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What is the Most Effective Way to Produce Food Safety? INFORMS Seminar Series Isenberg School of Management October 29, 2004 Julie A. Caswell [email protected] 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
