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Some Economic Benefits and Costs of

Jayson L. Lusk and F. Bailey Norwood

It is now fashionable in many circles to advocate vegetarianism, and many activist groups are vocal in their aim to convert the human race to vegetarians. What would be the economic costs and benefits of a shift away from meat consumption? In this article we provide some partial answers to this question. In three separate analyses we show (i) that it is much more costly to produce energy and from animal-based sources than from some -based sources, (ii) that sizable demand shifts away from meat consumption would result in significantly lower corn prices and production, and (iii) that the average U.S. consumer places a higher value on having meat in his or her than having any other group. This information should help move forward our understanding of the economics of vegetarianism and provide an objective stance from which to evaluate the claims being made by advocates of vegetarianism.

Key Words: cost of nutrients, crop production, dietary costs, production, value of meat, vegan, vegetarian

In her bestselling book Food in History, Reay For example, as early as the sixth century B.C., Tannahill begins, “For 12,000 years there has been Pythagoras and his followers led a vegetarian life a steady undercurrent of antagonism between (Spencer 2000). Because of religious beliefs, many vegetarians and meat-eaters” (Tannahill 1988, p. cultures have restricted their consumption of ani- 1). In the Old Testament—a sacred text shared by mal products in different ways. Judaism, Christianity, and to some extent Islam— Reverence for the Old Testament caused some humans began in the Garden of Eden, where “to Jews to view vegetarianism as closer to the ideal every beast of the earth, and to every fowl of the life that God planned in the Garden of Eden. For air, and to everything that creepeth upon the this reason, Jews prefer to eat meat only from earth, wherein there is life, I have given every animals that are vegetarians, and thus ban the green herb” (Genesis 1:30). The interpretation of eating of pigs, which are omnivores. During the this text to some scholars is clear: “this should be Middle Ages, meat was seen as a sign of earthly interpreted to mean: every green herb and nothing strength and power. Nobles who behaved poorly else” (Soler 1996, p. 52). and were thus deemed unworthy of their power Yet humans left the Garden of Eden, and along were punished by prohibiting the eating of meat, with it, their herbivore diet. The natural history of sometimes for life. The Catholic Church urged its humans, including archaeological evidence, sug- congregation to seek spirituality and shun the gests that Homo sapiens have always eaten both pursuit of earthly power. To abstain from meat and animals (Tannahill 1988). For the vast was to announce a preference for the spiritual majority of their existence, obtaining nutritional world over the earthly world. Hence, the Catholic needs was a daily challenge for humans, and Church banned the eating of meat on Wednes- famine was a recurring threat. Given the scarcity days, Saturdays, and all the days of Lent. De- of nutritional resources, it would seem odd for pending on how the ban was enforced, these days humans to restrict their diet for religious or cul- of meat-fasting could comprise half the days of tural reasons, but that is exactly what they did. the year (Montanari 1996, Tannahill 1988). Eastern religions such as Hinduism, Buddhism, ______and maintain a belief in reincarnation, Jayson Lusk is Professor and Willard Sparks Endowed Chair, and and a specific belief that humans can be rein- Bailey Norwood is Associate Professor, both in the Department of Agricultural Economics at Oklahoma University in Stillwater, carnated as livestock and vice versa. For these ad- Oklahoma. herents, eating an animal can mean eating an an-

Agricultural and Resource Economics Review 38/2 (October 2009) 109–124 Copyright 2009 Northeastern Agricultural and Resource Economics Association 110 October 2009 Agricultural and Resource Economics Review cestor, so it is not surprising that vegetarianism is ucts. For example, Singer (2001, p. 177) states, more popular in the regions where these religions “The most urgent task of the Animal Liberation took hold. Ancient became heavily reliant movement is to persuade as many people as pos- on dairy products from female cows and the labor sible to make this commitment [to stop eating from male cows, and urged against the killing of meat], so that the boycott will spread and gain cows because the animals were generally worth attention.” more alive than dead. Combined with the idea of Opposition to factory farming is becoming more reincarnation, the Hindu Sacred Cow emerged prominent and has led to more than just propa- (Tannahill 1988). Similar beliefs existed in an- ganda. In Arizona, California, and Florida, it is cient , and like some Catholic priests, many now illegal for farmers to confine hogs to small of the Egyptian priests also abstained from meat crates (Arnot and Gauldin 2006). Egg producers (Spencer 2000). Pockets of vegetarianism also ex- have been persuaded to increase the size of hen isted in American and European cultures, such as cages (Smith 2007), Burger King has begun buy- the experimental vegetarian commune that settled ing eggs from cage-free production systems (Mar- on the Kansas frontier shortly before the Civil tin 2007), and retailers such as Whole have War (Gambone 1972), but they were unusual. created an animal-compassionate label for its Vegetarianism can denote a specific diet, or be meat products (Martin 2006). As consumers be- used as an umbrella term for a variety of diets that come more aware of modern farming practices, restrict consumption of animal products. When vegetarianism may rise. When the president of used to denote a specific diet, the term “vegetar- Jewish Vegetarians of North America was asked ian” refers to the abstaining from all meat, fish, or the major reason children adopt vegetarianism, he shellfish, but does include eggs and dairy prod- responded, “Compassion for animals is the major, ucts in the diet. A “pescatarian” shuns the eating major reason” (Stobbe 2009). of all animal flesh except fish, and a “vegan” ex- However, it would be a mistake to attribute cludes any product derived from animals; dairy, vegetarianism to concerns solely, eggs, and even gelatin are not part of a vegan or to any one single concern. In the , diet. This paper largely concerns vegetarianism, modern vegetarianism arose largely from the as it focuses on the consequences of changes in counterculture movement of the mid-1960s and a meat consumption, but some of the empirical re- cultural movement that seeks “pure” food that is sults also consider dairy and eggs, which are per- removed from animal production, less processed, tinent to vegan diets. generally less affected by scientific advancements, A number of recent cultural and technological and sometimes associated with New Age spiritu- changes have made vegetarianism a timely topic ality (Spencer 2000). Health concerns are a major in the Western and Eastern worlds alike. Live- reason for vegetarianism, especially for those con- stock production technologies, such as improved cerned with cholesterol. Although a healthy diet feed formulations, have made it cheaper to raise can certainly include meat, there is increasing chickens and hogs indoors exclusively. For egg- evidence that a vegetarian diet may be healthier laying hens and swine, these facilities confine the (Sabate 2003). animal to cages or pens barely larger than the As the environment has become an increasingly animal itself. Gestating sows are confined to stalls important policy issue, some individuals see vege- so small that they prohibit the animal from turn- tarianism as a way to personally combat agricul- ing around, and laying hens are allotted 67 square tural pollution (Spencer 2000, Stuart 2006). Live- inches of space at most, despite the fact that the stock production is often seen as a food factory in hen needs 75 square inches to stand comfortably reverse, consuming more energy than it produces. and 144 square inches to spread its wings (Daw- Opponents of “factory ” contend that such kins and Hardie 1989, United Egg Producers operations represent inefficient methods of food 2008, Mason and Singer 1990, Singer 2001, production. Moreover, activists often consider Singer and Mason 2006). Opponents of such prac- calories fed to animals as “wasted” in that they tices refer to these facilities as factory farms, and, represent calories that could have been used to beginning with Ruth Harrison’s book Animal Ma- feed hungry humans. The argument is that by chines (Harrison 1964), have opposed such farms converting to vegetarianism, there would be fewer and urged consumers to abstain from animal prod- crop acres planted and hence less pollution from

Lusk and Norwood Some Economic Benefits and Costs of Vegetarianism 111 fertilizer runoff and pesticides. Furthermore, a to move forward our understanding of the eco- portion of the acres no longer needed to feed nomics of vegetarianism and to provide an objec- Americans could be used to feed less fortunate tive stance from which to evaluate the claims be- parts of the world (Singer and Mason 2006). By ing made by many vegetarians. In the next section ignoring the fact that this “reverse-protein fac- of this paper, we first tackle the issue of the rela- tory” creates form utility (i.e., some people prefer tive cost of producing calories and protein from eating meat to raw corn), vegetarian advocates some plant-based and animal-based sources. This argue that meat production is inefficient and un- analysis is intended to provide insight into the ethical. However, meat-eaters would contend that economic efficiency of the present-day agricul- the loss in calories is acceptable given the in- tural production system as compared to one in crease in eating satisfaction that results from which food is produced only via plant-based agri- turning corn into steak. culture. Identifying which concern (animal welfare, re- Of course, simple comparisons of costs cannot ligion, health, or the environment) is the main fully reflect how crop prices and consumption driver of vegetarianism is difficult, and probably will change if a large portion of the population the wrong question to ask. Perhaps a question decides to eschew meat consumption. Thus, in the more amenable to the tool-kit of economists is, third section, we study the interrelationship of what would be the economic effects of increasing corn and livestock markets and investigate the vegetarianism? The number of vegetarians in the effect of a shift away from meat consumption on United States is small, representing only about 3 corn prices. Although the first two analyses pro- percent of the population (Vegetarian Journal vide insight into the economic efficiency of eat- 2003, Norwood, Lusk, and Prickett 2007, Stobbe ing meat, people care about more than the effi- 2009). However, as previously noted, advocates ciency with which food is produced. In particular, of vegetarianism have become more prominent people care about which foods they eat and how and often make no attempt to hide their objective they taste. Although many advocates of vegetari- of converting the population to vegetarianism— anism suggest that people can, over time, easily whatever the means. Such claims are made in all give up meat, it is an open question as to how seriousness, and as such, one should seriously much people value having meat in their diet. The evaluate their consequences. penultimate section of this article seeks to deter- Given the stated aim of the vegetarianism mine the value that consumers place on main- advocates and the increased acceptance of vege- taining their current level of meat consumption in tarianism as a lifestyle choice, it is surprising that their diet. The final section concludes. so little work on the economics of vegetarianism has been conducted. For example, a search for the word “vegetarian” in the database EconLit yielded Cost of Producing Nutrients only 5 peer-reviewed journal articles, and only one of these explicitly attempted to investigate It is often argued that producing meat is ineffi- the economic effects of vegetarianism. In the only cient. For example, Francione (2004, p. 116) ar- paper on the issue, Risku-Norja and Maenpaa gues that “respected environmental scientists have (2007) constructed an input-output model of the pointed out the tremendous inefficiencies and re- Finnish agricultural and food production system sulting costs to our planet of animal . and forecasted that an increase in vegetarianism For example, animals consume more protein than would reduce the need for agricultural land and they produce. For every kilogram (2.2 pounds) of lead to positive environmental outcomes such as animal protein produced, animals consume an lower greenhouse gas emissions. However, these average of almost 6 kilograms…of plant protein authors also projected that greater vegetarianism from and .” Similar arguments can would generally have negative economic conse- be found in Singer (2001). The economic ques- quences for the agricultural production sector. tion, however, is not necessarily the rate at which The purpose of this article is to empirically an organism converts raw inputs into nutrients study the economics of vegetarianism from sev- suitable for human consumption, but rather the eral different angles. We do not claim to provide relative cost of producing nutrients from various an exhaustive treatment of the issue. The goal is sources.

112 October 2009 Agricultural and Resource Economics Review

To address this issue, we utilize data reported type: energy and protein. For meat, this raw com- by the U.S. Department of Agriculture’s Eco- modity was the carcass. nomic Research Service (ERS) regarding the cost The fifth and sixth columns of Table 1 report of production for various agricultural commodi- the nutritional content of each commodity on a ties (USDA 2004 and 2005). As shown in Table per pound basis. Peanuts contain more energy and 1, ERS estimates indicate that the average cost of contain more protein than any of the producing corn was about $387/acre from 2004 to other commodities listed in Table 1. Meat prod- 2005, whereas the average cost of producing ucts contain more protein than corn and , wheat was only about $197/acre over the same but less protein than soybeans and peanuts. The time period. The fourth column in Table 1 takes last two columns in Table 1 report the ultimate information on average crop yields over this time statistic of interest: the cost per nutrient produced, period to convert the cost from the units of acres which is obtained by dividing the cost of produc- planted to pounds produced. Of the four crops tion by the nutrient content of each commodity. A shown in Table 1, corn is the least expensive to comparison of the plant-based foods to the ani- produce on a per-pound basis, whereas peanuts mal-based foods reveals that obtaining nutrients are the most expensive to produce. The last four from plants is much cheaper than obtaining the rows of Table 1 carry out similar calculations for same nutrients from meat or dairy products. Ob- livestock, poultry, and . The ERS reports taining a kcal of energy from the cheapest meat cost-of-production data only for hogs and milk, product (broilers) is 5 times more costly than ob- so we gathered cost of production data on cattle taining a kcal from the most expensive plant- from Lawrence (2005). The poultry sector is based product (peanuts). A similar result is true highly integrated, making detailed estimates of for protein. Obtaining a gram of protein from the cost of production difficult to find. As such, we cheapest meat product (broilers) is 3.26 times turned to Canadian budget data for 1999 pro- more costly than obtaining a gram of protein from duced by the Manitoba Chicken Producer Board the most expensive plant-based product (peanuts). (1999) for an estimate of the production costs for These cost differences are remarkable when one broilers, and used Georgia broiler prices to con- considers that suggested daily energy and protein firm the validity of this estimate (National Agri- intake is about 2,000 kcal and 100 grams, respec- 1 cultural Statistics Service 2006). The fourth col- tively. umn of Table 1 reports the estimated costs of Of course, these price differences reflect not production on a per pound basis, which just costs of production but also the utility that factors in the dressing percentage for each animal individuals receive in obtaining nutrients from species. various sources. It may be cheaper to obtain en- Results reveal that it is significantly more ex- ergy from corn than from cattle, but some people pensive to produce a pound of meat (or milk) than prefer eating beef to eating corn. That is, there are a pound of commodity crops. However, the nutri- legitimate reasons why consumers choose to ob- tional contents of crops and livestock are not tain nutrients from more expensive food sources. identical. To determine the nutritional content of This is a topic we return to later in the paper; this each of the commodities listed in Table 1, the section seeks only to analyze cost differences in U.S. Department of Agriculture’s Agricultural nutrients, acknowledging that the eating experi- Research Service (ARS) National Nutrient Data- ence differs by food source. base was consulted (USDA 2006). The database One important qualification regarding the re- contains detailed nutritional information for a sults in Table 1 is in order. The costs of produc- wide variety of foods. For each commodity, we ing each of the nutrients are at the farm level. searched the database to find products that most However, most agricultural commodities go closely resembled the raw, uncooked, unproc- through some form of processing before they ar- essed commodity, and collected information on rive at the grocery store or restaurant. This proc- two primary nutritional categories for each food essing, in addition to other expenses such as labor and transportation, increases the cost of each food

1 We used the currency conversion that prevailed at the time the item as the product moves from the processing to budget was published, which was UR$1 = Can$1.5. the wholesale and stage. If these costs differ

L Table 1. Cost of Producing Nutrients from Various Agricultural Commodities usk andNorwood

Cost per Nutrient Produced Production Costs a Nutrient Content b at the Farm Level

Protein Cost of Energy Cost of Protein

Commodity Cost of Production Yield Cost ($/lb) Energy (kcal/lb) (grams/lb) ($/kcal) ($/gram)

CROPS Corn $387.03 per acre 162.5 bushels per acre; $0.043 80.526 2.078 $0.001 $0.020 56 lbs per bushel Soybeans $256.7 per acre 46 bushels per acre; $0.093 98.397 8.050 $0.001 $0.012 60 lbs per bushel Wheat $196.68 per acre 38.1 bushels per acre; $0.086 72.143 2.782 $0.001 $0.031 60 lbs per bushel Peanuts $638.88 per acre 3186.5 lbs per acre $0.201 125.092 5.692 $0.002 $0.035

LIVESTOCK, POULTRY, AND MILK Hogs (farrow to finish) $50.53 per cwt live 75.5 lbs of meat per $0.669 82.953 3.069 $0.008 $0.218 weight gain live cwt Some EconomicBenefitsandCostsofVegetarianism Cattle (finishing one steer) $917.87 per head 1150 lbs per head; 0.65 $1.228 64.200 3.821 $0.019 $0.321 live weight lbs of meat per live lb Broilers $0.33 per lb live 0.7 lbs meat per live lb $0.471 47.433 4.104 $0.010 $0.115 weight Milk $20.57 per cwt 100 lbs per cwt $0.206 13.237 0.710 $0.016 $0.290 a Cost of production data for all commodities except cattle and broilers are from USDA-ERS Commodity Costs and Returns data (USDA 2004 and 2005) averaged across years 2004 and 2005. Production costs for cattle, averaged across years 2004 and 2005, are from Lawrence (2005). Production costs for broilers (converted from Canadian dollars to U.S. dollars) for year 1999 are from the Manitoba Chicken Producer Board (1999). b All nutritional information was obtained from the USDA-ARS National Nutrient Database (USDA 2006). Nutritional information for livestock is based on the entire carcass.

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114 October 2009 Agricultural and Resource Economics Review for plant- and animal-based foods, the relative nowski and Specter 2004, and Drewnowski and cost of obtaining nutrients from animals and Darmon 2005). Of course, this does not mean that plants at the retail level will be altered as well. In vegetarians (or meat-eaters) spend less on food if fact, it is the case that many plant-based foods they supplement corn, , wheat, and - undergo more transformation than animal-based nut items with relatively expensive like foods. For example, wheat is processed into , blueberries, strawberries, and lettuce. Whereas which in turn is mixed with other ingredients and cheap energy is obtained from some plant-based baked into , which is then packaged and foods such as bread and pasta, lettuce and - shipped to the supermarket. By contrast, a steak berries are very expensive energy sources. Never- or hamburger at the retail level has undergone theless, other studies have shown that, consistent relatively little transformation from the farm. with our results, vegetarian diets reduce food To account for these differences, Table 2 re- costs. For example, using consumption data from ports the farmer’s share of the retail dollar re- a sample of French consumers, Drewnowski, ported by the ERS (USDA 2005) for each of the Darmon, and Briend (2004) showed that increas- commodities analyzed. The farmer’s share of the ing the number of meat products in a person’s retail dollar for cereal and bakery products, which diet was associated with significantly higher diet includes corn, soybeans, and wheat, is only 5.7 costs. percent. This implies that 94.3 percent of the One interesting fact about these nutritional costs involved in transforming corn, soybeans, studies is that the authors considered cheap calo- and wheat into products that people consume at ries as a “bad,” arguing that cheap calories lead to the retail level are incurred post-farm. By con- weight gain and obesity. Thus, depending upon trast, almost half of the costs of producing beef whether one is more concerned about people be- occur on the farm. coming overweight or about the economic effi- To arrive at the cost of nutrients at the retail ciency of nutrient production, the fact that ani- level, the costs of nutrients at the farm level are mal-based foods are relatively more expensive divided by the farmer’s share of the retail dollar than plant-based foods can be considered a posi- for each commodity. As shown in Table 2, when tive or negative. Most vegetarians appear to fall the post-farm processing and transportation costs into the latter camp as it supports their argument are considered, overall, plant-based nutrients re- that vegetarianism results in a more efficient main less expensive than meat products, but the means of producing the world’s food supply. cost differences are not as stark. At the retail Many nutritionists, by contrast, suggest taxing level, energy obtained from any of the crops is cheap sources of calories under the assumption less expensive than the least expensive meat item, that the price of such calories is too low from a broilers. In terms of the cost of protein, all crops social perspective. are less expensive than pork, beef, or milk; how- Of course, as just mentioned, not all vegetarian ever, poultry is a competitive provider of protein, foods are more efficient than meat in terms of as it is less expensive than corn and wheat and is cost of energy and protein produced. Of particular similar to soybeans. What Table 2 shows is that consideration are fruits and . The pro- the cost disadvantage of animal-based products is duction of such foods requires high-quality, pro- not nearly as pronounced at the retail level as at ductive land. One benefit of livestock production the farm level.2 is that cattle, hogs, and chickens can be produced on relatively unproductive land. There are certain Our findings are generally consistent with the types of land that can support only livestock pro- nutritional literature investigating the relationship duction, with cattle having the ability to produce between energy density and cost (e.g., see Drew- meat and milk from materials like grasses and that would be otherwise inedible to

humans. Indeed, Peters, Wilkins, and Fick (2007) 2 Should large portions of the population convert to vegetarianism, it is unclear how these marketing margins would change. On the one recently found that strictly vegetarian or vegan hand, as people rely more heavily on plants for food, the products may diets required more land to produce food than a undergo more processing to compensate for the loss in variety from calorie-neutral diet that involved the consumption forgoing meat. On the other hand, with more food processors focusing on plant products, greater research and economies of scale may cause of some meat. The authors concluded that includ- marketing margins to fall. ing some meat in the diet resulted in increased

Lusk and Norwood Some Economic Benefits and Costs of Vegetarianism 115

Table 2. Cost of Producing Nutrients at the Farm and Retail Levels

Cost per Nutrient Produced Cost per Nutrient Produced at the Farm Level at the Retail Level

Cost of Energy Cost of Protein Farmer’s Share of Cost of Energy Cost of Protein Commodity ($/kcal) ($/gram) Retail Dollar a ($/kcal) ($/gram)

CROPS Corn $0.001 $0.020 5.7% $0.009 $0.359 Soybeans $0.001 $0.031 5.7% $0.017 $0.203 Wheat $0.001 $0.031 5.7% $0.021 $0.543 Peanuts $0.002 $0.035 17.1% $0.009 $0.206

LIVESTOCK, POULTRY, AND MILK Hogs (farrow to finish) $0.008 $0.218 31.1% $0.026 $0.701 Cattle (finishing one steer) $0.019 $0.321 46.9% $0.041 $0.685 Broilers $0.010 $0.115 40.3% $0.025 $0.285 Milk $0.016 $0.290 31.2% $0.050 $0.928 a The source of farmer’s share of retail dollars is USDA (2005). The share for corn, soybeans, and wheat corresponds to the farmer’s share of “cereal and bakery products,” whereas the peanut farmer’s share of the retail dollar is assumed to equal that for “processed fruits and vegetables.”

efficiency of land use. They attributed their find- nel, and not just one component of food pro- ings to relative differences in land quality require- duction. ments for livestock and production. One important observation that arises out of the Effect of Reduced Meat Demand on Corn statistics reported in Tables 1 and 2 is that simple Prices and Production comparisons of the amount of energy/protein con- sumed versus the amount of energy/protein pro- duced by a plant or animal as in Francione Arguing that people should become vegetarians (2004), Singer (2001), or Peters, Wilkins, and based on philosophical and ethical arguments is Fick (2007) can be misleading. The reason is that one thing, but it is an entirely different issue alto- many crops, as typically consumed, require signi- gether as to how a mass shift towards vegetarian- ficantly higher levels of processing than animal- ism will affect . As previously indi- based products, and as such the full cost of cated, many have argued that producing meat is transforming the raw commodities into products inefficient. The previous section provided some that people actually consume needs to be consi- evidence for this claim, but the simple statistics dered. If such processing is also associated with reported in Tables 1 and 2 do not consider the greater pollution (as greater economic activity interrelationship between crop and meat produc- usually is associated with greater pollution), the tion. How much cheaper or more expensive environmental benefits of some types of plant- would crops become if people stopped consuming based food consumption are less pronounced meat? It is impossible to answer such a question, when taking into account food processing. Pollu- as this would require extrapolating outside of the tion arises from the processing, wholesale, and world we observe, but it is possible to draw infer- retail stage of food production as well as the ences at the margin. farming stage, yet opponents of modern agricul- We address this question by turning to the crop ture tend to focus only on the farm. These authors sector that is most intimately tied to livestock pro- should consider the entire food marketing chan- duction: corn. It is difficult to overstate the reli-

116 October 2009 Agricultural and Resource Economics Review ance of modern U.S. livestock production on the lagged dependent variable. The appendix con- corn. For example, USDA-ERS data indicate that tains Marsh’s original equations and a brief dis- in the 2004/2005 marketing year, almost 58 per- cussion on how they were used to arrive at the cent of corn disappearance was a result of live- equations shown below. stock and poultry feed use (Baker, Allen, and The supply and inverse demand equations for Bradley 2007).3 As such, we focus on the effect corn, respectively, are of reduced meat demand on corn prices and (1) QPˆ = 0.469 ˆ production. Wheat and soybean are also used as CN CN , though not as extensively as corn. Because soybeans and wheat are substitutes in ˆˆˆ human food as well, the three crop prices are (2) PQPCN=−0.371 CN + 0.440 B positively correlated. Other commodities used as ++0.127PPˆˆ 0.454 , livestock feed (e.g., , ) would be ex- PCK pected to exhibit similar, though less pronounced, where the subscripts denote the commodity (CN = relationships with meat demand. corn, B = beef, P = pork, and CK = chicken) and As Tables 1 and 2 show, it is less expensive to ˆ ˆ where Qi and Pi represent percent change (i.e., obtain nutrients from corn by consuming it di- Xˆ = dX/X) in the quantity and price of the ith rectly than by using it as animal feed. Thus, if commodity. there were a massive shift from meat to vege- Supply and inverse demand equations for slaugh- tarian diets, one might expect a decrease in the ter cattle (beef) are demand for corn if the reduction in livestock consumption of corn outweighed the increase in (3) QPPˆ =−0.817ˆˆ 0.278 human consumption of corn. If such an effect B BCN were to occur, the price of corn would fall, making the cost difference between obtaining nu- (4) PQSˆ =−0.565ˆ + , B BB trients from plants and meat even more pro- nounced. However, a reduction in the price of where SB is an exogenous demand shifter we corn would reduce the price of meat. To assess introduced that represents the percent change in these impacts arising from a shift towards vege- the initial equilibrium price for slaughter cattle tarianism, a general equilibrium model of meat (beef). More precisely, SB represents the percent and corn markets is employed. change in willingness-to-pay for slaughter cattle. Marsh (2007) recently reported estimates of the Greater interest in vegetarianism would reduce supply-demand interrelationships in the livestock- the demand for retail beef, which would be trans- poultry and corn sectors. We make use of the lated into a reduced demand for slaughter cattle estimates in Marsh (2007) to construct an equilib- by the beef processor. A reduction in demand for rium displacement model that specifies the supply beef would be represented by a negative value for and demand equations for corn and livestock as SB. deviations from an initial equilibrium given ex- Supply and inverse demand equations for ogenous shocks to the system [see Alston (1991) slaughter hogs (pork) are or Wohlgenant (1993) for more discussion in equilibrium displacement models]. The estimated (5) QPPˆ =−1.555ˆˆ 0.710 P PCN supply curves in Marsh (2007) contain lagged de- pendent variables, allowing for separate analyses ˆ ˆ of short- and long-run effects. In this paper, we (6) PQSP = −+0.641 PP. focus solely on the long-run effects, and convert the short-run supply elasticity estimates to long- The supply and inverse demand equations for run estimates by dividing the reported short-run processed broilers (chicken) are supply elasticities by one minus the coefficient on (7) QPPˆ =−0.695ˆˆ 0.344 CK CK CN 3The percentage of corn disappearance that is attributable to livestock feed fell to about 50 percent in 2006/2007, primarily as a result of in- (8) Pˆ =−0.133QSˆ + , creased production. CK CK CK

Lusk and Norwood Some Economic Benefits and Costs of Vegetarianism 117 where S and S are exogenous demand shifters (10) PSSS= 0.280++ 0.059 0.385 P CK CN B P CK in the pork and broiler equations, respectively. To analyze how small changes in the demand (11) QSSSCN= 0.131 B++ 0.028 P 0.181 CK . for cattle, chickens, and pork influence corn prices, equations (1) through (8) are used. Al- The result in equation (10) indicates that for though some variables such as the boxed beef and every one percent decrease in willingness-to-pay wholesale pork price included in Marsh’s (2007) for slaughter cattle (i.e., SB = -1), corn prices will original equations (see the appendix) could be fall by 0.28 percent and corn quantity will fall by considered endogenous in a larger general equi- 0.13 percent. Similarly, for every one percent librium model, one can consider the demand decrease in willingness-to-pay for slaughter hogs shocks used here as proxies for changes in whole- (i.e., SP = -1), corn prices will fall by 0.06 percent sale meat prices, given that the purpose of in- and corn quantity will fall by 0.03 percent. cluding these wholesale prices in Marsh (2007) is Changes in demand for broilers have the largest to proxy for consumer meat demand. influence on corn prices: for every one percent Equations (1) through (8) represent a system of decrease in willingness-to-pay for processed equations characterized by eight endogenous vari- broilers (i.e., S = -1), corn prices will fall by ables (the price and quantity of each of the four CK 0.39 percent and corn quantity will fall by 0.18 commodities) and three exogenous variables (the percent. demand shifters). Collecting these equations into matrix form, the system can be represented as (9), These elasticities are calculated using recent where X is the vector of endogenous variables, empirical data, and thus reflect the supply and and A and B are matrices containing constants. To demand relationships for the range of prices and illustrate, the first row of the A matrix contains quantities observed in recent history. One could the parameters associated with equation (1), the choose values of SB, SP, and SCK to reflect zero corn supply equation, and the last row of A con- meat consumption, but this would be outside the range of the data used to obtain the estimates, tains the parameters associated with the inverse 4 demand for broilers: making the corresponding results suspect. How- ever, it is possible to evaluate the impact of a (9) AX=B, or small change in meat consumption on corn prices

⎡ 0.469 0 0 0 −1 0 0 0 ⎤⎡ ˆ ⎤ ⎡ 0 ⎤ 4 PCN Suspect, but not uninteresting. Researchers regularly characterize ⎢ ⎥⎢ ⎥ ⎢ ⎥ −1 0.440 0.127 0.454 − 0.371 0 0 0 Pˆ 0 ⎢ ⎥⎢ B ⎥ ⎢ ⎥ the amount of oil reserves by counting the number of years left until all ⎢− 0.278 0.817 0 0 0 −1 0 0 ⎥⎢ Pˆ ⎥ ⎢ 0 ⎥ ⎢ ⎥⎢ P ⎥ ⎢ ⎥ oil runs out, assuming oil prices are unchanged as oil becomes in- 0 −1 0 0 0 − 0.565 0 0 Pˆ − S ⎢ ⎥⎢ CK ⎥ = ⎢ B ⎥ creasingly scarce. In a similar spirit, asking how a 100 percent decrease ⎢− 0.710 0 1.555 0 0 0 −1 0 ⎥⎢Qˆ ⎥ ⎢ 0 ⎥ ⎢ ⎥⎢ CN ⎥ ⎢ ⎥ ˆ in meat would change corn prices is equally useful, recognizing the ⎢ 0 0 −1 0 0 0 − 0.641 0 ⎥⎢ QB ⎥ ⎢ − S P ⎥ ⎢ ⎥ ⎢− 0.344 0 0 0.695 0 0 0 −1 ⎥ Qˆ ⎢ 0 ⎥ assumptions being made. We can simulate the effect of a complete ⎢ ⎥⎢ P ⎥ ⎢ ⎥ 0 0 0 −1 0 0 0 − 0.133 ⎢ ˆ ⎥ − S shift towards vegetarianism by finding the magnitude of the demand ⎣⎢ ⎦⎥⎣QCK ⎦ ⎣⎢ CK ⎦⎥ shocks that would cause a 100 percent reduction in the equilibrium quantity of livestock produced and consumed. Solving for the values of -1 Solving for X as X = A B identifies the changes SB, SP, and SCK that reduce the quantities of meat produced and con- in the equilibrium quantities and prices as a func- sumed to zero (i.e., the values that set QB = QP = QCK = -100) yields the values SB = -236, SP = -207, and SCK = -242. That is, if willingness-to- tion of the three demand shocks. By inserting par- pay for slaughter cattle, hogs, and broilers were to fall by 236 percent, ticular values of SB, SP, and SCK, a reduced-form 207 percent, and 242 percent, respectively, the predicted equilibrium equation showing the response of corn prices and quantities of beef, pork, and chicken produced and consumed would quantity to meat demand shocks can be calcu- each fall by 100 percent, to zero. Plugging these demand shifts back into equations (10) and (11) yields the percent change in corn price and lated. For example, by assuming SB = 1, the first quantity that would result from the negative meat demand shocks of element of X equals -0.28, which implies that a such magnitude to eliminate production and consumption of meat. If one percent decrease in willingness-to-pay (WTP) all consumers were to become vegetarians, the model predicts that corn for slaughter-cattle decreases corn prices by 0.28 prices would fall 172 percent and corn production would fall 81 per- cent. Of course this magnitude of price change cannot be literally true percent. Because equation (9) is linear, a 2 per- (because it would predict negative prices); however, the results are cent decrease in WTP results in a 0.28*2 = 0.56 consistent with the idea that if a mass shift towards vegetarianism were percent decrease in corn prices. Solving equation to occur, corn would be much cheaper. The reason for the extreme price reduction is that equilibrium displacement models rely on ob- (9) for corn prices and quantities yields the served data to derive predictions along with the assumption of constant following: elasticities (i.e., linearity).

118 October 2009 Agricultural and Resource Economics Review as an investigative peek into the consequences of vegetarianism do reduce acres planted to corn. large-scale vegetarianism for corn prices. This is When consumption of all meat products falls one accomplished by assuming that the demand for all percent, the quantity of corn produced falls by three types of livestock falls by one percent. 0.81 percent. Assuming that this lower corn pro- When SB = -0.02373, SP = -0.02068, and SCK = duction is met by retiring crop acres, or putting -0.02422, the equilibrium quantity of beef, pork, those acres to an alternative, less polluting use, and chicken decreases by one percent. Corre- vegetarianism is environmentally friendly. Vege- spondingly, when the consumption of each farm tarians often claim that the reduced corn acres product falls by one percent due to these shocks, needed for American consumers can be freed to corn prices fall by 1.72 percent and corn quantity fight famine in developing countries (Spencer falls by 0.81 percent. The results are, of course, 2000, Stuart 2006). However, farmers are un- sensitive to any measurement errors in the Marsh likely to plant additional corn acres to feed the (2007) study, and standard errors could be calcu- hungry without compensation. If the negative lated using the methods outlined in Davis and value for the meat shocks (SB, SP, SCK < 0) are not Espinoza (1998). This section, however, seeks to accompanied by a positive shock for corn demand provide a best estimate, and thus leaves sensitiv- (SCN > 0), say for example by charities purchasing ity analysis to future research. corn and delivering it to areas of famine, vege- This result highlights the interdependency of tarianism will not achieve its goal of reducing livestock and corn production. When the con- hunger. That is, for the market to remain in equi- sumption of livestock falls by one percent, corn librium, the demand curve for corn would have to prices fall by almost two percent. One would then shift out by an amount equal to the charitable conclude that large-scale movements towards corn donations given to developing countries. vegetarianism would cause large decreases in corn prices, making the cost advantages of vege- The Value of Meat to Consumers tarianism even more pronounced. Should the de- crease in meat consumption become significantly Many advocates of vegetarianism have argued large, there would be a point where corn prices that most consumers can, without much trouble, reached the minimum average variable cost for eventually switch their diets away from meat con- the most efficient producers, at which point corn sumption. It is true that eating meat is not neces- prices would become insensitive to changes in sary to live a healthy life (Sabate 2003). How- meat production, and be at their lowest possible ever, simply because meat consumption is not value. necessary does not mean that consumers do not Of course, a shift towards vegetarianism by one strongly desire it. How strongly do consumers de- portion of the population would reduce corn sire meat? According to a leading advocate of prices and hence meat prices for the remaining vegetarianism, (2001, p. 88), “those meat-eaters, as lower corn prices reduced the cost who switch to a vegetarian diet will, over time, of feeding animals. Assuming SB = -0.02373, SP = enjoy their food at least as much as they did be- -0.02068, and SCK = -0.02422, corn prices fall fore. …” These sentiments are echoed by Reagan 1.72 percent, beef prices fall 1.81 percent, pork (2004, p. 335), who argues that “there are many prices fall 1.43 percent, and poultry prices fall other tasty foods besides those that include meat 2.29 percent. Large-scale shifts towards vege- …we are not being asked to choose between eat- tarianism not only make vegetarian diets cheaper ing…meat or harming ourselves by depriving our- due to lower corn prices, but make non-vege- selves of the opportunities for the pleasures of the tarian diets cheaper as well. Given these percent palate.” changes in prices, movements towards vegetari- In this section, we seek to determine whether anism may actually make meat consumption in- there is any empirical evidence for such claims by creasingly affordable relative to vegetarianism. evaluating the value that individuals place on pro- A major motivator for many vegetarians is to hibiting a forced reduction in their meat con- reduce pressures on cropland, thereby reducing sumption. This analysis does not assume that in- fertilizer use, pesticide use, and runoff. The dividuals decrease meat consumption due to a model results suggest that movements towards change in tastes or preferences, such as a volun-

Lusk and Norwood Some Economic Benefits and Costs of Vegetarianism 119 tary adoption of vegetarianism. Instead, it as- this estimated function implies the following de- sumes that tastes remain the same, and that a mand function: policy, perhaps driven by significant political power of groups, forces consumers 9 α j to reduce their meat consumption through higher (13) xYpjj= β+(), −∑ kk β p k =1 meat prices. j Conceptually, the value of meat consumption to an individual is simply the person’s maximum which results from maximizing the following util- willingness-to-pay for each unit consumed less ity function: the price paid times the number of units con- sumed. Thus, the value of meat consumption is 9 simply the area below the meat demand curve and (14) Ux= ∑α−βkkkln( ) . above price. Measuring this value requires an k =1 estimate of consumer demand for meat. Although numerous such studies exist in the literature, it is Plugging equation (13) into equation (14) yields important that the estimated demands are “inte- the indirect utility function, V(p,Y ), which de- gratable,” meaning that the underlying indirect pends on food prices and total food expenditure. utility or expenditure function can be recovered Inverting this indirect utility function gives the from the demand estimates. This is essential be- expenditure function E(p, V ), which indicates the cause the utility or expenditure function needs to minimum level of expenditures required to achieve be known to properly calculate the welfare a particular level of utility. change that would result from eliminating meat How can this linear expenditure system be util- from one’s diet. In addition to this requirement, ized to estimate the value of meat consumption? we sought published studies that reported suffi- Ideally one would estimate individuals’ maximum cient price and consumption information so that willingness-to-pay to maintain their current level changes in the expenditure function could be of meat consumption, as opposed to reducing evaluated. These requirements led us to utilize the their meat consumption to zero. Obtaining such food demand estimates reported by Raper, Wan- estimates requires observations of consumer pur- zala, and Nayga (2002). chasing behavior when meat consumption is zero The food demand estimates reported in Raper, or close to zero, and behavior under contempo- Wanzala, and Nayga (2002) stem from a linear rary levels of consumption. However, no data expenditure system. In particular, the authors exists where meat consumption is remotely close reported results of a system of demand equations to zero. Thus, instead of estimating the value of for nine food categories (meat, non-alcoholic bev- prohibiting a 100 percent reduction in meat con- erages, cereals and bakery products, dairy, fruits sumption (which would imply vegetarianism for and vegetables, sweets and sugars, and oils, all), we consider a small movement towards vege- food away from home, and other food at home) tarianism. Specifically, this section estimates the applied to a data set on a sample of U.S. house- monetary value that individuals place on prohibit- holds’ weekly food expenditures. Nine expendi- ing a policy that would reduce their meat con- ture equations were estimated for each of the j = 1 sumption by one percent. to 9 goods. The estimated expenditure functions We generally follow the approach introduced took the form by Hausman (1996) and utilized by Hausman and Leonard (2002) and by Dhar and Foltz (2005). In 9 these applications, the focus was on estimating (12) Ep=β+α−(), Y p β jjjj∑ kk the value of new goods, but the approach is also k =1 applicable to identifying people’s values for any existing good. The approach is as follows. First,

where Ej is the household’s weekly expenditure let j = 1 represent meat at home and let the cur- for the jth good, pj is the price of the jth food, rent price of meat at home be given by p1. This and Y is household’s total weekly expenditure on implies that the expenditure function at current all nine foods. Pollak and Wales (1969) show that price levels is E(p1, p2, p3, p4, p5, p6, p7, p8, p9,

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V 0), where V 0 indicates utility at current price one percent reduction is $0.16/week (82.34 – levels. Second, for the good in question, in this 82.18 = 0.16). To put this value in perspective, it case meat, utilize equation (13) to find the virtual is instructive to compare the relative value of price of the good that would reduce meat con- each food category analyzed by Raper, Wanzala, sumption by one percent.5 Let this virtual price of and Nayga (2002). To conduct these relative V meat be given by p1 . Third, determine the com- comparisons, we carried out the above steps for pensating variation that would occur from this each food type to determine the change in expen- V price change: CV = E(p1 , p2, p3, p4, p5, p6, p7, p8, ditures that must occur to keep utility constant if 0 0 p9, V ) – E(p1, p2, p3, p4, p5, p6, p7, p8, p9, V ). As the particular food price were to rise to such a V the price of meat rises from p1 to p1 , the budget level that consumption of that food would fall by constraint moves inward and changes slope, mov- one percent. The estimates of the value of each ing the consumer to a lower indifference curve. food category are reported in Table 3. Even if we Additional income is needed to shift the new focus on the relative value, we find meat to be the budget constraint with its altered slope up to the most important food category behind “food away old indifference curve. The amount of this addi- from home.” Of course, food away from home tional income is the compensating variation CV. includes meat and non-meat items. Assuming that The calculated compensating variation is the people eat meat in roughly the same proportion to change in welfare that would occur if meat con- their overall diets away from home as they do at sumption were reduced one percent and the prices home, the results imply that meat is the most of all other foods were held constant at the levels valuable to consumers.7 prior to the meat reduction. These results suggest that giving up meat is no Using the data and estimates reported in Raper, easy task. Singer (2001, p. 88) argues, in regard Wanzala, and Nayga (2002), we find that meat to the difficulties associated with not eating meat, prices would have to increase 1.012 times their that “…these are minor human interests that we current level for meat consumption to be reduced should not allow to outweigh the more major in- by one percent.6 Due to the nature of the data, it is terests of nonhuman animals.” The calculations assumed that this meat reduction comes exclu- provided here suggest quite the contrary: eating sively from food consumed at home. Whereas the meat is no minor issue for most Americans. Meat average weekly household expenditures on food is the most valued food source. It is perhaps not at mean prices and consumption levels was about too surprising, then, that vegetarians are estimated $82.18/week, results reveal that were meat con- to represent less than 4 percent of the U.S. popu- sumption at home forced to fall one percent (i.e., lation (Ginsberg and Ostrowski 2007); humans meat prices for food at home increased 1.012 derive great pleasure from consuming beef, pork, times above current levels), food expenditures would have to increase to $82.34/week to hold 7 Some readers may be interested to know whether we extrapolated utility constant. This means that the value of eat- outside the data to estimate the value of prohibiting a 100 percent reduction in meat. Given the data used by Raper, Wanzala, and Nayga ing meat, at home, at current levels relative to a (2002), the closest the data allow to answering this question is to evaluate a 100 percent reduction in meat consumed at home, not

counting what is referred to as “subsistence” quantities of meat. Meat 5 There is another, more technical reason for investigating a one per- prices would have to rise 310 times their current levels to cause a 100 cent reduction in meat consumption instead of a 100 percent reduction. percent reduction in at-home meat consumption, not including subsis- In the linear expenditure system, the quantity demanded for good j tence meat quantities. To compensate for this higher meat price, food expenditures would have to rise to $282.66 per week to hold utility cannot be set exactly to zero if β j is positive because the utility in constant. This means that the value of eating meat, at home, to the equation (14) would be undefined. The coefficient β j is usually de- scribed as the “subsistence” or “pre-committed” quantity level. average household is $200.48/week (282.66 – 82.18 = 200.48). Stated 6 differently, a person would have to be compensated an extra $200.48 Raper, Wanzala, and Nayga (2002) let the β j parameters vary by each week to make them indifferent to whether they eat meat at home, demographic characteristics. The results reported in this paper corre- without changing their restaurant consumption habits, assuming the spond to the level of β j calculated at the means of each of the demo- price of other foods is unchanged. This calculation implies an annual graphic characteristics. Although the authors report this value in their value derived from eating meat of almost $10,500 per household in Table 4, we obtained slightly different figures when doing the calcula- 1993 dollars. Given that there are roughly 125 million households in tion ourselves; thus, we utilize the mean β j obtained from our own the United States, the value of meat consumption to U.S. consumers is calculations. Raper, Wanzala, and Nayga (2002) also segregated their about $1.3 trillion in 1993 dollars or $1.8 trillion in 2006 dollars. Of analysis by poverty and non-poverty households, but we report only course, this result requires one to extrapolate far outside the range of the results corresponding to the non-poverty households. Similar re- data, but it is a useful way of illustrating the importance of meat in sults are obtained from both groups. Americans’ diet.

Lusk and Norwood Some Economic Benefits and Costs of Vegetarianism 121

Table 3. Consumer Welfare Loss from a One In addition to this budget-based approach, we Percent Reduction in Consumption of also considered a model of the interrelated corn, Competing Food Categories (in 1993 dollars) livestock, and poultry markets. This analysis sug- gested that demand shifts away from meat prod- Value of Food Category to ucts would result in significantly lower corn Food Category Consumers ($/week) prices and corn production. Meat prices fall as Food away from home $0.606 well, sometimes by a larger percentage than corn Meat $0.162 prices. This represents a positive outcome for consumers, as commodity plant-based food would Other food at home $0.139 be cheaper and less land would be in crop pro- Fruits and vegetables $0.083 duction (resulting in fewer environmental exter- nalities). However, a reduction in prices and pro- Cereals and bakery products $0.079 duction of crops and livestock implies reduced Non-alcoholic beverages $0.036 revenues to the farm sector. Meat production is a Dairy $0.035 value-added enterprise; it takes plants like corn, soybeans, and grass, and converts them into a Sweets and sugars $0.011 more valuable item like ground beef and pork Fats and oils $0.004 chops. Adding this value necessarily requires eco- nomic activity, and forgoing this activity would cause economic hardships to those working in the

livestock and meat processing sector who would

then have to find alternative employment. Also and poultry. One may question whether the tastes impacted economically will be crop producers, as of consumers would change after a prolonged ex- large-scale adoption of vegetarianism will result perience with vegetarianism, or whether children in a decrease in the value for their product, espe- raised in a vegetarian household would develop cially corn and soybeans. These economic im- preferences similar to those reported in Table 3. pacts can be significant in the short run, and One cannot question, however, the great extent to devastating for some families. Some studies have which the American consumer values meat. shown that consumers generally care more about the financial well-being of farmers than farm ani- Conclusions mal welfare (Norwood, Lusk, and Prickett 2007), so policies promoting vegetarianism may con- This paper reported three separate analyses aimed front additional political obstacles when the at providing some insight into the economics of public begins to associate vegetarianism with vegetarianism. Despite the fact that many vege- financial hardships in the farm sector. The flip tarianism advocates routinely make claims about side of this argument is that some types of farms the economic effects of vegetarian diets, there has could benefit from an increase in vegetarianism, been surprisingly little systematic study of the as consumer demand for certain plant-based foods economics of vegetarianism. The purpose of this shifts outward. study was to partially fill this void in the Finally, in response to claims made by advo- literature. cates of vegetarianism, we determined the impor- Our initial analysis indicated that it is much tance of meat in a consumer’s diet. Results re- less costly to produce nutrients (i.e., calories and vealed that meat is the most valuable food cate- protein) from some plant-based sources compared gory to consumers. This finding underscores the to animal-based sources. This cost advantage, difficulty activist groups have in prompting a however, is partially offset by the significantly mass shift towards vegetarianism and suggests higher marketing bill for crops as compared to that the claims that consumers can easily give up livestock. Many crops undergo significant trans- meat-based diets are overstated. It could be that formation prior to being consumed at the retail the demand and utility parameters used to calcu- level, and it would be a mistake to ignore such late the value of meat consumption would change costs when comparing the efficiency of nutrient once people became accustomed to the vegetarian production across animal and plant sources. lifestyle. Children raised in a culture free of meat

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124 October 2009 Agricultural and Resource Economics Review costs, respectively. Supply and inverse demand ˆˆˆ (A8) PCK =−0.723 − 0.133QPCK + 1.045 BR equations for slaughter hogs (pork) are ˆˆˆ +−+0.045PPPBXPXL 0.003 0.043 , ˆˆˆ (A5) QP =−0.457 + 0.241PPPCN(1)−− − 0.110 (1) where P is the retail price of broilers. ˆ BL ++ 0.008TQ 0.845 P(1)− To convert these equations to their long-run form requires some simple algebra. For example, ˆˆˆ suppose that a supply equation is written as Q = (A6) PP =−4.000 0.641QPPPX + 0.412 a0 + a1P + a2Q(-1), where Q(-1) is the value of Q in +−− 0.225PPTˆˆ 0.027 0.008 , PV L the previous period. In the long run, Q = Q(-1), so the equation can be rewritten as Q = a0 + a1P + where PPX and PPV are the prices of wholesale a2Q, or Q – a2Q = a0 + a1P, or Q(1–a2) = a0 + pork and pork by-products, respectively. The sup- a1P, or Q = (a0 + a1P)/(1 – a2). The equations in ply and inverse demand for processed broilers the text ignore every variable except the price and (chicken) are quantity changes of cattle, chicken, pork, corn, and the meat demand shocks. The other variables ˆˆˆ (A7) QCK =+0.167 0.091PPCK(1)− − 0.045 CN are considered exogenous for our analysis, or al- ternatively can be interpreted as being subsumed −++ 0.055PTQˆ 0.006 0.869 ˆ BL CK (1)− in our meat demand shock variables.