Letâs assume for simplicity that these companies are profit-maximizing. Then they are, in fact, not incentivised to maximize tastiness. Taste can increase revenue, but it also increases cost. Therefore, the profit-maximizing investment in taste-improving research need not equal the socially optimal investment.
But actually, that is not the argument used in the post. They say:
These are foundational, pre-competitive research problems. They are unlikely to be solved by any single company and are systematically underfunded by both public agencies and private R&D budgets, making them strong candidates for philanthropic support.
So this is a classic underprovision of fundamental research issue.
I fear this is missing the main objective though. Maximising taste is solely for the purpose of maximising uptake of alternative meats. There isnât an intrinsic good in having tasty meat alternatives.
The logic is: tastier meat alternatives â> more people eat meat alternatives â> less animal suffering.
Itâs foundational argument is better tasting meat alternatives increase the number of people eating meat alternatives.
There are companies that exist to sell people meat alternatives. So their incentives are aligned. Profit maximising is just an incentive to do that most efficiently, so theyâd do it if taste was the most cost effective wayâI.e. if for every $1 spent on making meat alternatives taste better it led to $2 of sales, but $1 spent on marketing led to $1.5 of sales, then itâd be better value to spend on making it taste better.
My issue with this RFP is it presumes the market is failing. My question is where is the proof? It being underfunded by public agencies and private R&D suggests to me either massive vested interest (which may be true for public agencies but less clear why Beyond Meat wouldnât want more customers if tastier meat alternatives was the best way to do that); or it suggests there is a more efficient method being employed by those with the incentives to find it. Unless you think the meat alternative providers donât want more customers, or are incompetent (in which case why hasnât a tastier competitor already appeared).
This whole RFP looks to fix a market failure, which Iâm not clear exists. It also tries to do that with $10m, which by their on linked numbers is such a tiny fraction of money spent on tasting research. Unfortunately, this RFP has the hallmarks of a fund that would have to be so amazingly well spent to make a difference that the whole thing seems destined to have little to no impact.
Honestly, I fail to see how this responds to my comment. I will try to explain again.
There are two arguments here. My argument was that a profit-maximizing firm will invest less in improving taste than one that internalizes the externalities of replacing meat with plant-based foods, or whose customers internalize those externalities. Similarly, Apple has an incentive to increase the quality of the iPhone, but its incentive is tempered by cost. It chooses the quality that maximizes profit, not the maximum quality possible. Maybe for every GB of storage they cram into the iPhone, a baby alien is saved from a terrible death on a faraway planet. But if neither Apple nor Appleâs customers internalize those externalities, Apple is going to put fewer GB of storage into the iPhone than is socially optimal.
Here is maybe a better example: if we found out that adding extra GBs of storage to iPhones was somehow a massive boon for insect welfare, do we think that Apple would seriously put much effort into maximizing the number of GBs of storage in iPhones? No. Very few people care about insect welfare, and Apple would continue to market iPhones with the same amount of storage as they had previously planned. Even if Apple did care, if its customers didnât, then Apple might struggle to raise enough capital from profit-maximizing investors to reach the socially optimal level of GB of storage. (Ok, Apple would not struggle to raise capital, but Beyond Food might!)
The second argument, and this is the argument directly made in the RFP, is that they plan to fund foundational pre-competitive research questions. This is a well-known market failure in economics. Foundational research is often non-excludable and non-rival. That is, you canât patent it, and my use of it doesnât diminish your ability to use it. In short, a firm doing this research would absorb all of the cost but would not capture all of the benefit. This is why foundational research is often funded by governments and philanthropic organizations.
Maybe there are reasons why these arguments donât work in this case! But I would like to see counterarguments. Simply claiming that incentives are aligned doesnât address either of these arguments.
I think the issue is arising from a simple miscommunication.
You seem to be arguing that improving taste has some sort of intrinsic social value in and of itself, that warrants funding. My argument has been, from the start, that if the goal is to maximise uptake of meat alternatives then what is the proof better tasting products is the best method to achieve that and that there is evidence of a market failure there.
Your argument hinges on taste being the value we want here. I reject that as a premise. The value the RFP wants is better uptake of the meat alternatives. And there are big market players that are fundamentally incentivised to solve that (and can raise capital if they prove there will be the returnsâI.e. the actual uptake and not just vague âof course if itâs tastier more people will eat itâ).
To be as explicit as I can to reply to your argument: your Apple example proves my point above. Your causal chain in that argument is:
More storage â better insect welfare = win
Apple donât care about insect welfare (I assume). They care about more users and thus more profit. Thus they arenât incentivised to solve any part of that causal chain.
This RFPs causal chain is not like that, itâs:
Tastier meat alternatives â> more people eat meat alternatives â> less animal suffering = win
Beyond Meat, even if they donât care about the end goal (which I assume they probably do), do care about solving the middle part, which is the predictor to the less animal suffering end goal. Given that, if tastier meat was the best way to achieve that, theyâd be able to raise capital. If they couldnât, itâd suggest there wouldnât be enough uptake from such a moveâwhich means bad value for money and thus either weâve hit the limit of the number of people who will eat meat alternatives, or it is not an efficient way to increase uptake.
Not to get distracted but to avoid being criticised for not answering your point again: Separately, I also disagree with the foundational research pointâin that I think the choice of that is a function of this being philanthropic funds, rather than because itâs solving a market problem such as inability to patent the research or keep it secret. Evidence being: all the food manufacturers who spend money making their food taste better and keep their recipes secret.
There is definitely a miscommunication occurring here. I am not arguing that improving taste has intrinsic social value, nor does my argument hinge on it. Quite the opposite, argument 1 requires an externality beyond taste. To state clearly, my arguments show that there is a market failure that causes the profit-maximizing investment in taste to be lower than the socially optimal investment in taste, where the socially optimal level is higher since higher tastiness would cause increased consumption, which would lower consumption of animal products, which would alleviate animal suffering.
To clarify the example in argument 1, I meant to say every iPhone sold, not every iPhone produced. Note that the causal chain is the same. This is precisely why I chose this example.
More storage â more people buy iPhones â better insect welfare = win
Tastier meat alternatives â> more people eat meat alternatives â> less animal suffering = win
The example is not perfect, because tastier meat alternatives only affect animal suffering through the number of meat alternatives sold (and more precisely, the number of animal products displaced), whereas, in the iPhone example, there is the extrinsic margin of increasing the number of iPhones sold, and also the intrinsic margin of increasing the number of GB, conditional on sale. I can see why this would be confusing and make it sound like the taste of the meat alternatives is presumed to be intrinsically good. That was not my intention. I intended to highlight a product with a positive externality, where increasing its value to the customer would also create additional social value.
To that end, letâs fix the example. Letâs assume that we found out that every iPhone sold was somehow a massive boon for insect welfare. The social value of increasing the number of GB of storage in iPhones would increase upon the news, as increasing the storage capacity would make the iPhone more attractive to consumers, which would increase the number of iPhones sold, which would lead to better insect welfare. Likewise, any increase in the quality of iPhones would have the same effect. Storage was arbitrarily chosen as a metric that people care about, like the taste of food. However, I highly doubt that Apple would do much at all, if anything, to increase the number of iPhones sold upon learning this news regarding insect welfare.
Thus, we can see that the introduction of an externality to the number of iPhones sold led to underprovisioning of iPhone quality-improvement research relative to what is socially optimal (profit-maximizing quality-improvement research remained the same, whereas the socially optimal value increased).
Regarding foundational research, the fact that food manufacturers invest in taste research does not imply a lack of underprovision of foundational research. Pretty much all industries do research. Foundational research is not the same as other kinds of research. Since this market failure is well-known, I donât think it is worth hashing out in detail, though I did explain it briefly above. You could argue that there isnât any foundational research to do in this field, or that it is very intractable, but arguing that a well-known market failure doesnât exist will be difficult.
Letâs assume for simplicity that these companies are profit-maximizing. Then they are, in fact, not incentivised to maximize tastiness. Taste can increase revenue, but it also increases cost. Therefore, the profit-maximizing investment in taste-improving research need not equal the socially optimal investment.
But actually, that is not the argument used in the post. They say:
So this is a classic underprovision of fundamental research issue.
I fear this is missing the main objective though. Maximising taste is solely for the purpose of maximising uptake of alternative meats. There isnât an intrinsic good in having tasty meat alternatives.
The logic is: tastier meat alternatives â> more people eat meat alternatives â> less animal suffering.
Itâs foundational argument is better tasting meat alternatives increase the number of people eating meat alternatives.
There are companies that exist to sell people meat alternatives. So their incentives are aligned. Profit maximising is just an incentive to do that most efficiently, so theyâd do it if taste was the most cost effective wayâI.e. if for every $1 spent on making meat alternatives taste better it led to $2 of sales, but $1 spent on marketing led to $1.5 of sales, then itâd be better value to spend on making it taste better.
My issue with this RFP is it presumes the market is failing. My question is where is the proof? It being underfunded by public agencies and private R&D suggests to me either massive vested interest (which may be true for public agencies but less clear why Beyond Meat wouldnât want more customers if tastier meat alternatives was the best way to do that); or it suggests there is a more efficient method being employed by those with the incentives to find it. Unless you think the meat alternative providers donât want more customers, or are incompetent (in which case why hasnât a tastier competitor already appeared).
This whole RFP looks to fix a market failure, which Iâm not clear exists. It also tries to do that with $10m, which by their on linked numbers is such a tiny fraction of money spent on tasting research. Unfortunately, this RFP has the hallmarks of a fund that would have to be so amazingly well spent to make a difference that the whole thing seems destined to have little to no impact.
Honestly, I fail to see how this responds to my comment. I will try to explain again.
There are two arguments here. My argument was that a profit-maximizing firm will invest less in improving taste than one that internalizes the externalities of replacing meat with plant-based foods, or whose customers internalize those externalities. Similarly, Apple has an incentive to increase the quality of the iPhone, but its incentive is tempered by cost. It chooses the quality that maximizes profit, not the maximum quality possible. Maybe for every GB of storage they cram into the iPhone, a baby alien is saved from a terrible death on a faraway planet. But if neither Apple nor Appleâs customers internalize those externalities, Apple is going to put fewer GB of storage into the iPhone than is socially optimal.
Here is maybe a better example: if we found out that adding extra GBs of storage to iPhones was somehow a massive boon for insect welfare, do we think that Apple would seriously put much effort into maximizing the number of GBs of storage in iPhones? No. Very few people care about insect welfare, and Apple would continue to market iPhones with the same amount of storage as they had previously planned. Even if Apple did care, if its customers didnât, then Apple might struggle to raise enough capital from profit-maximizing investors to reach the socially optimal level of GB of storage. (Ok, Apple would not struggle to raise capital, but Beyond Food might!)
The second argument, and this is the argument directly made in the RFP, is that they plan to fund foundational pre-competitive research questions. This is a well-known market failure in economics. Foundational research is often non-excludable and non-rival. That is, you canât patent it, and my use of it doesnât diminish your ability to use it. In short, a firm doing this research would absorb all of the cost but would not capture all of the benefit. This is why foundational research is often funded by governments and philanthropic organizations.
Maybe there are reasons why these arguments donât work in this case! But I would like to see counterarguments. Simply claiming that incentives are aligned doesnât address either of these arguments.
I think the issue is arising from a simple miscommunication.
You seem to be arguing that improving taste has some sort of intrinsic social value in and of itself, that warrants funding. My argument has been, from the start, that if the goal is to maximise uptake of meat alternatives then what is the proof better tasting products is the best method to achieve that and that there is evidence of a market failure there.
Your argument hinges on taste being the value we want here. I reject that as a premise. The value the RFP wants is better uptake of the meat alternatives. And there are big market players that are fundamentally incentivised to solve that (and can raise capital if they prove there will be the returnsâI.e. the actual uptake and not just vague âof course if itâs tastier more people will eat itâ).
To be as explicit as I can to reply to your argument: your Apple example proves my point above. Your causal chain in that argument is:
More storage â better insect welfare = win
Apple donât care about insect welfare (I assume). They care about more users and thus more profit. Thus they arenât incentivised to solve any part of that causal chain.
This RFPs causal chain is not like that, itâs:
Tastier meat alternatives â> more people eat meat alternatives â> less animal suffering = win
Beyond Meat, even if they donât care about the end goal (which I assume they probably do), do care about solving the middle part, which is the predictor to the less animal suffering end goal. Given that, if tastier meat was the best way to achieve that, theyâd be able to raise capital. If they couldnât, itâd suggest there wouldnât be enough uptake from such a moveâwhich means bad value for money and thus either weâve hit the limit of the number of people who will eat meat alternatives, or it is not an efficient way to increase uptake.
Not to get distracted but to avoid being criticised for not answering your point again: Separately, I also disagree with the foundational research pointâin that I think the choice of that is a function of this being philanthropic funds, rather than because itâs solving a market problem such as inability to patent the research or keep it secret. Evidence being: all the food manufacturers who spend money making their food taste better and keep their recipes secret.
There is definitely a miscommunication occurring here. I am not arguing that improving taste has intrinsic social value, nor does my argument hinge on it. Quite the opposite, argument 1 requires an externality beyond taste. To state clearly, my arguments show that there is a market failure that causes the profit-maximizing investment in taste to be lower than the socially optimal investment in taste, where the socially optimal level is higher since higher tastiness would cause increased consumption, which would lower consumption of animal products, which would alleviate animal suffering.
To clarify the example in argument 1, I meant to say every iPhone sold, not every iPhone produced. Note that the causal chain is the same. This is precisely why I chose this example.
More storage â more people buy iPhones â better insect welfare = win
Tastier meat alternatives â> more people eat meat alternatives â> less animal suffering = win
The example is not perfect, because tastier meat alternatives only affect animal suffering through the number of meat alternatives sold (and more precisely, the number of animal products displaced), whereas, in the iPhone example, there is the extrinsic margin of increasing the number of iPhones sold, and also the intrinsic margin of increasing the number of GB, conditional on sale. I can see why this would be confusing and make it sound like the taste of the meat alternatives is presumed to be intrinsically good. That was not my intention. I intended to highlight a product with a positive externality, where increasing its value to the customer would also create additional social value.
To that end, letâs fix the example. Letâs assume that we found out that every iPhone sold was somehow a massive boon for insect welfare. The social value of increasing the number of GB of storage in iPhones would increase upon the news, as increasing the storage capacity would make the iPhone more attractive to consumers, which would increase the number of iPhones sold, which would lead to better insect welfare. Likewise, any increase in the quality of iPhones would have the same effect. Storage was arbitrarily chosen as a metric that people care about, like the taste of food. However, I highly doubt that Apple would do much at all, if anything, to increase the number of iPhones sold upon learning this news regarding insect welfare.
Thus, we can see that the introduction of an externality to the number of iPhones sold led to underprovisioning of iPhone quality-improvement research relative to what is socially optimal (profit-maximizing quality-improvement research remained the same, whereas the socially optimal value increased).
Regarding foundational research, the fact that food manufacturers invest in taste research does not imply a lack of underprovision of foundational research. Pretty much all industries do research. Foundational research is not the same as other kinds of research. Since this market failure is well-known, I donât think it is worth hashing out in detail, though I did explain it briefly above. You could argue that there isnât any foundational research to do in this field, or that it is very intractable, but arguing that a well-known market failure doesnât exist will be difficult.