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Thinking on the margin: prostitution (UPDATED)

One of the most important ideas in economics is that people think and act on the margin. By that I mean that we make our decisions as if we were looking at the costs and benefits of just one more. Just one more slice of pizza. Just one more minute on the bike in the gym. Just one more share of some stock bought. If we reckon the benefits of that one more to be greater than the cost of it, irrespective of what has come before and what may come after, we’ll typically do it. The point is that we optimise, or at least act as though we optimise. We may only optimise locally instead of globally (that last slice of pizza may have seemed like a good idea at the time, but it’s not much good for my health in general), but it’s still what we do.

The idea is by no means unique to economics. There is, at the least, an entire branch of mathematics devoted to it. But economists just love to point out that optimisation – and, therefore, thinking on the margin – applies to human behaviour just as well as it does to equations on a blackboard, and that realisation can sometimes lead to surprising, even counter-intuitive observations with serious consequences for public policy.

As I’ve mentioned before (here and here), Steven Levitt and Sudhir Venkatesh are currently finishing a paper on street prostitution in Chicago. They were able to study the provision of prostitution services during a predictable demand shock and discovered that the supply of prostitution services is rather elastic: a 63% increase in quantity was associated with only a 30% increase in price. More importantly, that increase came on three margins: an increase in supply from existing prostitutes (who, on average, only work 13 hours a week), a temporary in-migration of prostitutes from other areas and the temporary entry into the market of women who are not ordinarily willing to perform sex acts for money. Levitt and Venkatesh estimate that 43 of the 63% increase in the number of tricks came from existing prostitutes in the area and the remaining 20 from the in-migrating prostitutes and the temporary market entrants.

That third margin bears highlighting. Typical thinking about the topic holds that the choice to become a prostitute, if it is a choice at all, is a discrete [update:  I originally had “discreet”.  It’s certainly that 🙂] one; that women and a very few men first choose – or are compelled – to be a prostitute and only then consider what money they might make. The idea that some women might choose to start or stop being a prostitute in the face of a ten, five or even one dollar an hour change in the money available doesn’t make sense in this thinking. I believe that the reason for this is founded in a moral abhorrence at the very idea of prostitution – the belief that in addition to any social or economic conditions faced by prostitutes, the act of prostitution itself is immoral. Since it has become au fait, among Western intelligentsia at least, to never accuse people of direct moral failure, it has also become the norm to conclude that all prostitutes were misled or forced into their position and thus need to be rescued. The terrible issue of people trafficking naturally lends support to this idea.

I do not want to belittle the tragedy and travesty that is people trafficking. It is a truly awful phenomenon and the fact that it exists at all, let alone in countries that are supposed to be based on freedom of the individual as a founding tenet, is abhorrent. It needs to be stamped out.

My concern is to highlight that not all prostitutes are forced into their profession. There really are women who, faced with an outside option of $7/hour, are not willing to be a prostitute for $25/hour, but are willing to do so for $35/hour. I have no doubt at all that – and this is important – the same statement would be true if you multiplied all of those figures by 10.

The upshot of this is that, slaves aside (and that’s what people trafficking is – slave trading), you cannot simply save or rescue a prostitute. It is not a problem, if you consider it one, to be tackled. It is not something that you solve, once and for all. Prostitutes are people like everyone else and like everyone else, they think on the margin and respond to incentives. If your concern is that prostitutes live in poverty, that they are compelled into their work by economic hardship, then you must work to improve their outside options. But at the same time, you should recognise that you will not be stopping prostitution from happening; you will simply be raising the minimum asking price. That will lower the quantity demanded, but it will never remove it altogether.

Update (5 April 2008):

See my new entry here. It would appear that maybe even the figures for human trafficking are overblown.

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From marriage to trade with China

In another great example of bouncing topics around in the often-academic blogs, we have this:

Betsey Stevenson and Justin Wolfers wrote an article for Cato Unbound: “Marriage and the Market“. Here is a brief summary of their idea (the exact snippet chosen is stolen directly from Arnold Kling):

So what drives modern marriage? We believe that the answer lies in a shift from the family as a forum for shared production, to shared consumption…the key today is consumption complementarities – activities that are not only enjoyable, but are more enjoyable when shared with a spouse. We call this new model of sharing our lives “hedonic marriage”.

…Hedonic marriage is different from productive marriage. In a world of specialization, the old adage was that “opposites attract,” and it made sense for husband and wife to have different interests in different spheres of life. Today, it is more important that we share similar values, enjoy similar activities, and find each other intellectually stimulating. Hedonic marriage leads people to be more likely to marry someone of their similar age, educational background, and even occupation. As likes are increasingly marrying likes, it isn’t surprising that we see increasing political pressure to expand marriage to same-sex couples.

…the high divorce rates among those marrying in the 1970s reflected a transition, as many married the right partner for the old specialization model of marriage, only to find that pairing hopelessly inadequate in the modern hedonic marriage.

It produced a flurry of responses and reactions, but the chain I want to follow is this one:

Which finally brings me to why I wrote this entry. I love this sentence from Tyler:

Symbolic goods usually have marginal values higher than their marginal costs of production; Americans for instance love the idea of their flags but the cloth is pretty cheap, especially if it comes from China.

Brilliant. 🙂

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Bankers’ pay

I’ve been meaning to read this piece by Martin Wolf (chief economics commentator for the Financial Times) for the last week. As it happens, it’s a “me too” response and a minor expansion to this brilliant piece by Raghuram Rajan (professor of finance at the Graduate School of Business at the University of Chicago and former chief economist at the IMF). I recommend reading both of them in full. Here are some cut-down snippets from Rajan’s efforts:

The typical manager of financial assets generates returns based on the systematic risk he takes – the so-called beta risk – and the value his abilities contribute to the investment process – his so-called alpha.

…

[T]here are only a few sources of alpha for investment managers. One of them comes from having truly special abilities in identifying undervalued financial assets. [e.g. Warren Buffet]

…

A second source of alpha is from … using financial resources to create, or obtain control over, real assets and to use that control to change the payout obtained on the financial investment. [e.g. a venture capitalist]

…

A third source of alpha is financial entrepreneurship or engineering – creating securities or cash flow streams that appeal to particular investors or tastes. As long as the investment manager does not create securities that exploit investor weaknesses or ignorance (and there is unfortunately too much of that), this sort of alpha is also beneficial, but it requires constant innovation.

…

How do untalented investment managers justify their pay? Unfortunately, all too often it is by creating fake alpha – appearing to create excess returns but in fact taking on hidden tail risks, which produce a steady positive return most of the time as compensation for a rare, very negative, return.

…

True alpha can be measured only in the long run and with the benefit of hindsight – in the same way as the acumen of someone writing earthquake insurance can be measured only over a period long enough for earthquakes to have occurred. Compensation structures that reward managers annually for profits, but do not claw these rewards back when losses materialise, encourage the creation of fake alpha. Significant portions of compensation should be held in escrow to be paid only long after the activities that generated that compensation occur.

Martin Wolf’s addition comes in like this:

By paying huge bonuses on the basis of short-term performance in a system in which negative bonuses are impossible, banks create gigantic incentives to disguise risk-taking as value-creation.

We would be better off with Jupiter’s 12-year “year”, since it takes about that long to know how profitable strategies have been. The point is that a year is an astronomical, not an economic, phenomenon (as it once was, when harvests were decisive). So we must ensure that a substantial part of pay is better aligned to the realities of the business: that is, is made in restricted stock redeemable over a run of years (ideally, as many as 10).

Yet individual institutions cannot change their systems of remuneration on their own, without losing talented staff to the competition. So regulators may have to step in. The idea of such official intervention is horrible, but the alternative of endlessly repeated crises is even worse.

Dani Rodrik has been noting for a while that Martin Wolf seems to be coming ’round to his point of view in economic development. I’ve seen the same thing and it’s great to see.

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Biting off more than I can chew

Today I sat down with my supervisor, Professor Andrea Prat, to talk some more about my research ideas. I would have liked to speak with him more frequently over this year, but it turns out that teaching is taking more time than I anticipated, just as everyone warned me it would.

My ideas are a lot more fleshed-out than the vague arm-waving on my research page and Prof. Prat seemed excited at where they are going. That’s big in itself – when one of my friends here at LSE heard that he was going to be my supervisor he replied with: “Wow. He must have an IQ of, like, a million.” Not having great, gaping holes shot in my thoughts is a minor victory in itself. 🙂

I wasn’t planning on developing it fully for my research paper this year, but even on the area that I was thinking of doing, his unnerving comment was that it is probably still a bit too big an idea for this year.

Bugger.

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Australia, you’re not as rich as you think you are

We’re covering this in my EC102 classes this week and I thought it interesting enough to share with a wider audience:

Looking at what goes into GDP is usually a pretty tedious affair, but the simplest way to think of it is like this: GDP is meant to represent the total value added. It is new work done; new stuff produced.

One upshot of this is that new houses are counted in GDP, while sales of existing houses are not. This is because sales of existing houses are just value transferred – an exchange of assets – and so don’t represent new effort. That’s not quite true. The real-estate agent fees and legal fees associated with the sale count, since they are new work done: they add new value by facilitating the trade.

Here’s a trick in looking at value added: we only need to look at the prices of final goods. This is because the price of the final good will represent the total value added along the entire production chain. The typical example of this used in introductory textbooks is bread:

Who Sells Price Value added
Farmer Wheat $0.10 $0.10
Miller Flour $0.20 $0.10
Baker Bread $0.45 $0.15
Supermarket Packaged and convenient bread $1.00 $0.55


The price of the final good – packaged, convenient bread – is $1.00, which exactly equal to the sum of all the value added. So when the statisticians want to calculate a country’s GDP, they can ignore all the intermediate levels and just add up all the final goods that were produced.So what counts as a final good? Anything that gets sold to someone for consumption or investment. That might be to an individual, or to a private firm, or the government, or someone overseas. (Of course, since I buy both bread and flour from my supermarket, flour is sometimes an intermediate good and sometimes a final good; but it’s easy to tell which is which – flour sold by the supermarket is final, while flour sold by the miller is intermediate.)

Now consider a country that has a large natural resource sector. Australia is a great example. So are all the oil exporting countries. We’ll pick the mining of iron ore in Australia as an example. Just like with the wheat above, there is a whole range of production possibilities based on the iron ore. However, when it’s exported, the final good that gets counted from the point of view of the Australian economy is the iron ore in the ship as it sails off to another country.The mining companies are definitely adding value. They’ve got to find the stuff in the first place, dig it up, clean it a bit to get rid of the dirt, transport it to the coast and then ship it overseas. They’ve also got to maintain all their equipment and allow for the fact that they wear out over time. All of that is new effort. But the price that India or China pays for the ore is more than cost of doing all of that. A large fraction of the price they pay represents the market value of the underlying asset – the ore – itself. But since the mining company didn’t actually produce the ore, that part of the price shouldn’t really count in GDP, for the same reason that when existing houses are sold, only the agent and legal fees are counted. None of this is really news.

When natural-resource-based industries are only a small part of a country’s economy, there’s not too much distortion, so we tend not to worry about it. But when those industries represent a large share of the national income, then the overestimates can be significant. In Australia, mining represents about 6.7% of the national economy. A fair chunk of that will be “true” value added, but a large share of it is really just the transfer of assets. How much? Well, BHP currently has a Return on Equity of 49%, while the long-run, risk-free return on capital is more like 8-10%. So as a very rough guess, assuming that BHP is representative of the mining industry as a whole and that the mining industry is competitive, we might suggest that Australia’s “true” GDP is at least 39% * 6.7% = 2.6% smaller than we think it is.

Some people might at this point wonder about the farmer back in the bread example. What if the farmer who, like BHP, is taking something from the land, is actually only adding 60% of the value that we think she is? The answer lies in the fact that there is a large production chain that builds up from the farmer’s wheat. Even if we remove a large fraction of the farmer’s value-added, that is only a small share of the total value added that we see in the final good’s price. So we would expect this overestimate to be very small overall. The point about mining is that we are only adding a small amount of value relative to that of the asset we are trading away, so as a percentage of the final good, the asset itself is quite large.

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Beaten to the punch

I had a brilliant idea over the Christmas break. It would save some people money, it would give other people flexibility, it allow me to get a “markets in everything” link from Tyler Cowen. I couldn’t lose! It turns out that I’m too slow and have been beaten to the punch by a good few years.

I wanted to build a website that allowed people to trade store credit and gift cards. The sellers would get the flexibility of cash, the buyers would get a discount at whatever store they were buying the card for and I’d take a (tiny) slice out of the middle.

Here are two articles from 2005 speaking of exactly that market: one from Wired and one from MSNBC. Between them, they list five different sites already doing what I thought of. Oh well.

They still don’t seem to have realised the full potential of this, though. I would like to see a site to exchange all currently-non-tradable forms of pseudo money (that is, things that effectively are a store of value, but are tied to particular stores or providers). That includes gift cards, store credit, frequent flier miles, supermarket reward programmes and Second Life Linden dollars.

There are clear issues of fraud risk to overcome, but I wonder how those sites get around the various stores’ policies of making gift cards non-transferable (i.e. not for resale).

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Sex for free

Following on from my earlier post noting (via Andrew Leigh) that Steven Levitt and Sudhir Venkatesh have been researching street prostitution in Chicago, Andrew managed to find a link to a preliminary draft of the paper. You can find it here. Andrew also noted that:

Levitt cited evidence that in the 1930s-50s, a very large share of men had their first sexual experience with a prostitute. With the rise of premarital sex, this is no longer true, so the market that’s left today is much seedier than in the past.

This would seem to imply that early sexual encounters once represented a sizable, or at least influential, portion of demand, which is interesting in itself.

Many modern-day feminists despair at the way that the so called “sexual revolution” has developed and I do wonder where the current arc of embracing sexuality will stabilise.

Here is a recent story from ABC News being shocked (shocked!) to discover that college parties are both racier and boozier than they used to be at some unspecified time in the past. They report (and fret) that girls seem to drink more at themed parties, where they also tend to wear less.

Here is a story about the merging of reality television and the public acceptability of sex for it’s own sake. A Czech brothel is offering it’s services for free in exchange for the clients’ permission to broadcast the event over the internet.

I suspect that the Czech offering is just the latest in a recent push for a form of authenticity or believability in pornography. It seems to go hand-in-hand with an increase in the popularity of amateur porn, which has two broad sub-categories: the professionally arranged and the truly amateur.

Truly amateur pornography, where the participants film or photograph themselves and share the material for free is arguably the ultimate sharing of the self in the web 2.0 paradigm [1]. It is a logical extension of the attention-seeking self-affirmation that we see in people’s embracing of a public side to their sexuality.

Professional outfits that seek out amateurs who are willing to be filmed (possibly for free) and then offer the material in the traditional business model of internet porn (give out teaser snippets for free and charge for the complete set) , seem to be the adult industry’s response to this shifting demand. In a way, the Czech brothel is just a new branch of this genre.

These developments are not without their concerns. Sara Montague – a presenter on BBC Radio 4’s Today programme – is clearly concerned, noting that much of the movement seems grounded in the hope of empowerment and self-confidence, but worrying that this serves indirectly to promote eating disorders among girls and the acceptance of rape among boys.

The main problem that Montague faces is that for most people, embracing public sexuality is non-harmful – not every girl gets an eating disorder and not every boy contemplates forcing himself on a girl – and is undertaken by choice. Montague is, in essence, faced with Douglas Adams’ cow that wants to be eaten. [2]

There is a saying that seeks to advise against supporting or encouraging prostitution: “No little girl ever says that when she grows up, she wants to be a prostitute.” The idea is a variation on Rawls‘ “veil of ignorance” and implicitly argues that the framing of a choice is of vital importance: that given a wider range of options than those she faces, no woman would choose to be a prostitute.

Montague may argue that just as the prostitute is compelled into her profession by a narrowing of her options, people are lead to an acceptance of public sexuality because of social conditioning. In her article she highlights the flood of media imagery seemingly designed to associate female success with sexiness. In other words, Montague is pointing out that Adams’ cow was genetically engineered to want to be eaten and asking if the cow then truly had a free choice. That question, of course, is moot when considering the cow in front of you. Its preferences may have been implanted, but as a conscious entity, you have to respect it’s choices. At most, you can try to stop future cows from being interfered with.

But to make the same argument for public sexualisation is still predicated on the idea that it is inherently a bad thing. I am not in any way trying to belittle the tragedy of eating disorders or defend the horror of rape, but the point is to weigh the benefits against the costs in aggregate. There is a parallel with opening a country up to trade and allowing jobs to be “lost” to, say, China. It is true that some people will lose their jobs and for them, the pain is tremendous; but it is also true that the vast majority of people experience a small improvement in their material lives because of the cheaper products. It is almost always the case that in aggregate, the latter outweighs the former and the social ideal is to open up to trade but have those that benefit compensate those that suffer.

The same, I think, applies to the progress of public sexualisation. By all means work to increase support for those burdened excessively by concerns of body image. By all means increase support to rape victims and ease the ability of the state to bring those guilty to justice. But that doesn’t mean we should fight to stop it altogether if people choose it freely and feel that it helps them, or even if they just enjoy it.

[1] Yes, I hate that word too; but what else should I have said?

[2] In The Restaurant at the End of the Universe (Foyles, Waterstones, Amazon), Adams had his characters encounter a cow in a restaurant that wanted to be eaten, going so far as to recommend particular parts of it’s body.

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John Pilger versus “the great game”

John Pilger (biography on Wikipedia) has a new piece out in the New Statesman, “The ‘good war’ is a bad war.” This is the central part of his essay:

The truth about the “good war” is to be found in compelling evidence that the 2001 invasion, widely supported in the west as a justifiable response to the 11 September attacks, was actually planned two months prior to 9/11 and that the most pressing problem for Washington was not the Taliban’s links with Osama Bin Laden, but the prospect of the Taliban mullahs losing control of Afghanistan to less reliable mujahedin factions, led by warlords who had been funded and armed by the CIA to fight America’s proxy war against the Soviet occupiers in the 1980s. Known as the Northern Alliance, these mujahedin had been largely a creation of Washington, which believed the “jihadi card” could be used to bring down the Soviet Union. The Taliban were a product of this and, during the Clinton years, they were admired for their “discipline”. Or, as the Wall Street Journal put it, “[the Taliban] are the players most capable of achieving peace in Afghanistan at this moment in history”.

The “moment in history” was a secret memorandum of understanding the mullahs had signed with the Clinton administration on the pipeline deal. However, by the late 1990s, the Northern Alliance had encroached further and further on territory controlled by the Taliban, whom, as a result, were deemed in Washington to lack the “stability” required of such an important client. It was the consistency of this client relationship that had been a prerequisite of US support, regardless of the Taliban’s aversion to human rights. (Asked about this, a state department briefer had predicted that “the Taliban will develop like the Saudis did”, with a pro-American economy, no democracy and “lots of sharia law”, which meant the legalised persecution of women. “We can live with that,” he said.)

By early 2001, convinced it was the presence of Osama Bin Laden that was souring their relationship with Washington, the Taliban tried to get rid of him. Under a deal negotiated by the leaders of Pakistan’s two Islamic parties, Bin Laden was to be held under house arrest in Peshawar. A tribunal of clerics would then hear evidence against him and decide whether to try him or hand him over to the Americans. Whether or not this would have happened, Pakistan’s Pervez Musharraf vetoed the plan. According to the then Pakistani foreign minister, Niaz Naik, a senior US diplomat told him on 21 July 2001 that it had been decided to dispense with the Taliban “under a carpet of bombs”.

That is fascinating stuff. I am glad that people like Pilger exist as journalists because he really does push to uncover the truth. Any lie by any government is shameful. Nevertheless, while I am happy to accept the facts that Pilger presents as true, it’s difficult to read this article and to know what he actually wants other than to continue his vociferous criticism of Western foreign policy and that of the United States in particular.

On the one hand, he highlights above some of the awful aspects of an Afghanistan ruled (let’s not say governed) by the Taliban: no democracy, no freedom of religion, little (if any) freedom of speech, the utter subjugation of women, an economy based on the extraction and capture of wealth. On the other hand, he later speaks of the …

… historic ban on opium production that the Taliban regime had achieved. A UN official in Kabul described the ban to me as “a modern miracle”. The miracle was quickly rescinded. As a reward for supporting the Karzai “democracy”, the Americans allowed Northern Alliance warlords to replant the country’s entire opium crop in 2002. Twenty-eight out of the 32 provinces instantly went under cultivation.

But he doesn’t bother noting that the Taliban were only able to enforce their ban by killing anyone who violated it. I’m pretty sure that Pilger opposes the death penalty. I’m absolutely certain that he opposes it when it’s instigated without any recourse to defence in a fair trial.

I agree entirely with Pilger that the main priorities of the U.S. in looking at other countries have been political stability and economic liberalism, with the rule of law being a distant third and anything else almost entirely off the radar. I likewise agree that this is principally because these represent minimum conditions for the inevitably large U.S. companies to do business in those countries. I say “inevitably” because small U.S. companies are not in a position to invest internationally. Pilger views this as a modern form of imperialism. It’s a tempting position, but I tend to think of it more as the U.S. looking out for it’s own and leaving other countries to sort out their own particular rights and values. It is not non-interventionism, but a sort of ideally-minimal-but-occasionally-dramatic-interventionism.

I would understand if Pilger thought that the West ought to promote the good things it has aspired to itself: women’s rights, religious freedom, the welfare state and so forth. But Pilger is apparantly against humanitarian intervention, which he describes as the work of the ascendant, “narcissistic, war-loving wing” of liberalism, so I am again left confused as to what he wants the West to actually do. Does he want complete isolation?

Let me put it this way: Zimbabwe is in a terrible state. From once being described as the “bread-basket of Africa,” it is now the basket-case of the continent. It’s inflation is so high as to become unmeasurable. A third of it’s population has fled the country. It has no democracy. The opposition, when they attempt to rally, is beaten. For it’s part, the West has imposed sanctions, but China has happily handed truckloads of cash to Mugabe’s regime in exchange for Zimbabwe’s natural resources. What does John Pilger think the foreign policy of the U.S.A., the U.K. and the rest of the West ought to be towards Zimbabwe?

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Organic food, standards and conspicuous consumption

There is a fantastic article up at the Financial Times by Bee Wilson, entitled “What makes a pig organic?”  It’s clearly part of a publicity push for her soon-to-be-published book, “Swindled:  From Poison Sweets to Counterfeit Coffee – The Dark History of the Food Cheats” (Foyles, Waterstones, Amazon), which was recently book-of-the-week on the BBC.  It starts with:

This is a tale of two pigs. The first – let’s call him Soren – is reared in Denmark. For the first few months of his life, he lives a cramped existence in a barn. This pink, flabby creature is castrated so that his meat won’t taste too strong. When at last he is allowed outside, his only freedom is a small concrete run. At a young age, he is killed and turned into bacon, using potassium nitrate and sodium nitrite. When you put slices of him in a pan, white watery liquid runs out.

The second – let’s call him Juan – was lucky enough to be born in the Iberian peninsula. He is sleek, black and hairless, a descendant of the original wild boar. Juan spends his life munching acorns among the oak trees. By the standards of animals destined for pork, he is allowed to live a long, calm life. He is only killed when he is 20 months, oldish for a pig, after which time his flesh is cured in sea salt until his fat turns to oleic acid, a fatty acid similar to that in olive oil. Juan is now jamón ibérico de bellota. When you eat slices of him, the salty flesh melts in your mouth.

It should be perfectly obvious which pig has led a better life and makes for better food. But there is one further crucial difference between the two. Because he has had only organic feed and has not suffered the worst indignities of factory farmed pigs – overcrowding and no access to outdoor space – Soren the Danish pig ends his life in a British supermarket labelled “organic”. Whereas Juan, for technical reasons, doesn’t qualify for the organic label.

… which is just a little bit sensationalist, but gets the point across.  A little later we start getting into the truth of the matter:

When you buy an organic egg you are not just buying the means to make an omelette, you are buying a dream. It is the dream of something delicious, which will simultaneously be good for your body and good for the hens and people who produced and packed it. It is the dream of being self-indulgent and virtuous at the same time – which essentially encapsulates the main yearning of our consumerist world. As Lynda Brown says: “Everybody wants an organic egg to come from a chicken that has led an idyllic life. But most people don’t actually want to pay for it.” The result is that when you look behind the dreamy label of much organic food – as with Soren the pig – you find it is not so very different from the industrial, compromised food you were trying to buy your way out of. The yolk is still pallid. The workers are still underpaid. The hens are still crowded – just a bit less than for conventionally farmed eggs.

In other words, buying organic is a form of conspicuous consumption.  How do we know that buying organic is a “dream of being self-indulgent and virtuous at the same time”?  Well, as Bee notes later on:

Take soy milk. In the Tesco longlife milk aisle, you can choose between: first, Tesco Calcium Enriched Soya Drink (at 63p a litre), your basic average soy milk; second, Tesco Organic Unsweetened Soya Drink (at 99p a litre), a premium-looking product with a price tag to match; and third, Tesco Value Unsweetened Soya Drink (60p a litre) with its no-frills packaging. Yet if you look at the small print, you will see that the Value soy milk is organic too. In other words, you are being offered a choice between spending 60p on organic soy milk that doesn’t appear to be organic or 39p more for the organic soy milk that loudly trumpets the fact. By paying that 39p, you are effectively admitting that organic food is simply an idea to you. It is an idea that says wealth and health (whereas “Value” is an idea that says poverty). This is the reductio ad absurdum of “organic” as a brand.

However morally-driven we might all pretend (and like) to be, people like Megan McArdle are a rarity.  For the vast majority of us, buying organic is a way of tickling our egos or showing off to our dinner-party guests.  If we actually end up easing the living conditions of the creatures we eat, that’s a largely unnecessary bonus, because it’s the label that counts.  This is not unique.  In a very real way, buying organic food is much the same as buying “fair trade” food.  We’re buying the highly-visible feel-good factor.  Don’t believe me?  Here’s another titbit of evidence.  Bee Wilson notes:

In the US, [t]he USDA allows many more nonorganic ingredients to be used in “organic” food than are permissible in the UK. Last year, there was outrage when the USDA certified Anheuser-Busch’s Wild Hop Lager, which included hops sprayed with pesticides and grown with chemical fertilisers, as an “organic” beer.

Wild Hop Lager does get lampooned, but not because they failed to make their product truely organic.  People bag it because it’s a bad beer.  Here are it’s reviews on RateBeer.com, BeerAdvocate.com and hop-talk.com.  Notice that none of them are rejecting it because of it’s judicious use of the word “organic.”  They’re rating it on the basis of what makes a good beer.  The closest we get is from the latter, saying:

Why is it awful…? Because once again a megabrewery is trying to make a product that looks like a craft brew, yet they are pouring their money into marketing it and not into making it.

… which is really saying nothing about the desirability of environmental sustainability or the avoidance of man-made chemicals.  If Anheuser-Busch produced a not-at-all organic beer that nevertheless tasted good this reviewer would be all over it.