The Power of Choice

by Lawrence Libby, Chair, Department of Food and Resource Economics, University of Florida, Gainesville; Daniel E. Kugler, Director, Office of Agricultural Materials, CSRS, USDA, Washington, DC; and Steven Taff, Agricultural Economist, Department of Agricultural and Applied Economics, University of Minnesota, St. Paul.

Consumer demand is a powerful force, and people can use that power as a way to put their values to work. Individuals do care about the quality of life beyond their immediate needs, and they are often willing to pay for it.

Problems such as solid and hazardous waste disposal, depletion of finite natural resources, and food safety are affected by individual choice as well as by social policies.

The real challenge is to provide meaningful options for people in their behavior choices. One of these important options is the opportunity to purchase consumer products that do not deplete or damage the environment. Time and time again, we see that consumers do adjust their personal preferences, and make decisions that take into account the social and community impacts of private action, if they are given the product choices and the information that allow them to do so.

Consumer demand for a safe and attractive natural environment increases with income. Those with low incomes, who do not have adequate food or shelter, have priorities different from those whose basic needs are met. Yet whether we look at the developing world or the wealthy nations, economic development that abuses or destroys the environment may exchange short-term relief for long-term damage.

Addressing the World Future Society in 1989, former Secretary of Agriculture Orville Freeman asserted, "We make a potentially dangerous mistake when we assume that we must choose between serving humanity or serving the environment. It must be a priority to bring these goals of feeding the world's hungry and protecting the world's environment into harmony. They need not and they must not be mutually exclusive."

No one wants to destroy a place while seeking to improve it, at home or abroad. The public needs and deserves the chance to act on the understanding that economic improvement and environmental safety can co-exist.

People are the marketplace. The decision to select and purchase a product expresses an opinion which the marketplace interprets as demand. USDA 0885X940-7

At the Personal Level

In the marketplace, when a buyer selects and purchases a product, he or she is expressing an opinion which the marketplace interprets as demand. In some cases, we purchase tangible things such as cars, newspapers, or lunch. In other cases, they are intangible things such as clean air or education.

Our attitude toward market products, to the extent that it affects what we actually purchase, is an important determinant of change in what is produced. If consumers ask for change in the marketplace, the market will adjust. It is also a function of the marketplace to offer options that respond to the preferences for consumer choice. By providing information about product attributes and their impacts on human welfare, markets both respond to and help shape consumer preferences.

How do consumer preferences change? They are influenced by changes in family income, by advertising, by education, by experience, and by the relative prices of competing products.

We are bombarded with thousands of messages and experiences every day, and the information in these messages helps us to formulate and change our attitudes. More consistent and more credible messages, and those presented by more prominent or respected individuals, increase the likelihood that groups of people will arrive at some consensus of opinion or public consciousness. If the collective attitude is expressed in the market, change can occur. Individuals influence the marketplace and the marketplace influences individuals, but there must be communication between the two: a level of common understanding, a language of exchange, and a willingness to interact.

Agriculture at a Crossroads

As a Nation, we are rediscovering that "agriculture is the foundation of manufacture and commerce" (as the motto on USDA's seal suggests). We are learning that agriculture provides much more than food and fiber, that agriculture is a storehouse of renewable chemicals and materials for the Nation's industries. This role was fundamental and widely understood in the past, but now we have come to rely largely on synthetics, many of petrochemical origin, and American agriculture has devoted much of its research to the production and improvement of a few crops: corn, wheat, soybeans, rice, and cotton.

Agriculture in the United States provides more than food and fiber; it is a renewable chemical and materials storehouse for our Nation's industries. Tim McCabe/USDA 0981X1234-21

Today, in another swing of the pendulum, public attention and market demand may be moving away from how much food, fiber, and other material is grown to how it is grown. More and more buyers are looking beyond simple price and quantity of agricultural outputs and seeking other qualities as well. Today, concerns for the environment, human health, and economic well-being are increasingly being expressed in the marketplace by consumer demand as well as by law and regulation. There is a greater sense that short-term action can have long-term effects that may be inconsistent with personal beliefs.

What does this mean for farmers and agricultural businesses? Is it no longer enough to grow corn, raise cattle, or produce cotton? Beyond assuring the public of an adequate supply of reasonably priced and wholesome food a clear, although often unstated, policy goal for decades agriculture is now being asked to accomplish this without generating unacceptable levels of environmental damage or human health risk.

One way to think of the situation that American farmers face is to view a product, such as a bushel of soybeans, as a "total product." It not only contains a certain level of vegetable oil, protein, and carbohydrates, characteristics which are valued in the market, but also has embedded in it the technique used to grow the soybeans (including tillage and chemical practices), the ownership of the farm, the relative prosperity of the surrounding community, the opportunity costs of those soybeans not being produced in some other way or in some other place, and so forth. Now, the buyer gets all this with a bushel of soybeans.

In addition, with domestic demand for food-based products relatively stable, industrial uses are becoming an attractive alternative market for farm-based commodities. One example of a new industrial use for soybean oil is as a partial replacement for petroleum in newspaper print inks.

Demand for environmental services from agriculture will be increasingly evident throughout the world as more and more countries approach the U.S. level of national wealth. At the moment, this demand is expressed more through policy than through prices.