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Testing the Truth about the BSE Test Ban:

Is the USDA barring private companies from testing cattle for "mad cow" disease in order to protect major beef producers' profits? Not based on the materials presented in a recent legal case, according to Stuart Buck. (LvIP)

Ron Hardin (mail) (www):
There's in any case no first-order effect on industry profits in raising everybody's costs. The costs are simply passed on to consumers. (A second-order effect may effect profits, that consumers simply in response buy less at those higher prices, and in effect downsize the industry, but the return on capital is the same, only with less capital.)

A similar effect occurs with hiring illegal workers - it only helps your business if you're the only one doing it. Otherwise it simply leads to cheaper products.

And, in the 50s, pollution of the Hudson, which lead to cheaper GE appliances. The polical argument won, that cleaner water is worth higher prices. GE didn't get anything out of it one way or the other.
6.5.2007 10:37am
Justin (mail):
Stuart Buck's a good lawyer, but he's really done nothing to establish that Hilzoy's motive is incorrect. And while Hilzoy relied on the wrong legal argument made by an errant journalist, the actual legal argument the government is providing makes only a limited amount of sense - although comprehensive testing of mad cow might not catch particular positives, it WILL catch them EVENTUALLY, and since mad cow disease is infectous, youd think that the chances of eating mad cow from that manufacturer, compared to other manufacturers, would be far less.

Of course, the USDA has been WIDELY criticized for having third-world-like mad cow testing procedures compared to other countries. Hilzoy's criticism should be viewed in that context.
6.5.2007 10:56am
Justin (mail):
Ron Hardin, even basic, theoretical, Econ 101 disagrees with you that "100%" of the costs will be born by consumers, unless there are no substitutes and an inelastic demand.
6.5.2007 10:57am
Ron Hardin (mail) (www):
Justin, the return on capital has to return to the same level. Capital has lots of competition for its attention.
6.5.2007 11:35am
OK Lawyer:
If I understand it correctly, the USDA won't allow voluntary testing of all animals because they are afraid that consumers will see on the packaging that this particular steak has been tested for BSE and is clean when in fact that might not be the case because the only test available simply will not detect BSE at the time of slaughter?

If that is true, then wouldn't the testing company know this and simply be opening themselves up for huge liability as soon as someone buys such a tainted, but "tested," product? Not to mention that any goodwill gained from such labeling would immediately vanish as soon as one tainted package was found, right?

I don't know anything about the test. Is the USDA's position factually correct? does anyone have any cites?
6.5.2007 11:39am
Montie (mail):

Ron Hardin, even basic, theoretical, Econ 101 disagrees with you that "100%" of the costs will be born by consumers, unless there are no substitutes and an inelastic demand.


Not exactly. If a market has a horizontal supply curve (i.e., perfectly elastic supply), then all cost increases would be born by consumers. The elasticity of supply depends on several things include technology, capacity, and competition.
6.5.2007 11:41am
byomtov (mail):
Justin, the return on capital has to return to the same level.

But that's because profits shrink and so does the value of the firm. That is, profits fall, so the stock drops. The lower profits give the same percentage return as before, but there's less capital in the company.

By the way, I wonder why GE fought so hard to avoid having to do the cleanup if it really didn't matter to them.
6.5.2007 11:46am
byomtov (mail):
By the way, Buck is being a bit dishonest when he writes that,

The reason the government is "in the case to start with" is that Creekstone Farms filed a lawsuit against the Department of Agriculture.

The reason Creekstone filed the lawsuit was to challenge the USDA's action in stopping the testing.
6.5.2007 12:05pm
Stuart Buck (mail) (www):
Byomtov: Hilzoy didn't ask why the USDA regulates the beef industry. She asked why the USDA was "in the case." Case = lawsuit. Thus, I read the question to mean, "Why is the government even involved in this lawsuit." This is not a "dishonest" reading, as you assert.
6.5.2007 12:25pm
byomtov (mail):
Stuart Buck,

That's a rather strained, narrow, legalistic reading. If I cause an accident and get sued, then, by your interpretation, the "only reason I'm in the case" is that the victim sued me. But something happened before that - the accident. Similarly, USDA doesn't just regulate the industry in general, it specifically prohibited Creekstone from buying the tests.

As for the USDA's fear of consumers being deceived, I think it would have been a good idea to note that Creekstone wanted to do the testing because the Japanese required it of companies exporting beef to Japan.

Finally, it's interesting to me that you manage, in one post, to both sneer at and defend regulation, according to what you're trying to say at the time.
6.5.2007 1:06pm
Stuart Buck (mail) (www):
Use all the adjectives you want, but I still think my reading of Hilzoy's question was the most obvious reading. If she meant to ask something other than why the government was part of the lawsuit to begin with, then it was sloppy writing.

On another note, where do you purport to detect "sneer[ing]"?
6.5.2007 2:00pm
Stuart Buck (mail) (www):
Use all the adjectives you want, but I still think my reading of Hilzoy's question was the most obvious reading. If she meant to ask something other than why the government was part of the lawsuit to begin with, then it was sloppy writing.

On another note, where do you purport to detect "sneer[ing]" at regulation?
6.5.2007 2:00pm
Ron Hardin (mail) (www):
The economic point is that the advantage from not testing, the advantage from hiring illegals, the advantage from polluting, are all competed out. They go to the consumer.

The exception is if you're the only one doing it. That's the case that always gets analyzed, and never applies.
6.5.2007 2:58pm
Brett Bellmore:
Strictly speaking, in order for a test to produce false negatives, doesn't it have to be the case that a negative result is false?

Given that the company is probably not deceived about the utility of the test, the basis of the complaint has to be that they're misleading the customers about the safety of their meat. However, given that their meat isn't going to be any less safe than that of companies not doing the testing, is it the case that the USDA WANTS consumers to be afraid of American meat?

I think there's a certain internal inconsistancy in the USDA's case, even if they've got a legal basis for their position...
6.5.2007 3:06pm
Malvolio:
I consider myself a strong libertarian, but even I regard Creekstone's plan as out-and-out fraud.

First, an important fact: BSE is not found in beef cattle. BSE has a long incubation period and a cow old enough to manifest BSE is too old to be eaten.

Say Creekstone tests 1000 cows, of which one is actually infected with the prion that causes BSE (and is suspected of causing CJD in people). Assuming the test has a 99% accuracy, 10 cows will fail -- and at least nine of those cows and probably all 10 will be healthy. The test will likely (99 times out of 100) miss the infected one -- as no test works on a cow that young. The true positive, if it occurred, would be pure luck.

And then Creekstone sells the meat as "safe", when it is no safer than any other beef. Perhaps they just intend to label it "tested" or "screened", but that, if anything is worse. The beef is in fact safe, compared to, say, driving a car or drinking a beer, but the test being used to demonstrate that fact has no more validity than does phrenology or astrology.

Creekstone's day in court should be as a criminal defendant.
6.5.2007 3:12pm
byomtov (mail):
Stuart,

I don't think it's a question of adjectives, but of common sense. "Case" can refer to a lot of things, not just a lawsuit. Do you think that in my example of an accident it's fair to say that the reason I'm in the case is that I got sued, or would it be more accurate to say the reason is that I caused an accident?

As to the sneering, I took your phrase, "a perfectly normal case of the liberal regulatory state protecting its turf," (your italics) as a sneer. If it wasn't, I misinterpreted.
6.5.2007 6:00pm
Stuart Buck (mail) (www):
No sneer intended. I was just pointing out that, to my mind, what's going on here is not a unique excess of the Bush administration. Instead, it's exactly the sort of economic regulation that progressives have supported for the past century or so.
6.5.2007 8:06pm
Owen Hutchins (mail):
Malvolio- if that is the case, what is the point of the mandated testing at all?

And what exactly, besides costing the company money, would be the negative results of false positives?
6.6.2007 12:05am
Hewart:
Indeed, Owen.

It seems that if the government has already established that there is merit in mandating testing a statistical sample, then they have already assented to the idea that some valuable knowledge comes from that test.

Hence, it would seem to follow that testing all cattle should result in a greater degree of information (higher degree of certainty, whatever), than simply testing a statistical sample.
6.6.2007 3:12pm
Pol Mordreth (mail):
Owen, Hewart,

As I understand it, the beef cattle headed for the slaughterhouse are not the ones being tested. AFAIK, the ranchers are required to maintain a percentage of each seasons calves and let them get old during periodic testing. this tells the regulators how clean / dirty a specific ranching operation is. The tests are (at the moment) all but worthless for pre-slaughter testing.

R/
Pol
6.6.2007 4:12pm
TJIT (mail):
A few points on BSE and how it has been approached in the US

Surveillance of the US cattle herd for the presence of BSE began in 1990.

BSE was spread in cattle by the feeding them ruminant animal meat and bone meal (MBM). The US banned this in 1997 and the chances of having any BSE in the US decline every year because of this ban.

Between the feed ban and the incubation period for BSE international food safety groups agree that the risk of BSE being present in US cattle under 30 months of age is exceedingly small.

BSE is spread by specific risk materials (SRM) which are the brain, spinal tissue, eyes, trigeminal ganglia, tonsils, dorsal root ganglia, and distal ileum. In the US these are all declared inedible in cattle over 30 months of age and are prohibited from use as human food. This should stop the possibility of any transmission of BSE from cattle to humans within the US.
6.6.2007 9:00pm
TJIT (mail):
This is from an APHIS (animal plant health inspection service) document on BSE surveillance in the US

Surveillance Plan Overview


The Animal and Plant Health Inspection Service (APHIS), in cooperation with the Food Safety and Inspection Service (FSIS), and the Food and Drug Administration (FDA), implemented an Enhanced BSE Surveillance Program that tested over 600,000 samples (June 2004 through March 2006) and found only two positive domestic cows, one each in Texas and Alabama. The results of enhanced surveillance indicate that while BSE is present, it is at an extremely low level in U.S. cattle.

This warrants movement to a BSE Ongoing Surveillance Plan designed to detect disease should the prevalence rise above 1 case per 1,000,000 adult cattle. The BSE Ongoing Surveillance Plan is designed to exceed the accepted surveillance practices established by the World Organization for Animal Health (OIE) and reassure consumers and international trading partners of the BSE status of U.S. cattle. The surveillance plan will be continuously analyzed and periodically adjusted as needed to assure market confidence in U.S. cattle
6.6.2007 9:09pm
TJIT (mail):
Here is a link to a report from the Harvard center for risk analysis that gives a detailed look at the surveillance program.

Comments on USDA bovine spongiform encephalopathy (BSE) surveillance plan
In summary, we agree with USDA's focus on testing high risk cattle. If there are additional BSE-infected animals in the U.S., the likely high false negative rate for laboratory detection of BSE in normal adults and juveniles (animals that do not yet show signs of disease) would make a focus on these populations inefficient.

The main interpretation challenge for USDA is the extrapolation of test results from the high risk cattle population to normal adult and juvenile cattle. Doing so requires the development of explicit assumptions about how the BSE prevalence rates in these sub-populations are related.
6.6.2007 9:30pm
TJIT (mail):
I followed this issue closely in the 1990s when the British experience with BSE began scaring the daylights out of the US beef producers.

As an engineer BSE has provided an interesting example of how the media, professional orginizations and consumers approach risk.

BSE got lots of attention because it is a nasty disease that has horrible consequences. However, it is a tiny risk in the US.

Two things that are much more dangerous as far as food borne disease are lack of hand washing after using the bathroom and improper cleaning of rotary lunch meat slicers at your neighborhood sub shop or supermarket.

Even though they are more of a risk these two items don't get as much attention because they are familiar to us.
6.6.2007 9:43pm