You’re the first person who disagrees with my conclusion but is willing to admit that some industries will be decreasing-cost (wherein we should expect greater than 1:1 effect on production); that is very refreshing!
in the extreme, every industry is increasing-cost, simply because of resource scarcity (consider the situation if computer game demand was so high that 90% of the population worked as game developers).
Yes, I agree in the extremely-large case. What about the extremely-small case? It’s very hard to think of a fledgling market for which the average price would be higher if the market produced 100 units instead of 1 unit. So I think that the vast majority of markets will be decreasing-cost when they’re arbitrarily small, and increasing-cost when they’re arbitrarily large. What about in between? How do we know where on the spectrum an industry is?
I agree we need a prior. If something could be positive, neutral, or negative, and I have no evidence of which it is, my default meta-prior is neutral. Obviously that is an extremely weak prior (ie I’m very open to being convinced it should be something else), but nothing in the pieces I quoted justifies an increasing-cost prior (they just discuss short-run market dynamics). Your “low hanging fruit” argument comes the closest because it’s a valid reason that points in one direction, but it is incompletely argued so far (the “in the extreme” argument is unconvincing since the same can be said of an opposing force).
Without looking at data, my prior on meat production being an increasing cost industry is extremely high.
Meat production is a commodity product. Commodity products compete mainly on price, and so we should expect the industry to be fairly normal (i.e. the sort of industry discussed in econ 101 courses) in terms of competition, costs, etc.
Meat has a number of costly inputs, including feed, water, land and labor. If you have several commodity inputs, you can expect that at least one of them would be a potential bottleneck to increasing the scale of the industry at constant cost. For example, we know that water usage is definitely increasing cost, because the next efficient option after depleting our reservoirs is desalination which is stupid expensive on agriculture scales (and this flows into feed prices).
Meat production is an extremely large and mature industry. We should expect that large and mature industries have scaled up to the point where marginal costs are increasing, because they have had the time and intelligence invested in them to pick the low-hanging and high-hanging productivity fruit.
People who eat meat would like to eat more of it, if only it were cheaper. For example, if MacDonalds introduced a third-pounder for the same price as a quarter pounder, most people would buy it. Since this situation exists, it is probably difficult to provide meat at cheaper prices holding other relevant factors stable. One can imagine another industry where people have no particular desire to purchase more of the given product if the price were lower, such as child car seats and so the industry is limited in size before it achieves minimum cost scale.
Of course, in some sense this dodges another question, which is what is your prior probability prior to. If you had never heard of economics, and were just talking about abstract categories which industries either were a member of or were not a member of, then perhaps you could presume a 50% meta-prior. If someone were to take all the industries in the world at a very fine-grained level, and they presented it to you, perhaps then a 50% probability would be warranted as well. To be honest, I’m not sure what the probability would be in that situation, if you were looking at, like beekeeping and video game production and taxi driving as example categories. But from that point to the point of meat production specifically we have many pieces of knowledge that become our prior before we actually get to the collecting real data. My prior of an industry being increasing marginal cost, weighted by the number of times it gets discussed in newspaper articles, or weighted based on the amount of revenue it generates per year, is much higher than 50%.
Edit: I see that this is somewhat repetitive of what you wrote in your other comment. Oh well, it’s already written.
Great! This is the only ‘complete’ argument I’ve seen that our prior for animal products industries should be that they are increasing-cost rather than constant-cost. I’m not as confident as you seem to be, but that’s more of a quibble at this point, and I’m glad we agree on the meta-prior!
The challenge then is to convince Norwood and Lusk that we want to know the long-run impact of consumer choices on animal production, not the short-run! They’re clearly estimating short-run elasticities since (a) their supply curves are way too steep, even for an increasing-cost industry, and (b) they explain their elasticities with an explanation that is irrelevant to the long-run:
Because it takes a year between the time a cow is bred and the time her calf is born, and then it also takes a long period before that cow can be transformed into beef or produce milk, it is difficult for beef and dairy producers to alter production according to changes in consumer preferences.
You’re the first person who disagrees with my conclusion but is willing to admit that some industries will be decreasing-cost (wherein we should expect greater than 1:1 effect on production); that is very refreshing!
Yes, I agree in the extremely-large case. What about the extremely-small case? It’s very hard to think of a fledgling market for which the average price would be higher if the market produced 100 units instead of 1 unit. So I think that the vast majority of markets will be decreasing-cost when they’re arbitrarily small, and increasing-cost when they’re arbitrarily large. What about in between? How do we know where on the spectrum an industry is?
I agree we need a prior. If something could be positive, neutral, or negative, and I have no evidence of which it is, my default meta-prior is neutral. Obviously that is an extremely weak prior (ie I’m very open to being convinced it should be something else), but nothing in the pieces I quoted justifies an increasing-cost prior (they just discuss short-run market dynamics). Your “low hanging fruit” argument comes the closest because it’s a valid reason that points in one direction, but it is incompletely argued so far (the “in the extreme” argument is unconvincing since the same can be said of an opposing force).
Without looking at data, my prior on meat production being an increasing cost industry is extremely high.
Meat production is a commodity product. Commodity products compete mainly on price, and so we should expect the industry to be fairly normal (i.e. the sort of industry discussed in econ 101 courses) in terms of competition, costs, etc.
Meat has a number of costly inputs, including feed, water, land and labor. If you have several commodity inputs, you can expect that at least one of them would be a potential bottleneck to increasing the scale of the industry at constant cost. For example, we know that water usage is definitely increasing cost, because the next efficient option after depleting our reservoirs is desalination which is stupid expensive on agriculture scales (and this flows into feed prices).
Meat production is an extremely large and mature industry. We should expect that large and mature industries have scaled up to the point where marginal costs are increasing, because they have had the time and intelligence invested in them to pick the low-hanging and high-hanging productivity fruit.
People who eat meat would like to eat more of it, if only it were cheaper. For example, if MacDonalds introduced a third-pounder for the same price as a quarter pounder, most people would buy it. Since this situation exists, it is probably difficult to provide meat at cheaper prices holding other relevant factors stable. One can imagine another industry where people have no particular desire to purchase more of the given product if the price were lower, such as child car seats and so the industry is limited in size before it achieves minimum cost scale.
Of course, in some sense this dodges another question, which is what is your prior probability prior to. If you had never heard of economics, and were just talking about abstract categories which industries either were a member of or were not a member of, then perhaps you could presume a 50% meta-prior. If someone were to take all the industries in the world at a very fine-grained level, and they presented it to you, perhaps then a 50% probability would be warranted as well. To be honest, I’m not sure what the probability would be in that situation, if you were looking at, like beekeeping and video game production and taxi driving as example categories. But from that point to the point of meat production specifically we have many pieces of knowledge that become our prior before we actually get to the collecting real data. My prior of an industry being increasing marginal cost, weighted by the number of times it gets discussed in newspaper articles, or weighted based on the amount of revenue it generates per year, is much higher than 50%.
Edit: I see that this is somewhat repetitive of what you wrote in your other comment. Oh well, it’s already written.
Great! This is the only ‘complete’ argument I’ve seen that our prior for animal products industries should be that they are increasing-cost rather than constant-cost. I’m not as confident as you seem to be, but that’s more of a quibble at this point, and I’m glad we agree on the meta-prior!
The challenge then is to convince Norwood and Lusk that we want to know the long-run impact of consumer choices on animal production, not the short-run! They’re clearly estimating short-run elasticities since (a) their supply curves are way too steep, even for an increasing-cost industry, and (b) they explain their elasticities with an explanation that is irrelevant to the long-run: