670. Beeconomics 101 | Freakonomics Radio

How do beekeepers make a living? Why is there so much honey fraud? And why did billions of bees suddenly disappear? To find out, guest host Steve Levitt activates his hive mind. You can find the transcript and show notes for this episode on our website here: https://freakonomics.com/podcast/beeconomics-101/ FOLLOW FREAKONOMICS RADIO: YouTube: https://freak.ws/3yIl6dl Apple Podcasts: https://freak.ws/3yAvQh0 Spotify: https://freak.ws/3TsdCmV ABOUT FREAKONOMICS RADIO: Discover the hidden side of everything with host Stephen J. Dubner, co-author of the Freakonomics books. Each week, Dubner speaks with Nobel laureates and provocateurs, intellectuals and entrepreneurs, and various other underachievers to uncover things you always thought you knew (but didn’t) and things you never thought you wanted to know (but do) — from the economics of sleep to the future of education, from markets for marriage to the surprising utility of wolves. ABOUT THE FREAKONOMICS RADIO NETWORK: Freakonomics began as a book, which led to a blog, a documentary film, more books, a pair of pants, and in 2010, a podcast called Freakonomics Radio. Hosted by Stephen J. Dubner, it’s one of the most popular podcasts in the world, with a reputation for storytelling that is both rigorous and entertaining. Its archive of more than 500 episodes is available, for free, on any podcast app, and the show airs weekly on NPR stations. Freakonomics Radio is now the flagship show of the Freakonomics Radio Network, which includes the podcasts No Stupid Questions, People I (Mostly) Admire, and The Economics of Everyday Things. FREAKONOMICS RADIO NETWORK PODCASTS: Freakonomics Radio: https://freakonomics.com/series/freakonomics-radio/ No Stupid Questions: https://freakonomics.com/series/nsq/ People I (Mostly) Admire: https://freakonomics.com/series/people-i-mostly-admire/ The Economics of Everyday Things: https://freakonomics.com/series/everyday-things/ Special series: https://freakonomics.com/topics/ CONNECT WITH US: [email protected] https://twitter.com/freakonomics https://www.instagram.com/freakonomics/ https://www.facebook.com/freakonomics/ https://www.tiktok.com/@freakonomicsradio https://www.linkedin.com/company/freakonomics-media Subscribe to our newsletter: https://stephendubner.substack.com/subscribe

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:03Stephen J. Dubner?

  Last week, we made an episode about the bourbon industry. One thing we didn't get into is the fact that the consumption of alcohol generates what an economist would call negative externalities. This just means that something you do can impose a negative cost on me. Like, if you drink too much bourbon and then you get in your car and drive, you raise the risk for me and everybody else on the road. Economists have many examples of negative externalities, but positive externalities don't get as much airtime, which is a shame, because there are some good ones, like education, vaccination, also honeybees. I'm serious.

• 0:48Stephen J. Dubner?

  But when it comes to honeybees, and especially the making of honey, all is not well. Honey is more popular than ever, but the industry is very lightly regulated, which makes it vulnerable to fraud.

• 1:01Speaker 01

  Honey has, for years, been one of the top three most frauded foods in the world. It's milk, olive oil, and honey.

• 1:09Stephen J. Dubner?

  So what if the honey in your cupboard is not actually honey? Do you care? You like the taste? Do you care if it's not authentic? It turns out that honey fraud has been around for centuries.

• 1:21Speaker 02

  People in Lisbon were fraudulently exporting Lisbon honey, but calling it Porto honey.

• 1:27Stephen J. Dubner?

  And what is happening with the bees?

• 1:30Speaker 03

  The adult bees actually disappeared. There weren't dead bees lying around the hive, and nobody knew what happened to them.

• 1:38Stephen J. Dubner?

  If only we had an economist handy to help us understand the positive externalities of bees. Oh, wait, we do. Today on Freakonomics Radio, my Freakonomics friend and co-author Steve Levitt is back in the host's chair to explain the sticky economics of the honeybee industry. And that starts now.

• 2:13Speaker 04

  This is Freakonomics Radio, the podcast that explores the hidden side of everything with your guest host, Steve Levitt.

• 2:30Steve Levitt?

  Hi, I'm Steve Levitt. A few months ago, I got an email from a beekeeper.

• 2:35Speaker 01

  My name's Chris Hyatt with Hyatt Honey Company. My dad started our family business 58 years ago, and I have four brothers and myself that we've taken it over and grown the business. And we run about 18,000 hives between California, North Dakota, and Washington. I can remember in high school, I really did want to play baseball, and I couldn't because I had to put bees in and out of almond orchards all over eastern Washington. And we were helping the family, and of course, that paid for my college. And we employ 20, 30 people, and it's been a fun ride. These honeybees, you take care of them, they'll take care of you financially.

• 3:12Steve Levitt?

  But there are challenges. As past president of the American Honey Producers Association, Chris Hyatt has fought on behalf of beekeepers across the country.

• 3:21Speaker 01

  We have a lobbyist, and we've tried to improve our industry, improve honey prices, try to get more research for why the bees are all dying, for our national bee labs. Is there another industry where you have such low prices for a commodity that is in such demand?

• 3:39Steve Levitt?

  Now, what made you think that I, as a one who has never thought about honey, would be able to help?

• 3:45Speaker 01

  Well, I've listened to a lot of the episodes, and I just thought, hey, economists, they would know, or they're so well-connected, I thought they might know of another industry that's having a similar problem that we have had. Commercial beekeepers, we only produce about 20% to 25% of what our nation needs for honey consumption. And 20, 30 years ago, it used to be the opposite. We used to produce 70, 75% of all the honey consumed in the United States. You know, we're approaching 700 million pounds of honey consumed in the United States, where it used to be 350 million, and the price is not keeping pace, not even with a price 20, 30 years ago.

• 4:25Steve Levitt?

  At first, this really surprised me. The total amount of honey consumed in the USA has roughly doubled since the year 2000. On top of that, the retail price of honey has almost tripled, even when you account for inflation. So why is it that beekeepers are struggling? We can start to answer this question by looking at Hyatt's business. He runs one of the country's largest honey-producing operations. Though there have been some technological advances over the course of Hyatt's life, the industry still requires a lot of labor, both from the humans and the bees.

• 4:58Speaker 01

  You need to apprentice with somebody, learn the bee industry. You have to diagnose the hive. That's all by hand. Manipulating the frames, pulling honeycomb out, looking for the queen, putting new queens in, medicating them, feeding them. And yes, there's forklifts and trucks, and my back is less sore than what it used to be, but a lot of it is still pretty old school.

• 5:19Steve Levitt?

  How many bee stings do you get a day?

• 5:20Speaker 01

  Oh, I get stung about every day.

• 5:22Steve Levitt?

  You said you had 18,000 hives, is that right?

• 5:24Speaker 01

  Correct.

• 5:25Steve Levitt?

  How many bees is that total?

• 5:28Speaker 01

  In the summer, the average hive could be 40 to 50 to even 60,000 bees. But in the winter, it goes down to 30, 20. Even the smaller hives, 10,000 bees per hive.

• 5:38Steve Levitt?

  By my math, that works out to Hyatt carrying for roughly a billion bees during a busy summer. Those bees don't just make honey. Like mini bees in large commercial hives, they have a second critical job. They pollinate crops on big commercial farms. During pollination season, Chris Hyatt has his hives loaded into semi-trucks and driven all across the United States.

• 6:01Speaker 01

  We pollinate almonds in California, apples in Washington, and we do a little bit of other things like cherries and plums and... Apricots and blueberries and a little bit of kiwi. And then most of our honey production is in North Dakota. You gotta look at it like livestock when you see those cattle trailers full of cattle. Same thing, we throw about four to 500 hives on a flatbed semi. And we go four pallets tall. And every pallet has usually four hives on a pallet. And the forklift is loading it. And when you have a dead out and you have a spare spot on the pallet, you gotta move and complete the pallets. So that's old fashioned work. It always makes the news when a semi tips over.

• 6:44Speaker 01

  Like last week, there was one in San Antonio, Texas that flipped over on the freeway. And they always say 450 hives, which is actually so many million bees in it just for the scare factor and stuff.

• 6:57Steve Levitt?

  And roughly, how many pounds of honey are you able to bring to market with all those bees?

• 7:02Speaker 01

  That's all weather dependent. Some years you can do 50 pounds and that's kind of a below average year, some years 80. On a good year, we've done 100, 150. My dad way back when used to make 250, 300 pound average in Alberta in the seventies before he started coming to North Dakota.

• 7:19Steve Levitt?

  So 80 per hive and you've got 18,000 hives. So you're talking about almost 1.5 million pounds of honey?

• 7:28Speaker 01

  Yeah, if we're below a million pounds, we had a bad year. If we're above it, we had a pretty good year.

• 7:33Steve Levitt?

  You said your dad used to be able to get 200 and something pounds of honey out of a hive in Alberta. What has changed? I would have thought the opposite would be true, right? With technology, we've learned a lot more about keeping bees healthy. You'd think that the yield per hive should have doubled or tripled. But what you just described is that it's maybe half of what it used to be. Why is that?

• 7:56Speaker 01

  Well, habitat has changed. There's a lot less blossoms, a lot less bloom. There's a lot of mom and pop dairies that went out of business. There's less alfalfa than there used to be. And there's less grassland where sometimes you can get sweet clover to grow just wild. So that's hurt. And then the whole varroa mite problem.

• 8:14Steve Levitt?

  What does the mite do in the hive?

• 8:17Speaker 01

  So the varroa mite, it's very tiny. It's like half of a grain of rice. And they are feeding on the fat bodies of these honeybees and them constantly feeding is weakening these honeybees. So their longevity is less. They're not living 40 days, 45 days. And then as they are biting and sucking, they are passing viruses. And the viruses are building up and taking out these hives. You know, my dad in the sixties had said, there was no varroa mite. Now we're treating four, five, six times a year. And the viruses are mutating and becoming worse and worse. So that's why we had a record high loss last year for the nation.

• 9:02Speaker 01

  Along with habitat and pesticides, some of the DDT and the organophosphates are gone, but there are a lot of the neonics and they persist longer, right? All these things are deaths by a thousand cuts. So these bees are not as strong as they used to be in the eighties. We rarely get swarms now because the hives are not as strong as they used to be.

• 9:24Steve Levitt?

  Interestingly, the gap between the retail price and what's paid to the farmer, that's really grown a lot over time. Why do you think that is the case?

• 9:34Speaker 01

  I feel like just the cheap imports have taken the spot of the lack of production that we can't keep up with. It's all about price point. We do know a lot of the honey market goes into the industrial grade. It's awesome that so many people want it in their cereal and their smoothies and Robitussin cough medicine and honey hams and everything. But most of the industrial market is cheap imports. General Mills used to have Florida Sue Bee Honey, the biggest co-op in the United States. Sue Bee owned by its members, but no, now it's Vietnam. And it's just sad.

• 10:12Steve Levitt?

  Way back in 2001, the Commerce Department concluded that China was dumping honey on the US market at artificially low prices. So can you explain what dumping means in this context? Because it's actually being used in a different way than we usually define it in economics textbooks.

• 10:31Speaker 01

  Well, I would define it as below cost of production. They were dumping it so cheap, it was 30, 40 cents a pound coming in, early 2000s. And the American beekeeper couldn't compete at that level.

• 10:45Steve Levitt?

  That's like 1/10 of the price that it would cost you to make a pound of honey. Is that right?

• 10:50Speaker 01

  Right. Well, in 2001, of course, labor input costs were quite a bit less than they are today.

• 10:57Steve Levitt?

  That's still five or six times cheaper than you could have made it.

• 11:00Speaker 01

  Correct.

• 11:00Steve Levitt?

  What seems strange to an economist is what would be the motivation for a Chinese honey producer to make a bunch of honey and then sell it in the US way below the cost of making the honey? That seems to fly in the face of what we think businesses should try to do.

• 11:18Speaker 01

  Well, because probably a lot of that had syrup mixed into it. So they were still making money and obviously it was profitable for them to ship it here even at that low a price, according to their business model.

• 11:32Steve Levitt?

  In academic economics, when we talk about dumping, it's a very strategic thing that a company will do to try to drive out their competition. But the kind of dumping that the Commerce Department was talking about was, I think, really something very different, which is Chinese producers were calling something that was in a barrel honey, but really it was something really different than honey. So in 2001, when the Commerce Department decided that China was dumping, what was their response? What kind of tariffs were levied on the Chinese producers?

• 12:09Speaker 01

  I can remember, and I look back at my dad's record, the price of honey more than doubled like overnight. It went up to like a dollar forty, dollar fifty. And then the second year, it went down ten, twenty cents, and the third year it went down a little bit. So it was temporary, but I felt like that was more reflective of the true price of honey. But of course, China found ways to trans ship through Vietnam and India, Taiwan and other countries to get the honey in without tariffs. Or they would have a dummy company. When customs would go collect the duties, there was nothing there. It was just a fake address and nothing. Can you just explain, what does transshipping mean?

• 12:48Speaker 01

  So they would ship Chinese honey into the United States and fake the paperwork saying this from Taiwan or India or Vietnam or Myanmar. We actually paid Georgetown Economics to do a study on it. And Myanmar and Taiwan increased their honey production 500% in one year. They had like a 20-year record of their honey production. And it went up by, it's like physically impossible. So that's how you trans shipped. It was still coming from China, but they were showing it was coming from other countries. Honey is for years been one of the top three most frauded foods in the world. There is economic motivated adulteration. We know that. There are syrups being added.

• 13:31Speaker 01

  Even Alibaba, that's the Amazon of China, they're openly advertising designer syrups saying mix this much with your honey to pass these certain tests to get into the United States. So we as commercial beekeepers, we're not saying ban all imports. We're saying if it's true honey, yes, it can come in, but this syrup, the sticky stuff, we want a level playing field.

• 13:57Speaker 01

  Is a level playing field possible?

• 14:00Speaker 06

  Fraud is intentional? You're dealing with an economic motive? And that's why it's so hard to eradicate.

• 14:07Steve Levitt?

  When you want to take on fraudsters, you need a lawyer like this guy.

• 14:12Speaker 06

  My name is Michael T. Roberts. I am the founding executive director of the Restnik Center for Food Law and Policy at UCLA Law School in Los Angeles. I teach and write on various subject matters related to food law and policy, and the area of food fraud has been a specific area of focus now for a number of years for me.

• 14:38Steve Levitt?

  How do you find your way to being an expert in food law?

• 14:41Speaker 06

  I was practicing law with a very good practice and a very good law firm, but I found myself reaching my late 30s and I just felt like I needed something more creative. And ended up reading an article on the future of food that focused on technology. It caught my attention because I grew up around food. My grandparents had a fruit and vegetable farm that I worked on all my years. My father was a produce broker. Honestly, I just decided then I was going to turn to food. And I ended up getting an advanced degree and then I went back as a professor at the University of Arkansas and headed up a National Agricultural Law Center. I taught a food law and policy class at the University of Arkansas. It

• 15:25Speaker 06

  was the first one to be taught in the country. And it just took off from there.

• 15:29Steve Levitt?

  Growing up, you were around farmers and your dad was doing food products. Did you experience food fraud?

• 15:36Speaker 06

  Well, I first experienced it on the farm. We would use pesticide in the orchards, not a lot. You know, we were a small farm and almost everybody back then did. But there was a group of folks that would buy the produce and they would label their produce, no pesticides applied. I remember seeing their labeling and I thought, that's not right. That was my first experience at seeing fraud upfront.

• 16:00Steve Levitt?

  Roberts has worked on many different areas of food fraud, but one special focus of his has been adulterated honey.

• 16:07Speaker 06

  One of the big problems of adulterated honey is what's called immature green or high moisture honey. You're actually harvesting the honey too early and it has a lot of moisture. But you want to get it to the market quickly. And so you get this green honey, immature honey. And then they use these vacuuming process and they remove the moisture enough to sell it on the market. And then they use oftentimes was called resin technology that was perfected by the Chinese. And that removes a lot of the color, the contaminants, the antibiotics and other things that get into the honey. A lot of syrups are used to mix with the honey, to blend it, to make it go further.

• 16:51Speaker 06

  So you get this syrupy mixture called syrup diluted honey. So it's a whole lot of different ways to adulterate honey. And it's really hard to catch.

• 17:02Steve Levitt?

  If I go to the grocery store today as an American shopper, what are the most commonly adulterated food products that I'm likely to be purchasing?

• 17:12Speaker 06

  Honey, olive oil, vinegars, spices. I would also say vitamins, even though I can't quantify that. That's just my own personal opinion. Some of this is really hard to quantify because it's hard to gather data on fraud. But anything that's a specialty good that's been imported and it has a large enough quantity has some fraud issues. The New York Attorney General's Office years ago identified fish as a product that's most susceptible to fraud. We have fun in my class at UCLA. We oftentimes do olive oil test tastings. We talk about whether we care, whether our sushi bar is mixing up species.

• 17:56Speaker 06

  These are all interesting questions because fraud is not necessarily a safety issue. Can be, but it's not necessarily.

• 18:02Steve Levitt?

  To understand what's happening in honey, it helps to look at another industry that's been fighting the same battle for decades.

• 18:09Speaker 06

  I consulted with the Italian government when they were trying to crack down on their olive oil fraud. Olive oil is a target because, one, it's high value. Two, it's relatively easy to adulterate or mislabel. Three, it's difficult for consumers and even regulators to verify without specialized testing. Those are the three reasons. High value, easy to adulterate, difficult to verify. What do you adulterate olive oil with? You can blend cheaper refined seed oils, like sunflower, soybean, palm, with small amounts of real olive oil. And then you sell it as extra virgin or 100% olive oil. You can manipulate the color, the flavor. How do you do that? What do they add for color?

• 18:53Speaker 06

  Yeah, I have to be careful because I get beyond my expertise, which is in law. I assume you know everything. I want my children to think that too, so let's not spoil that misperception. A lot of it's diluting and blending, and then you have to sometimes patch up the problems you create by blending. And that's when you manipulate colors and flavors with dyes and so forth to try to get the genuine olive oil color. There was a popular brand of olive oil in the store, and I was having lunch with a prospective student from my class. She told me she was an olive oil connoisseur, and she loved olive oil. That's why she wanted to take the class. I asked her what her favorite brand was, and she says, "Oh, I've tested all of them. This is the particular brand I'm most convinced is the best olive oil."

• 19:37Speaker 06

  It just so happened that I knew that that olive oil was like the worst brand on the market, and I didn't have the heart to tell her. Never tell a connoisseur they have bad taste. There's a trick, though, for those people out there who want, desperate to know, the chances of olive oil may be adulterated. You look at the label. Olive oil products are required to show

• 20:00Speaker 06

  All of the countries of origin. And I'm telling you, do not buy olive oil that comes from more than one country. Because you just increase your chances. It doesn't mean it's adulterated. But you increase your chances because the more it's blundered, the more it's played with, the chances of it being adulterated are greater. So if you have single source olive oil, you're probably in a pretty good position. And it's hard to tell through tasting because olive oil can taste differently depending on the region. You have more of a bite, for example, from northern Italy. And so sometimes the real bite, people think, wow, that's bad olive oil. It's shocking. But it's actually real olive oil.

• 20:42Speaker 06

  My students have never passed the olive oil test in class. So in class, we'll have three different olive oils. It used to be that I would call the Mondovi Center up at UC Davis, which specializes in olive oil and wine. And I would ask them, what's the worst olive oil on the market? And they'd say, well, whatever you buy in the grocery store. So I would go to the store, and I knew a couple of brands that were pretty poor. And I would pick those. And I'd bring one of them back to the class. And then I'd have like a medium, an olive oil that was sometimes fraudulent, but not so bad. And then I'd have a really premium olive oil. Oftentimes, I would bring it back from Italy myself, and I knew what they were doing. And it was great olive oil.

• 21:24Speaker 06

  Or I would get it at a specialty store that started to pop up in LA in recent years. So those three choices, and the students invariably would vote for the olive oil that was the, what we call pumice. It's an adulterated olive oil as the favorite olive oil because they were accustomed to the taste. And that would lead to the conversation, okay, it's not a safety problem. It's a fraud problem, but do you care? You like the taste? Do you care if it's not authentic?

• 21:54Steve Levitt?

  The federal government does sometimes weigh in on the authenticity question through what's called a standard of identity.

• 22:02Speaker 06

  Standard of identity in one word, it's a recipe. It helps identify what a product is. When we get into really complicated products, that becomes a complicated question. Standards of identity are really important because that's the benchmark by which we decide whether a food is authentic or not. They became very popular when we had the very first Food Act, the 1906 Pure Food and Drug Act, and then they became even more popular with the 1938 Federal Food, Drug, and Cosmetic Act. All of these acts were passed in response to food safety problems, or more broadly, food adulteration problems, which included both fraud and safety. So you had standards of identity being populated by the FDA right and left on food.

• 22:46Steve Levitt?

  So say something like peanut butter. Peanut butter, there is a standard of identity. I don't know what it is, but if you don't mean it, you can't call your thing peanut butter.

• 22:54Speaker 06

  In fact, peanut butter killed the making of standards.

• 22:57Steve Levitt?

  How so?

• 22:58Speaker 06

  Al Gore, Vice President, Bill Clinton, was given the assignment to modernize government, to clean up bureaucracies, cut waste. And he encountered this long saga of the making of a peanut butter standard, which led for over a decade, years and years of arguing about what is peanut butter. You had congressional hearings on this. The FDA was tied up in the knots over science. The question was, how many peanuts should be in peanut butter? And that was a really important economic question that had a lot of cost implications. It dragged on for years and years, and tons of money was spent. And Al Gore just wrote a scathing report about these peanut butter standards that were

• 23:43Speaker 06

  wasting time and money. It really caught a lot of attention, and the FDA, literally at that point, stopped making standards because it just wasn't worth the effort. It was too hard.

• 23:54Steve Levitt?

  Honey has never had a standard of identity in the United States. Why does that matter for American honey producers?

• 24:01Speaker 06

  Let's say, for example, you want to take to the FDA honey that you don't consider to be real honey, and the FDA has to decide that based on what? Well, you don't have a standard of identity, so who's to say what honey is? When I talked earlier about these different indirect ways of manipulating honey, do those take it out of the definition of honey?

• 24:24Steve Levitt?

  There are still some voluntary standards for honey. The scientific nonprofit US Pharmacopeia has one, and the International Codex Elementarius has another. But none of them are legally binding in the United States. One of the big reasons that tighter standards aren't in place is that adulterated honey isn't considered a food safety issue. Compared to something like adulterated baby formula, it doesn't seem like such a big deal, right? It's not a matter of life and death. Where does Michael Roberts come down on that question?

• 24:55Speaker 06

  Well, it's a great question, and this is something I love to pony up in my classes. And then I do my best not to answer the question, but here you are forcing me to answer the question I always ask. I've taken a lot of fraudulent food products to the FDA, and the first question invariably is, is there a safety problem? And if you have an authenticity problem and you don't have an unsafe problem, then you're probably not going to get much attention from regulators. So you could look at it that way and say, yeah, okay, I can see, that makes sense. If I'm eating sushi and it's really tilapia disguised as tuna or whatever, it doesn't hurt me. That's fine. I'm enjoying the experience. Life is okay.

• 25:39Speaker 06

  But there's all kinds of unintended consequences. So what about the honest farmer, the producer of a food? And they can't compete. And so we're losing our domestic producers. Does that mean anything to us? Might. That's a different issue, right? I wrote a piece about honey fraud from a different angle years ago, and I actually followed European thought on this. And that is that honey fraud actually can contribute to us losing our pollinator bees. And if that happens, we're all in trouble. There was a case study in Whole Foods, I believe, back on the East Coast, where they

• 26:20Speaker 06

  took out all the food from their store that was directly the result of bee pollination. And you almost emptied the store completely. Bees are imperative. We will die without pollinator bees.

• 26:36Steve Levitt?

  After the break, we've heard about the beekeepers, but what about the bees? I'm Steve Levitt. You're listening to Freakonomics Radio. We'll be right back. Before the break, we were talking about the unintended consequences of food fraud. So let's speak with an economist.

• 27:00Speaker 03

  Yeah, Wally Thurman is how I go. Walter Thurman appears on my articles, but call me Wally. I'm a professor emeritus of agricultural economics at North Carolina State University.

• 27:10Steve Levitt?

  And you were trained at the University of Chicago. It does seem appropriate that a University of Chicago-trained economist would be the authority on the economics of honeybees, both because it's not the typical thing you'd expect an economist to know about, and because there are so many aspects of the honeybee economics that are hard to make sense of unless you think hard about markets and how markets work.

• 27:34Speaker 03

  I'd agree totally with that. The biology of honeybees are fascinating to a lot of people, and the markets are even more fascinating because they depend on the biology. And I would say that there's very little economic analysis of how pollination and honey get provided.

• 27:54Steve Levitt?

  How did you first get interested in the economics of honeybees?

• 27:58Speaker 03

  I'm an agricultural economist, and a continuing theme of my research has been on the effects of farm subsidies, a wide variety of US government subsidies to agriculture of all sorts. And I became intrigued in the early 2000s by the honey price support program. This seemed to me sort of a garden variety example of an agricultural commodity being subsidized. There were interest groups, farmers who gained a lot from the activity, and consumers didn't cost them very much. And in the process of studying that, I started to learn about pollination and the economics of bees. What bees do is as much provide pollination services

• 28:42Speaker 03

  as provide honey, at least in terms of the economic value of what they do. So I started a multi-year project of Getting to know entomologists and bee specialists and just became fascinated by the movement of beekeepers while they're moving their bees around.

• 28:59Steve Levitt?

  Economists have been interested in one particular aspect of honeybees for a long time. I think it was back in the 1950s that the future Nobel Prize winner James Mead highlighted a very economically unusual feature of the relationship between honeybees and apple orchards. Could you describe what makes that relationship of special interest to economists?

• 29:21Speaker 03

  Yeah, Mead is the right one. He and Francis Bader later on, they said, imagine that there's a beekeeper and the beekeeper's bees fly out every day and they do two things. They bring back pollen from a nearby apple orchard and they bring back nectar. And in the process of moving nectar around, they pollinate the apples, meaning they increase the productivity of the apple orchard. But then they also bring back this valuable dilute sweetness from the nectar, which they produce honey from. So they're doing two economically useful things. One is produce apples and that benefits the apple grower. And the other is producing honey, which benefits the beekeeper. The interesting thing to Mead

• 30:05Speaker 03

  and others was that, at least according to them, the beekeeper didn't really receive any payment for increasing the output of apples and the apple grower didn't receive any payment for increasing the production of honey by bees. And so here's the beekeeper and the orchard owner mutually benefiting each other, but they didn't get compensated for an important piece of what they did for the other. Therefore, from Mead's perspective and standard economics perspective, there was too little honey being produced, there's too little beekeeping, and there are too few apples being produced.

• 30:40Steve Levitt?

  In economics, Dergan, that's what we call a positive externality. It's a kind of market failure. And that's really interesting to economists because we certainly see a lot of cases where we have negative externalities. But this idea of the positive externality, we don't have so many examples of those.

• 30:58Speaker 03

  Yeah, positive externalities are a lot less common in economic thought and possibly in the actual world. So in this case, there are two interesting things going on here. One is it is a positive externality. I mean, forget about the production of honey for a minute. If the bees visited the apples... Pollinate the apples increases the yield to the orchard owner. That's a positive benefit that the beekeeper ostensibly doesn't get paid for. And put a pin in that ostensibly. And the other interesting thing is it's reciprocal. Not only is the beekeeper benefiting the apple grower, but the apple grower by having this nectar source is benefiting the beekeeper. So this positive flow of externalities goes both ways.

• 31:43Speaker 03

  And that leads to this unambiguous theoretical conclusion that we should subsidize the production of apples and the keeping of bees.

• 31:50Steve Levitt?

  Okay, so let's go to negative externalities because we have a lot of those in the world and economists think we understand those. So examples would be the pollution from factories, the stench from pig farms, traffic jams on the roads because too many people are trying to drive to work, secondhand smoke. It goes on and on and on. Okay. So when there is a negative externality associated with an activity, then economists worry that the free market provides too much of that activity, right? The pig farmer, the polluting factory, they aren't responsible for the full damages of their pollution and they don't factor those costs into their decisions about how much to produce and so they make too much. So negative externalities are a problem. How do economists try to fix that problem?

• 32:35Speaker 03

  Well, going back even earlier than Mead, famous British economist A.C. Pigou said, you tax those activities that generate negative externalities. If you have too much smoke coming out of a factory, factory owner is senseless to the harm that the factory is doing, so you tax them per unit of output or per unit of smoke. And that would be a pretty standard economic prescription for the problem.

• 33:00Steve Levitt?

  And that's a way of internalizing the externality, making the producer take that into account. So it seems logical. If a negative externality leads to market failure where there's too much production and then you tax it, well, then with a positive externality, it would stand to reason that with the free market, there are too few bees around and maybe too few apple orchards. And that's what James Mead conjectured. But then in 1973, Stephen Chung gathered some data and it didn't seem to be true.

• 33:32Speaker 03

  The story about reciprocal positive externalities really rests on these two parties not being able to influence each other, not being able to transact with each other, and maybe not even being aware of each other. What Chung found was that if you go to rural Washington State towns and open the Yellow Pages of the phone book, you would find advertisements for pollination services from beekeepers. So not only did apple growers and other farmers know about beekeepers in the area, they could call them up and pay them a certain amount per colony to come over and pollinate their crops. So I would say this was Chung's aha moment was there were transactions going on. So at

• 34:16Speaker 03

  least to him, there was a prima facie case that some of this positive externality was being internalized.

• 34:24Steve Levitt?

  It's interesting because as you pointed out, there are reciprocal benefits. The bees are helping the apple orchard and the apple orchard is helping the beekeeper to have more honey and better tasting honey. So it's not actually completely obvious, ex ante, which way the payments should go. You could imagine that maybe the beekeepers would have to pay the owners of the apple orchards or vice versa. So why do you think it turned out that it's the apple farmers who are paying the beekeepers?

• 34:53Speaker 03

  Well, that's a great question. And if you fast forward to the modern beekeeping industry and modern commercial practices.

• 35:02Speaker 03

  Bees are moved around, they're migratory. That is not by means of their flight, but beekeepers move them around in trucks. And there are times of the year when bees are placed on crops like almonds where the demand for pollination services is very high and the pollination fees run from farmers to bees. There are other times of the year in late summer where beekeepers will sometimes pay landowners for the privilege of putting their bees on the farmer's land because the land is such good honey forage. So it can and does go both ways.

• 35:37Steve Levitt?

  And from an economist's perspective, what determines which way the flow of money goes?

• 35:43Speaker 03

  It's seasonal to start with, and I'll use almonds as the example because almonds are a very early blooming crop. In fact, right now it's February and beekeepers from all over the country are moving their bees into almond orchards in California. Pretty soon, by the end of February, 90% of every bee in the lower 48 states is going to be in California pollinating almonds. And so there's a huge demand for pollination services. Almond is a valuable crop. And at the same time, almonds themselves don't provide good honey forage. So in that instance, it's pretty clear that if you're going to get bees in the almond orchards, you need to pay them because they're not getting much honey out of the deal and

• 36:27Speaker 03

  they have to travel all across the country to get there.

• 36:29Steve Levitt?

  The vast majority of the world's almonds are grown in California. And all those almonds need to be pollinated in a narrow window of about three weeks in late February and early March. This almond pollination event and the subsequent pollinations around the country are so important to beekeepers that they've changed the economics of the industry. This again is Chris Hyatt, professional beekeeper and past president of the American Honey Producers Association.

• 36:56Speaker 01

  It's tough keeping hires alive and there's not much incentive with the price. A lot of people are chasing pollination versus going to the Midwest. They'd stay in the South, just wait for another pollination event because the price of honey is so terrible.

• 37:12Steve Levitt?

  What share of your annual revenue would come from pollinating the almonds versus selling honey?

• 37:19Speaker 01

  We are still like 60-40 honey to pollination. But if it's a drought in North Dakota and there's not much rain, our honey production is down. It's happened several times that pollination is more than honey income.

• 37:32Steve Levitt?

  Back in 2006, a new phenomenon in the beekeeping industry started making waves. It was referred to as colony collapse disorder. This again is economist Wally Thurman.

• 37:43Speaker 03

  If you look back in the historical record, bees have been around in North America for centuries, even though they're not native to North America. So beekeepers have dealt with honeybee diseases for a long time. And you can go back into the beekeeping trade publications and see discussion of viruses and diseases and chemicals used to treat them. But something did happen in the winter of 2006, 2007 that came to be known as colony collapse disorder, CCD. It was a sudden, odd disappearance of the adult bees from colonies all over the country. One beekeeper first discovered it in Florida, but pretty soon there were reports from all

• 38:26Speaker 03

  over, and it was an epidemic. The key symptom of colony collapse disorder is that the adult bees actually disappeared. There weren't dead bees lying around the hive, and nobody knew what happened to them. And to this day, I think it's not well explained.

• 38:42Steve Levitt?

  And how prevalent was this in the winters of 2006 and 2007?

• 38:47Speaker 03

  Well, I think if you go back and look at surveys of beekeepers, what you can say is that an overwinter mortality rate of about 15%. That would have been the norm prior to 2006 and 2007, doubled to an overwinter mortality rate of 30%.

• 39:07Steve Levitt?

  And so as a researcher, you heard about this colony collapse disorder, and it caught your attention. And what did you find when you looked at the data?

• 39:13Speaker 03

  Well, my colleagues, Randy Rucker and Mike Burgett and I, were studying other aspects of the bee industry at the time, and we heard about colony collapse disorder and thought, oh, my goodness, this is catastrophic. We should see increases in the prices of pollination services, in the prices of honey, reduction in bee colonies.

• 39:33Speaker 03

  And when we started to look at the data and disentangle effects from trends, there's no effect.

• 39:39Steve Levitt?

  What do you mean by no effect?

• 39:40Speaker 03

  The US Department of Agriculture takes a survey every year of how many bees there are in the United States, how many bee colonies. Now, this is not an easy number to estimate. Bees move around, how do you count them, when do you count them? But there are censuses. Well, just a few years after 2006, there were more bee colonies in the United States than there were prior to colony collapse disorder. So while it was true that overwinter mortality rates doubled due to this CCD effect, the measured number of bee colonies didn't change a bit and in fact increased a little bit.

• 40:18Steve Levitt?

  But how do you make sense of that? That seems contrary to normal intuition.

• 40:22Speaker 03

  Yeah, it does. And a couple of reasons. One is, an insect colony of 30,000 bees could be produced in pretty short order. So if a beekeeper finds that a colony has failed and he needs to replace the bees in the spring, there are ways that he can create a whole new colony bees in as little as six weeks. And beekeepers have, over decades and centuries, developed methods of managing bees that allow them to produce new colonies quickly. It's called splitting hives. You have two boxes of bees, one dies, and you split the healthy hive and you place its occupants into the dead hive, you feed them appropriately, and you take care of them, and then a month or two later, you've got two healthy colonies of bees again.

• 41:07Steve Levitt?

  Now, you said that when colony collapse disorder came and many more bees were disappearing, that nothing happened. But one thing changed, right? The fees that were being paid by the almond growers to the beekeepers, those went way up, right?

• 41:22Speaker 03

  That's right. You didn't see evidence of colony collapse disorder in colony numbers, in the price of honey, the price of queen bees, almost nowhere, except in early season pollination fees paid by almond growers and a few other growers of similarly early blooming crops. And the early blooming is the key here. You have to get your bees out of their winter torpor and get them back to full strength to provide that pollination. And there are so many bees required to pollinate almonds at such an early time of year that all these replacement methods to replace dead colonies due to CCD really

• 42:05Speaker 03

  have to be put on steroids early in the season at some expense to get the pollinating bees out to the almond orchards. So there was a spike and there continues to be high fees paid for early season rental bees for pollination.

• 42:21Steve Levitt?

  The almond growers need just about every bee in America to come to California and pollinate the orchards. Without the bees, the almond industry would collapse. And unlike with honey, where Chinese bees can do the same job as American bees, it's too far for these foreign bees to travel. The almond industry needs a thriving American bee population. What does that mean in terms of economics? It means that ultimately, it is the almond producers who are hurt the most by cheap foreign honey. Usually, when the price of honey falls, lots of beekeepers would go out of business. But the almond industry can't let that happen. They have to raise pollination fees enough to keep the beekeepers afloat.

• 43:04Steve Levitt?

  If you're an almond producer, that gives you a strong incentive to find ways to grow almonds that don't depend on bees. What does this mean for the future of beekeeping? Maybe the answer is in the past, like 700 years in the past. That's coming up.

• 43:31Steve Levitt?

  We've been talking about the uncertain future of the beekeeping industry, but let's take a minute to think about the industry's past.

• 43:38Speaker 02

  If you think about that absolute darkness that must have fallen... On people in the Middle Ages and then to walk into a church and to have it glowing, ablaze with all of these candles and the sweet smell from the beeswax, the experience of being in that kind of light must have been really extraordinary.

• 44:02Steve Levitt?

  Alex Sapoznik is a historian at King's College London who studies the economics of beekeeping in the Middle Ages. In her research, she found that medieval beekeepers faced the same fundamental problem that Chris Hyatt faces today, a market for their product that kept getting undercut by forces outside their control.

• 44:21Speaker 02

  I started my research looking at medieval peasants and especially very poor peasants. And one of the big questions that we have about very poor peasants and the population generally of medieval England before the Black Death is how did so many people live off of so little, given what we know about medieval agriculture? Something that I saw being mentioned in passing was beekeeping. I am not a beekeeper, so I did wonder, could people just keep bees? Was that a lucrative business? How would you keep a bee in England? It's very cold and rainy here. It was very cold and rainy in the Middle Ages, too.

• 45:00Steve Levitt?

  It turns out that people could and did keep bees all over medieval Europe. However, even back then, the market was vulnerable to fraud.

• 45:09Speaker 02

  We have a really nice example from 1459 where the parliament in Lisbon is dealing with complaints from merchants who are trading honey with the merchants from Porto who are saying that people in Lisbon were fraudulently exporting Lisbon honey but calling it Porto honey.

• 45:30Steve Levitt?

  Today, beekeepers are honey producers and professional pollinators. Back then, the biggest job was something else entirely.

• 45:39Speaker 02

  In the Middle Ages and certainly in Christian Europe, the main point of keeping honeybees was for the wax that they produced. The wax has lots of different purposes, but the main purpose to which it was put was for Christian religious observants in the Latin West.

• 45:53Steve Levitt?

  Do you have a sense of what share of a church's budget would go to wax?

• 45:58Speaker 02

  After the expenses for the actual building. The biggest expense year on year was for beeswax.

• 46:05Steve Levitt?

  This huge demand for wax supported a thriving medieval beekeeping industry. But then, like so many things in the medieval period, that changed with the Protestant Reformation.

• 46:16Speaker 02

  All of this use of candles is very much associated with the institution of the Catholic Church. One of the many things that Martin Luther and others disagreed with was all of that external ornamentation. And so as places become Protestant, they start to use wax candles much less frequently. And we can see that really nicely illustrated in England. We have an injunction in 1538 that forbade the use of wax and wax candles, except for the wax that was used on the altar and the candles that were on the screen that separates the altar from the rest of the church.

• 47:02Speaker 02

  The effect was to really very, very severely limit the use of candle wax in medieval churches.

• 47:12Steve Levitt?

  The data bear that out.

• 47:14Speaker 02

  So if we can put the cost of wax into perspective, if we express it as an agricultural laborer's wage, then we would say that the price of a pound of wax fell from just over five days' work in 1300 to just two and a half days by 1354. But then it falls even further so that by 1544, so after the Reformation, it's less than one day's labor to be able to afford that same pound of wax.

• 47:45Steve Levitt?

  Not long after the price of wax collapsed, beekeepers got hit with another devastating shock. With the opening of sugar plantations in the Americas, Europeans suddenly had access to cheap and plentiful sugar for the first time. Honey lost its spot as a major sweetener. This is the sort of double whammy that modern beekeepers will face if the almond industry finds a way to lessen its dependence on bees for pollination, a trend that has already started. In California, there are self-pollinating and self-fertilizing almond trees that have been introduced to orchards across the region for exactly that purpose. And I don't think there's anything beekeepers can do to fight that trend.

• 48:27Steve Levitt?

  Ultimately, if beekeepers want to survive, it will be by finding ways to stop adulterated honey from coming into the country. But how will they do that?

• 48:38Steve Levitt?

  I put that question to Michael Roberts, the food law and policy expert at UCLA.

• 48:44Speaker 06

  We have to have consumer protection laws that are more stringent. We have contract remedies. In other words, we have to make certain people in the supply chain responsible. And if they're responsible, they're going to make sure everybody else is responsible as well. And we have to have calibrated criminal enforcement. I really think that without that, we're not going to see much change. And it is criminal, it's intentional, and it's fraud. There's a lot of cooperation that has to take place, and there's not one entity that's going to solve this problem. It has to be a coordinated effort. And that gets us back to that basic question, do we care about food fraud?

• 49:23Steve Levitt?

  It seems like it really, like so many things, it comes down to incentives, that the agencies you're talking about just, in many ways, don't have that strong an incentive to deal with this problem because it isn't a life and death problem. And ultimately, I think the strongest argument is the argument you made about the importance of the honeybees for the entire food chain, right? The positive externalities that are associated with the honey. And again, that creates a real problem because even the honey producers themselves aren't getting anything like the full economic benefit of the activity they're doing. So they don't have the resources or the incentives to go out and fight.

• 50:06Steve Levitt?

  And making it even more complicated is, I suspect that many US food producers, they use honey as an input, breakfast cereals, yogurt, granola bars, breads.

• 50:17Steve Levitt?

  They don't really care so much about the sanctity of honey. They want some honey flavor. They want it really cheap. And they wouldn't say it loudly or publicly. But they're probably not too troubled if adulterated honey is the input they're using to their product.

• 50:32Speaker 06

  I've always thought that retailers have an important role to play here. Consumers don't know where food comes from. We don't know. We don't know which farm. The gatekeeper in all of this is the retailer. And actually, large retailers that I've worked with are very, very keen on this topic. Years ago, I was on a panel with the FDA and other folks about this issue. And I asked this food scientist a question. Why did very few people attend this open hearing the FDA was holding back in 2010 on economically motivated adulteration? And the answer was because our lawyers told us not to go. What we don't know won't hurt us legally. Now, that's changed a lot since then.

• 51:15Speaker 06

  And now every retailer I talk to really cares about this issue because they're doing a lot more private branding. And they care about whether consumers trust their labeling and their presentation. But even that's not enough because it's the person in the middle of the retailer company who actually doing the buying. They're the ones who make the decision, not the person at the top. It's that person in the middle who's on the ground trying to buy produce or honey at a price that makes them look good and creates security for their jobs. That's the meeting point right there.

• 51:50Steve Levitt?

  It seems to me that another sensible policy approach, thinking in terms of incentives, would be to make it more financially rewarding for private entities to try to identify food fraud. One example of this is the government has used something called the False Claims Act to pay massive rewards to individuals and companies that uncover trade fraud. Do you think it would make sense policy-wise to go even further in the direction of offering bounties to people who identify food fraud? And whether they're doing that through data science or chemistry or however they're figuring out that people are breaking the rules?

• 52:28Speaker 06

  Great idea. I like that. Can I write an article about it and not give you any credit?

• 52:32Steve Levitt?

  Please.

• 52:36Steve Levitt?

  The policy picture is complicated, the incentives are misaligned, and the solutions are slow, which brought me back to Chris Hyatt, who first brought my attention to the honey business. I wanted to know something simple. In spite of the challenges his industry is facing, does he enjoy what he does? And how does he feel about his bees?

• 52:56Speaker 01

  I take care of them and I, I love them and I've done it for years and I want the best for them. I love the nuance of I'm going to place this bee yard in this location. I'm going to decrease the amount of highs to give them a better shot of making more honey and being healthy and productive. I'm not going to use this bee yard because that one didn't do good last year, or someone sprayed something, I'm going to forget using that. I like just taking care of them. And it's amazing being in the bee yard. It almost sounds like a Boeing 747 on a hot summer day and they're all out there making honey. Just to think about, well, in the course of a summer, there's a million pounds of honey flying through the air in North Dakota airspace. No one knows about it. Just my honeybees that come back to the

• 53:40Speaker 01

  hive that I have to truck back to the warehouse and extract and put in a drum to go to the store, right? But it's depressing, losing all these highs and you have to build them back. Yeah, it's lost a little bit of the romance.

• 53:56Stephen J. Dubner?

  Hey there. It's Stephen Dubner again. Thanks to Steve Levitt for his great work hosting this episode. And big thanks to Chris Hyatt, Michael Roberts, Wally Thurman, and Alex Sapoznick for speaking with him. Coming up next time on the show. These images apparently were manipulated in severe ways that tended to support the hypothesis of the experiment when the actual data did not support it. For decades, researchers trying to solve Alzheimer's disease have focused on one dominant theory.

• 54:30Stephen J. Dubner?

  But what if that theory was built on shaky data? And what if you are an Alzheimer's researcher who has to blow the whistle on your own mentor? It came to my graduation. It came to my wedding. So what is the state of Alzheimer's research today? And where does it go from here? That's next time on the show. Until then, take care of yourself and if you can, someone else, too. Freakonomics Radio is produced by Renbud Radio. You can find our entire archive on any podcast app, also at Freakonomics.com, where we publish transcripts and show notes. This episode was produced by Augusta Chapman and edited by Gabriel Roth. It was mixed by Eleanor Osborne with help from Joseph Webster.

• 55:12Stephen J. Dubner?

  The Freakonomics Radio Network staff also includes Dalvin Abouaji, Ellen Frankman, Elsa Hernandez, Ilaria Montenacort, Jeremy Johnston, Mandy Gorstein, Peter Madden, Teo Jacobs, and Zach Lipinski. Our theme song is "Mr. Fortune" by The Hitchhikers, and our composer is Luis Guerra.

• 55:32Steve Levitt?

  Well, that was remarkable. I can't believe you can summarize your methods so effectively.

• 55:36Speaker 02

  And then we stare at each other blankly while wondering what to do. But I didn't see that.

• 55:44Speaker 04

  The Freakonomics Radio Network, the hidden side of everything.