"An Ounce of Prevention is Worth a Pound of Cure", by Timothy J. Richards, Ph.D.Topic : Developing rigorous Hazard Analysis and Critical Control Point (HACCP) programs
"An Ounce of Prevention is Worth a Pound of Cure", by Timothy J. Richards, Ph.D.
Topic : Developing rigorous Hazard Analysis and Critical Control Point (HACCP) programs
"Market Watch.....U.S. Fresh Apple", by Richard Adu-Asamoah, Ph.D.
Topic : The 1997/1998 U.S. Fresh Apple Market
by Timothy J. Richards, Ph.D.
A recent article in the New York Times (Economic Scene, p. C.2, Aug. 21, 1997) sings the praises of a silent auto alarm system, the Lojack, claiming that it is primarily responsible for converting Boston from a Mecca for auto thieves to just about average. While the more common, and decidedly more irritating, car alarms may prevent a theft, they do little to aid the apprehension of the would be thief. The Lojack, on the other hand, notifies the local constabulary if a car is stolen and, after a short wait, conveniently shuts the car down, leaving its new drivers stranded and often in jail. Because theft becomes a considerably more risky proposition when many drivers in an area install the Lojack, overall auto theft rates decline appreciably as would-be thiefs begin to expect certain cars to be outfitted with this nefarious device. In fact, although the average cost of theft falls from $5000 to $1000 per incident, a large part of the benefit from installing silent alarms accrues to society as a whole as theft rates fall. Unfortunately, this social benefit is not reflected in an alarm's price so individual consumers under-install them compared to what would be socially optimal. Economists call this a problem of positive externalities and is, alas, one case where the free market can indeed fail to produce the best solution. So what does a new type of car alarm have to do with produce?
Plenty, in fact not just produce, but as the recent Hudson Beef e. coli scare suggests, food products in general. Developing rigorous Hazard Analysis and Critical Control Point (HACCP) programs may prove to be the produce industry's Lojack. If one grower, packer, processor, or importer is responsible for distributing goods infested with some type of bacterium or other contaminant, then the industry as a whole suffers. In 1996, stories of infested strawberries cost growers millions of dollars, while raspberries and sprouts have fallen victim this year, just to name a few examples. While the cost to an individual firm of increasing its attention to possible contamination may be substantial in some cases, the potential cost to the industry is usually many times greater. To turn this problem on its ear, the potential benefit to a firm of prevention is thus far less than the potential benefit to the industry as a whole. Again, this is a positive externality problem - rational, profit maximizing individuals at all levels of the marketing channel will underinvest in inspection services compared to what the industry would consider optimal.
Consider a simple diagram of this problem. Suppose the cost per grower, handler, or processor of instituting a new HACCP program is the same from an industry-wide perspective as it is for an individual firm. This cost is given by the SMC curve, which stands for social marginal cost. However, suppose that the industry as a whole benefits more from each level of protection than does the individual firm. In this case, the SMB (social marginal benefit) will always be greater than the PMB (private marginal benefit), but both will decline with the level of protection as it becomes harder and harder to reduce the likelihood of an infestation all the way to zero. Assuming the firm makes decisions in order to maximize profit, it will choose the level of protection where PMB = SMC - at a protection level of Pf . The industry, however, would rather its members each choose a level of protection that maximizes not individual profits, but the net benefit to the industry as a whole - or the point where SMB = SMC, Pi. Because firms are free to make their own choices, and have no incentive to do anything different, they will choose to underinvest in preventing food-borne illnesses.
by Richard Adu-Asamoah, Ph.D.
This year's U.S. apple production is expected to increase by about 3 percent over the 1996 crop. A larger crop in 1997 will help to improve fresh use beyond the 8% increase of last year. Production in Western states, which on average accounts for about 60 percent of the national production, is expected to decrease by about 3 percent from the 1996 crop (USDA estimates). The decline in Western production is due to a smaller crop in Washington state. Washington state apple production is estimated at 5.42 billions pounds (USDA estimates), a 2 percent decline from the 5.54 billion pounds in 1996. Compared to 1996, this year's Washington state production of Red Delicious and Golden delicious varieties is expected to decline by 13 percent and 19 percent respectively. Expected production increases of other Washington state varieties (Gala 12 percent, Braeburn 25 percent, Granny Smith 13 percent, Fuji unchanged) will make up for some of the production losses in the state. The drop in Washington state production results from a light set for both Red Delicious and Golden delicious, and some hail damage in the Wenatchee district. Nationally, expected increased production in Colorado, Oregon, Michigan, Missouri, New York and Pennsylvania will more than offset the smaller crop in Washington and other Western states.
Since 1994, U.S. apple production has not enjoyed the upward trend of 1990-93 seasons. In 1997, however, production seems to have recovered from the downward trend of 1994-96. It seems that the generally seesaw production levels of the latter part of the 1980s may revisit the industry in the late 1990s. If this observation holds true for the 1990s, the production recovery in 1997 may be only moderately sustained through 1998 (NFAPP preliminary forecast, Figure 1).
