Long term supply curves are different than supply curves. They are similarly named, but different concepts.
Supply curves measure supply at a price.
Long term supply curves measure market equilibrium supply as demand changes over time.
The elasticity measurement is the derivative of supply with respect to price. It cannot be applied to long term supply curves.
I agree with your definitions of the two curves, although I don't know what point you're making by the distinction.
In either case we can ask, "how much will changes in demand affect equilibrium quantity?" In a constant-cost industry, the answer will be 1:1 in the long-run (as indicated by a flat, or infinitely elastic long-run supply curve), but as you gradually shorten the scope over which you're looking at the market, making it a shorter- and shorter-run supply curve, it will steepen (elasticity decrease) such that the answer is "less than 1:1".
Without looking at data, my prior on meat production being an increasing cost industry is extremely high.
Meat production is a commodity product. Commodity products compete mainly on price, and so we should expect the industry to be fairly normal (i.e. the sort of industry discussed in econ 101 courses) in terms of competition, costs, etc.
Meat has a number of costly inputs, including feed, water, land and labor. If you have several commodity inputs, you can expect that at least one of them would be a potential bottleneck to increasing the scale of the industry at constant cost. For example, we know that water usage is definitely increasing cost, because the next efficient option after depleting our reservoirs is desalination which is stupid expensive on agriculture scales (and this flows into feed prices).
Meat production is an extremely large and mature industry. We should expect that large and mature industries have scaled up to the point where marginal costs are increasing, because they have had the time and intelligence invested in them to pick the low-hanging and high-hanging productivity fruit.
People who eat meat would like to eat more of it, if only it were cheaper. For example, if MacDonalds introduced a third-pounder for the same price as a quarter pounder, most people would buy it. Since this situation exists, it is probably difficult to provide meat at cheaper prices holding other relevant factors stable. One can imagine another industry where people have no particular desire to purchase more of the given product if the price were lower, such as child car seats and so the industry is limited in size before it achieves minimum cost scale.
Of course, in some sense this dodges another question, which is what is your prior probability prior to. If you had never heard of economics, and were just talking about abstract categories which industries either were a member of or were not a member of, then perhaps you could presume a 50% meta-prior. If someone were to take all the industries in the world at a very fine-grained level, and they presented it to you, perhaps then a 50% probability would be warranted as well. To be honest, I'm not sure what the probability would be in that situation, if you were looking at, like beekeeping and video game production and taxi driving as example categories. But from that point to the point of meat production specifically we have many pieces of knowledge that become our prior before we actually get to the collecting real data. My prior of an industry being increasing marginal cost, weighted by the number of times it gets discussed in newspaper articles, or weighted based on the amount of revenue it generates per year, is much higher than 50%.
Edit: I see that this is somewhat repetitive of what you wrote in your other comment. Oh well, it's already written.
Great! This is the only 'complete' argument I've seen that our prior for animal products industries should be that they are increasing-cost rather than constant-cost. I'm not as confident as you seem to be, but that's more of a quibble at this point, and I'm glad we agree on the meta-prior!
The challenge then is to convince Norwood and Lusk that we want to know the long-run impact of consumer choices on animal production, not the short-run! They're clearly estimating short-run elasticities since (a) their supply curves are way too steep, even for an increasing-cost industry, and (b) they explain their elasticities with an explanation that is irrelevant to the long-run:
Because it takes a year between the time a cow is bred and the time her calf is born, and then it also takes a long period before that cow can be transformed into beef or produce milk, it is difficult for beef and dairy producers to alter production according to changes in consumer preferences.
if lots of people start/stop eating meat, the short-run supply curve will look different 5 years from now due to that change alone.
NO!
I'm curious, given my credentials with what probability do you think I'm right?
Edit: I'm embarrassed by this, but I retract what I said.
Given our confidence for opposing positions and your credentials my best guess is that there's a miscommunication, in which case my guess on your correctness won't be well defined. Perhaps there's some critical word I'm using colloquially that has an importantly different meaning in economics.
How confident are you that the price of haircuts will increase the more haircuts there are in the long-run? For example, do you expect the real price of haircuts to rise dramatically as the population of a country grows dramatically? I do not.
This confuses supply and demand. The most important factor of production in haircuts is human labour. If you double the population of a country, then you double the number of haircuts demanded, but you also double the amount of labour supplied. Similarly, oil prices wouldn't rise if oil demand doubled... but every oil field doubled in size and output rate.
You are right that some industries may be decreasing-cost at certain margins, and computer games sound like a plausible candidate due to the low marginal cost. However, in the extreme, every industry is increasing-cost, simply because of resource scarcity (consider the situation if computer game demand was so high that 90% of the population worked as game developers). This is why the default assumption is increasing-cost.
As I've shown from the standard economics citations, they are actually with me in not assuming that industries are increasing-cost (unless you're arguing that AmosWEB and Policonomics do not represent the standard economics view).
Neither of these publications make any suggestion as to whether most industries are increasing or decreasing cost in those articles, as far as I can tell. The fact that they don't make such a suggestion doesn't mean that we shouldn't have a prior.
The most important factor of production in haircuts is human labour. If you double the population of a country, then you double the number of haircuts demanded, but you also double the amount of labour supplied.
To get around the objection of increasing labor, let's assume instead that everyone in the country decides to permanently get their hair cut twice as often as before. What do you expect the real price of haircuts to be in 10 years? Significantly higher, about the same, or significantly less? My prior is "about the same" until I have more data.
More generally (and naively), if I had to guess whether a given industry is increasing-, constant-, or decreasing-cost, two factors I would consider are: 1) How important to the cost of the product are inputs that are finite? How much of the market for those inputs goes toward making the product (as opposed to other uses that might substitute away from that input if the price increases)? 2) What economies of scale exist in the production of the product? To what extent will greater demand-per-person allow firms to approach the maximally efficient scale?
I have not seen these (or other relevant) factors used to advocate that animal product industries in particular should be assumed to be increasing-cost. (However I do appreciate your attempt to argue that our prior should be that all industries are increasing-cost in the absence of better evidence, which I argue against in a separate comment.)
Given your credentials, I can't fathom you disagree that shifts in demand can cause shifts in the short-run supply curve in the long-run. E.g. if lots of people start/stop eating meat, the short-run supply curve will look different 5 years from now due to that change alone.
Given that I believe you agree with that, I deduce that you only mean that changes in demand cannot shift the short-run supply curve in the short-run, nor shift the long-run supply curve in the long-run. With that I do agree by definition.
Funny that the only post by someone acknowledging negative-sloping long-run supply curves AND refraining from advocating a prior that meat industries are increasing-cost (yay; that's all I really want!) ends up sounding like a disagreement anyway due to semantics : ]
How confident are you that the price of haircuts will increase the more haircuts there are in the long-run? For example, do you expect the real price of haircuts to rise dramatically as the population of a country grows dramatically? I do not.
This confuses supply and demand. The most important factor of production in haircuts is human labour. If you double the population of a country, then you double the number of haircuts demanded, but you also double the amount of labour supplied. Similarly, oil prices wouldn't rise if oil demand doubled... but every oil field doubled in size and output rate.
You are right that some industries may be decreasing-cost at certain margins, and computer games sound like a plausible candidate due to the low marginal cost. However, in the extreme, every industry is increasing-cost, simply because of resource scarcity (consider the situation if computer game demand was so high that 90% of the population worked as game developers). This is why the default assumption is increasing-cost.
As I've shown from the standard economics citations, they are actually with me in not assuming that industries are increasing-cost (unless you're arguing that AmosWEB and Policonomics do not represent the standard economics view).
Neither of these publications make any suggestion as to whether most industries are increasing or decreasing cost in those articles, as far as I can tell. The fact that they don't make such a suggestion doesn't mean that we shouldn't have a prior.
You're the first person who disagrees with my conclusion but is willing to admit that some industries will be decreasing-cost (wherein we should expect greater than 1:1 effect on production); that is very refreshing!
in the extreme, every industry is increasing-cost, simply because of resource scarcity (consider the situation if computer game demand was so high that 90% of the population worked as game developers).
Yes, I agree in the extremely-large case. What about the extremely-small case? It's very hard to think of a fledgling market for which the average price would be higher if the market produced 100 units instead of 1 unit. So I think that the vast majority of markets will be decreasing-cost when they're arbitrarily small, and increasing-cost when they're arbitrarily large. What about in between? How do we know where on the spectrum an industry is?
I agree we need a prior. If something could be positive, neutral, or negative, and I have no evidence of which it is, my default meta-prior is neutral. Obviously that is an extremely weak prior (ie I'm very open to being convinced it should be something else), but nothing in the pieces I quoted justifies an increasing-cost prior (they just discuss short-run market dynamics). Your "low hanging fruit" argument comes the closest because it's a valid reason that points in one direction, but it is incompletely argued so far (the "in the extreme" argument is unconvincing since the same can be said of an opposing force).
Basic intuition suggests we should assume an industry is constant-cost in the absence of industry-specific evidence.
Why on earth should we assume that?
The default assumption is that industries are increasing-cost, because low-hanging fruit is picked first. Just like extracting more oil means exploitation of more difficult-to-extract reserves, and bottling more wine means growing it in regions where the grapes need more looking after, producing more meat means cultivating more marginal land.
So in your case, in the long run, the reduced demand for meat leads to less cultivation of marginal land, leading to a slightly lower price, and so the reduction in meat consumption is slightly less than the amount of meat you would have eaten. The rationalist community, and standard economics, give the same answer, and it is only your very strange assumption (which you bury in the middle of your article!) that causes a discrepancy.
The default assumption is that industries are increasing-cost, because low-hanging fruit is picked first.
I agree this effect will push towards an increasing-cost industry, but there are other effects at play that might be even more powerful such that the industry is constant- or decreasing-cost. For an extreme example, consider the market for computer games; I expect this to be a decreasing-cost industry (the more people buy computer games, the cheaper-per-quality they will be in the long-run, even ignoring technology improvements). For a more moderate example consider haircuts. How confident are you that the price of haircuts will increase the more haircuts there are in the long-run? For example, do you expect the real price of haircuts to rise dramatically as the population of a country grows dramatically? I do not.
My claim is that we shouldn't assume that the meat industries are increasing-cost unless/until we have better reason to do so. The rationalist community pieces implicitly assume that all industries are increasing-cost (and don't give reasoning for that example that's relevant in the long-run), whereas the economics articles I cite show that industries can also be constant- or decreasing-cost as well.
The rationalist community, and standard economics, give the same answer, and it is only your very strange assumption (which you bury in the middle of your article!) that causes a discrepancy.
Actually my prior that industries are constant-cost is not a particularly strong one; I'd be happy if the sources I cite simply remove or justify their assumption that animal product industries in particular are increasing-cost. As I've shown from the standard economics citations, they are actually with me in not assuming that industries are increasing-cost (unless you're arguing that AmosWEB and Policonomics do not represent the standard economics view).
How does an industry's total output respond to decreases in a consumer's purchases
I think you mean to ask how an industry's output responds to a decrease in demand since Total output = consumer's purchases + wastage. If just one consumer decided to not buy the good at any price this is what would happen. The question you asked lumps together supply and demand effects and I believe this is the cause of your confusion. A decrease in demand means that for every possible price consumers want to buy less.
The answer is that it depends, and the decrease in sales could be tiny or huge depending on elasticities. The fall in demand will (by definition) have no impact on the supply curve since the supply curve takes into account how much firms are willing to sell at every price and so already accounts for the possibility of prices falling. If this question interests you, look at the elasticity chapter of an introductory microeconomics textbook.
If just one consumer decided to not buy the good at any price this is what would happen.
Yes, I'm referring to a decrease in a consumer's purchases at any price (such as someone becoming vegetarian in a chicken market) not just at one price (in which case, if the price lowered a cent, they would re-enter the market); I agree this also counts as a decrease in demand.
The answer is that it depends, and the decrease in sales could be tiny or huge depending on elasticities.
Yes, if you mean 'long-run elasticities' then we agree. In fact the only thing that confuses me about your answer is what you think I should learn from an introductory microeconomics textbook.
The fall in demand will (by definition) have no impact on the supply curve since the supply curve takes into account how much firms are willing to sell at every price and so already accounts for the possibility of prices falling.
I disagree with your claim and it seems like you're confusing short-run and long-run; I don't think you'll find a definition of supply curve such that it cannot react to changes in demand in the long-run. Policonomics explains such a demand-motivated change in supply (D', S', and E2 refer to the chart in the original post):
Once this market equilibrium is reached, one might ask: what happens if there is an increase in demand? First, this will shift market demand to D’, increasing prices because supply (for the moment) is given. This increase in prices allows for profits to be made, at point 1. However, as seen before, these profits will attract new firms, which will force supply to the right (S’), going to an equilibrium such as E2, where our firm will produce the exact same initial quantity (point 2).
Based on the comments to this article I realized a stronger appeal to established economic theory would probably be more convincing. I've made that appeal in a separate post: http://lesswrong.com/r/discussion/lw/lj0/misapplied_economics_and_overwrought_estimates/
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You seem to compare different models of supply in demand, each based on different assumptions, and each expected to work on different time scales, and declare one of them "incorrect". Presumably what you mean by a more "correct" model is that it explains existing data and predicts future events better than the alternatives. If so, one should take your outline, make it into a proper simulation, plug in the available data, tweak the free parameters to match, then check if its predictions match the data not used to calibrate the model. Only after that you will have an argument for correctness. And only then, say, make a recommendation to the EA community re ways to decrease farm animal production.
To be fair, this bias towards theorizing instead of modeling and testing is a common pitfall of this community. I find it pretty disappointing, but maybe it's just me.
What do you recommend if good data is too costly to collect?
I think that if someone has made a claim but failed to use good data or an empirical model, it should not require good data or an empirical model to convince that person that they were wrong. Great if you have it, but I'm not going to ignore an argument just because it fails to use a model.