for analyzing data in a systems framework. For example, Roberts (USDA/ERS) and Lin (Florida) will identify high-risk pathways using probabilistic risk assessment models to determine the location of critical control points. Analysis of farm level, slaughterhouse, processing, marketing, preparation, and consumption data require interdisciplinary cooperation among scientists, including economists, to document the risk factors and probabilities at each node and link in the food chain.

Anticipated Results: Benefit/cost analysis currently focuses on estimating the impacts of a specific proposed policy. The methodology, approaches, and results developed by the Project will widen that analysis to alternative methods of affecting food safety. This will contribute to the improved cost effectiveness of the food safety assurance system.

Timetable: The Project will hold a workshop on HACCP benefit/cost methodology in 1997-98. It will continue to develop work in this area as regulations are implemented and hold a retrospective/prospective conference in 2000-2001.

Participants: Connecticut, FDA, Florida, Kansas, Illinois, Massachusetts, Montana, North Carolina, Ohio, Reading-UK, Rhode Island, Research Triangle Institute, USDA/ERS

Procedure 2.C: Incentive-Based Regulation/Information

Key Questions: Are incentive-based regulatory systems more cost effective than command and control approaches that dictate particular practices or product characteristics? In what circumstances can information (e.g., labeling policy) substitute for other regulatory policies?

Food safety and other food quality attributes cannot be easily observed by consumers and markets for food products may fail to provide the appropriate incentives to consumers or producers for these attributes. Work in this area will be led by Jensen (Iowa) and Morales (North Carolina) and will focus on comparative economic analysis by Project members of different incentive systems aimed at improving food quality and safety. A key question to be addressed is whether information disclosure of quality attributes of foods offered for sale is associated with changes in food quality. Caswell (Massachusetts), Lichtenberg (Maryland), and Wessells (Rhode Island) will develop economic models and use case studies to evaluate the impacts of mandatory and voluntary information disclosure of food quality attributes and whether mandatory programs, including government grading programs, substitute or complement private disclosure. Fletcher (Georgia), Hennessy (Washington), and Segerson (Connecticut) will address the problems of quality variability and uncertainty, and information asymmetry on the structure of food processing and identify welfare improving regulatory responses and policies.

Other research will focus on incentive-based regulation and the impacts on processes (technologies) used in the production of foods with improved food attributes, including safety. The results provide both estimates of changes in costs as well as of improvements in food safety (or other attributes). Researchers in USDA/ERS will examine the relative effectiveness of pre-harvest food safety interventions and examine risk reduction control points in the food chain to achieve safer foods. Other studies of changes in technologies and related costs and improved food attributes will be carried out and coordinated by Fletcher, Lichtenberg, Anderson (Rhode Island), Morales, Jensen, and Henson (Reading-UK).

Anticipated Results: The Project will produce research methodologies that provide improved understanding of use of incentive-based versus command and control-based regulatory systems.

Timetable: The Project will target a major conference on the use of incentive-based systems, with a particular focus on the use of information policy, for late in the Project. It will build to the conference with smaller symposia and paper sessions in the early years of the 5-year Project.

Participants: Connecticut, Georgia, Iowa, Maryland, Massachusetts, North Carolina, Reading-UK, Rhode Island, RTI, USDA/ERS, Washington

Procedure 2.D: Operation of International Food Quality Systems

Key Questions: How will recent trade agreements such as the WTO and NAFTA affect food quality and quality regulatory systems in member countries? To what extent will domestic regulation be influenced by concerns about its effect on international trade?

Caswell (Massachusetts), Wessells (Rhode Island), Fletcher (Georgia), Ollinger (USDA/ERS), and colleagues from the University of Reading (UK) will cooperate in developing models and conducting case studies of international food safety and quality systems. Model development will focus on the role of national- or trading-bloc level food safety and quality regulation as a nontariff barrier to international trade. It will also explore what influence trade agreements such as the World Trade Organization (WTO) and the North American Free Trade Agreement (NAFTA) will have on this type of regulation.

Case studies to be conducted by several Project members on different safety and quality attributes will be coordinated via use of common models and approaches. The case studies will emphasize analysis of the effects of differing international standards on the food safety and quality available to consumers and the competitiveness of industries based in different countries. Wessells will contribute analysis of the impact of WTO and NAFTA on trade in seafood products; Caswell will conduct case studies of the meat and canned foods industries; Fletcher will analyze the effects of sanitary and phytosanitary standards on the peanut trade; and Ollinger will do case studies of the impact of pesticide regulations on trade in food products. Henson, Traill, Swinbank, and Burns (Reading-UK) will contribute expertise on the food safety and quality control system in the European Union. We expect to hold seminars for planning case studies and to compare and contrast the results of these studies.

Anticipated Results: North American and European Project members will cooperate on research on the dynamically changing world market for food products. Project analysis will contribute to development of government positions in trade disputes and to international efforts to cooperate on regulatory policy.

Timetable: Research will be reported at the major conference on international convergence of food marketing systems to be held in 1999. Project members will also contribute international analyses to the other food safety conferences held during the five years of the Project.

Participants: Georgia, Massachusetts, Reading-UK, Rhode Island, USDA/ERS

Table of Contents

Return to NE-165 homepage