Veblen Effect and food security in India

Cultural norms have a significant effect on preference of goods. An article in Mint’s Economics Express, a weekly column on issues in the Indian economy, describes the cultural effect on the preference and consumption in India with particular emphasis on poverty.

In his book Accounting for Tastes, Nobel Prize-winning economist Gary Becker wrote that “differences in cultures causes considerable differences in preferences over goods, as with the taboo against eating pork among religious Jews and Moslems, or the tradition of filial obedience in Chinese and some other cultures. The economists’ traditional assumption of ‘given’ and stable preferences over goods seems to be much more consistent with the influence of culture on preferences than with the influence of personal capital or other kinds of social capital”. Becker was suggesting that culture has important implications in shaping an individual’s preferences.

But how far does culture affect food choices and nutrition? A new study by David Atkin of Massachusetts Institute of Technology (MIT), to be published in the American Economic Review, attempts to answer that question. Atkin argues that migrants in India consume less because of food preferences, suggesting that people often lose out on nutrition when they migrate to a place where food habits are different.

He documents three striking findings. First, that long-term migrants still retained strong preferences for their origin-state food, and lose out on nutrition from locally available food, what he dubs as the implicit “calorie tax”. Second, that literate migrants should be able to switch to nutritious food, but the paper suggests that among literate migrants, the calorie tax is higher. Finally, migrants do not adjust their consumption according to price of an available bundle of food items. They continue to consume the same amount of own-state food even when it becomes expensive, suggesting that they are not as price-sensitive as one would expect them to be.

In their widely acclaimed book Poor Economics, Esther Duflo and Abhijit Banerjee argue that poor may be misinformed about the nutritional value and they may end up consuming more of “tastier” food and less of nutritional food.

The article cites the Veblen effect as a possible explainer to this phenomenon.

“No class of society, not even the most abjectly poor, forgoes all customary conspicuous consumption,” Veblen argued. “The last items of this category of consumption are not given up except under stress of the direst necessity. Very much of squalor and discomfort will be endured before the last trinket or the last pretence of pecuniary decency is put away.”

In the presence of such an effect, supply-side measures to increase the availability of foodgrains in rural parts of India might be insufficient.

“While improvements in the public distribution system may have increased their access to carbohydrate-rich food items such as cereals, rising prices of protein-rich and fat-rich items seem to have hit the poor hard, adversely affecting their diet.”

Providing cheap grain is unlikely to solve India’s malnutrition problem.

Originally published at logiconomics.wordpress.com on January 11, 2016.