What is the Most Effective Way to Produce

Food Safety?

INFORMS Seminar SeriesIsenberg School of Management

October 29, 2004

Julie A. Caswell caswell@resecon.umass.edu

The Food Safety Landscape in the U.S.

Safety– Foodborne disease remains significant– Recent (over) emphasis on biosecurity

Nutrition and obesity– The “SUPER SIZED” American

How Do We… Identify priorities for risk reduction (i.e.,

improving public health) through– Government regulation– Company and supply chain quality

assurance

Goals of Regulatory Systems

Protect and enhance public health Protect consumers from fraud, inform

consumers (right to know) Facilitate efficient market operation

– Enhance consumer decision-making– Lower transaction costs

Reward particular industries or consumers (rent seeking)?

Food Safety Research Consortium

Partners at 6 Universities and Resources for the Future

Multidisciplinary– Microbiologists– Food Scientists– Nutritionists– Economists– Lawyers

The Big Goal– Creating decision tools to improve risk management

decision making by the federal government (and private parties)

Why Do We Emphasize Risk Management?

Governments Are Applying the Risk Analysis Framework to Make Regulatory Decisions– Risk assessment– Risk management– Risk communication

But Effort is Seriously Out of Balance

Risk Assessment

Is the:

Risk Management

Is the:

What’s Needed:

Is risk management like the:

Risk Management Choosing interventions that:

– Address significant public health and market risks

– Are effective from a technical perspective The desired level of safety is attained

– Are effective from an economic perspective

Cost effective– The desired level of safety is attained at the lowest cost

Meet benefit-cost criteria– The desired relationship of benefits to costs is attained

Foodborne Illness Risk Ranking Model

Quantity foodborne risks from food/ pathogen combinations

Rank the related health impacts of illnesses– Illnesses, Hospitalizations, Deaths– Quality Adjusted Life Years (QALYs)

Rank the related monetary costs of illnesses– Willingness to Pay– Cost of Illness

Predictive Modeling

How do interventions affect risk generation and transmission?

Effectiveness and Costs of Interventions Ranking Model

How economic factors influence private decisions that then affect risk outcomes– In production– In consumption

How economic factors affect regulatory decisions– Perceived (argued) benefits and costs– Cost effectiveness analysis– Benefit-cost analysis

Input from Economists Consumer behavior

– Demand for quality (e.g., safety)– Incentives/disincentives to self-protect

Supplier incentives/disincentives– Consumer demand for safety– Supply chain demand for safety– Government requirements– Liability– Costs

Benefits and costs of government-mandated interventions

The Supply Chain is Crucial to Outcomes

Levels of risk generating and risk reducing activity, and cost of food, are influenced by – Interaction of supply and demand– Interaction along the supply chain

An example: substitutes– In input markets – In demand– In trade

Focus on models that incorporate– Risk transmission– Price transmission

Degree of Market Failure is Crucial to Regulation

Market failure in food safety is never complete

This impacts– Complexity of incentives to reduce risks– Number of private and public approaches

that can be used – Measurement and attribution of benefits

and costs

Lessons on Benefits and Costs

Benefits– Emphasis on the value of avoiding adverse health

outcomes– With efforts to count other benefits

Costs – Measuring costs of regulation is more difficult for

foodborne risks because of mix of incentives– Flexible regulatory approaches that allow choice

are likely to be more cost effective– Redistribution rather than level of costs is likely to

be most prominent effect of regulations

For Modeling Need Best Means to Measure

Interventions (public and private)– Current– Alternative

Technical feasibility (risk reduction)– At point applied– Along the supply chain

Costs and cost effectiveness (includes effects of economic incentives)– At point applied– Along the supply chain

Keeping in mind use as a decision tool

Current Work Meta analysis of costs and

effectiveness of interventions in the red meat industry

Linking cost and benefit data to generate measures of:– Cost effectiveness– Net benefits

Future Work Modeling workshop in December 2004 Grant applications for further development

of Effectiveness and Costs of Intervention Ranking Model

Integration of work with other modules of Food Safety Research Consortium work

Work on traceability in food systems– BSE as an example

Remember the Goal Creating decision tools to improve risk

management decision making by the federal government (and private parties– Risk ranking– Predictive modeling– Cost and effectiveness modeling