Yves here. This article mentions subsidies to food production and omits energy subsidies. Readers may be able to add others that were missed.
By Anita Dancs, an associate professor of economics at Western New England University, and Helen Scharber an assistant professor of economics at Hampshire College. Excerpted from excerpt from “Do Locavores Have a Dilemma? Economists debate the local food movement” (Dollars & Sense, July/August 2015)
Food produced on small farms close to where it is consumed—or “local food” for short—accounts for only about 2% of all the food produced in the United States today, but demand for it is growing rapidly. According to the U.S. Department of Agriculture, sales of food going directly from farmers’ fields to consumer’s kitchens have more than tripled in the past twenty years. During the same period, the number of farmers’ markets in the United States has quintupled, and it’s increasingly easy to talk about “CSAs”—community-supported agriculture operations where consumers pay up front for a share in the season’s output—without explaining the acronym.
But as local food has grown, so have the number of critics who claim that locavores have a dilemma. The dilemma, prominently argued by Pierre Desrochers and Hiroko Shimizu in their 2012 book The Locavore’s Dilemma: In Praise of the 10,000-mile Diet, is that local food conflicts with the goal of feeding more people better food in an ecologically sustainable way. In other words, well-meaning locavores are inadvertently promoting a future characterized by less food security and greater environmental destruction. The critics are typically academics, and while not all of them are economists, they rely on economic arguments to support their claims that the globalized food chain has improved our lives.
Why are critics pessimistic about the trend toward local food? Their arguments hinge on what we call the CASTE paradigm—the idea that Comparative Advantage and economies of Scale justify global Trade and lead to greater Efficiency.
The CASTE Paradigm
Efficiency, or maximizing benefits relative to costs, is the guiding principle in most economic analysis. For the critics, local food simply cannot be efficient because it does not take advantage of CASTE.
The theory of comparative advantage, developed by economist David Ricardo in the 19th century, says that because regions have different relative advantages in production, they should produce the goods and services that can be produced at the lowest “opportunity cost.” Even the best use of a resource—land, capital, time, labor—has an opportunity cost, which is the benefit that would have been gained from the next best use. Land devoted to growing food, for example, has a lower opportunity cost in Iowa than in New York City, since land in New York City is highly valued for office space or housing. So Iowa grows corn, this line of argument goes, because the alternatives are simply not as profitable to the owners of the land. As a rule, CASTE critics assert that food should be grown where it has the lowest opportunity cost, which will tend not to be close to most potential consumers.
The concept of economies of scale suggests that larger farms can make more efficient use of modern-day farming methods than smaller ones. Someone cultivating an acre or two of rooftop garden in New York City, for example, cannot take advantage of the large tractors, harvesters, and irrigation systems that can quickly plow, sow, fertilize and harvest a thousand acres of crops. Economies of scale help explain why the price of a bushel of corn is currently around $4, a price that might not be achievable by small farms producing diversified crops.
Taken together, the assumptions of comparative advantage and economies of scale lead to the conclusion that regions should specialize and trade. If Iowa’s comparative advantage in corn production along with economies of scale in farm size allow it to produce corn more cheaply than other regions, economists say, it should specialize in corn and trade for other goods and services. New York City residents benefit from the inexpensively produced corn, and resources are freed up to use their land, labor, and capital to produce other goods.
The idea that comparative advantage, economies of scale, and trade leads to the greatest efficiency—which we call the “CASTE” paradigm—is the foundation upon which modern economic thought has been built, and the critique of local food is just one recent example of how it has been applied.
Do We Need More CASTE?
While critics argue that a sustainable and food-secure future requires a more thorough application of the CASTE paradigm, actual evidence that a sustainable food system requires increasing reliance on comparative advantage and economies of scale seems to be lacking. Economies of scale undeniably exist with respect to various inputs to agricultural production, but the concept is not synonymous with “bigger is better.” A 2013 U.S. Department of Agriculture report praising the trend toward industrial farming and long-distance trade nonetheless noted that “most economists are skeptical that scale economies usefully explain increased farm sizes” partly because “crop production still covers a wide range of viable farm sizes.”
Comparative advantage based on climatic and soil conditions also exists, but the anti-locavore literature presents little evidence that cost reductions are mainly brought about through natural sources of comparative advantage. Carden’s claim that spinach is better grown in California than in Memphis should come with a footnote, since California’s supposed comparative advantage in spinach production is made possible by federally subsidized, imported irrigation water. As we witness the unfolding drought crisis in California, it is hard to maintain that society benefits from growing so much spinach (or other water-intensive crops, like almonds) in the state.
Other important reasons for lower costs of food production may appear to be the result of comparative advantage, but instead highlight inequities in the food system. Florida’s access to low-wage tomato pickers, for example, results in lower prices at American supermarkets—but these sources of comparative advantage are conspicuously absent from the critics’ examples.
Locavores may also fault the CASTE paradigm for excessive “tradeoff thinking,” which assumes any cost can be offset by any benefit. The assumption that all benefits (food, good soil, happiness) and all costs (inputs, pollution, psychological distress) might be measured and weighed against one another to make efficient decisions betrays the utilitarian philosophical basis of economics. It may seem like a reasonable way to make many decisions, but it is only one approach to making value judgments. Many ecological economists, for example, believe that ecosystem limits cannot be ignored and are not simply costs that can be traded off against monetary benefits. For instance, we may decide that four degrees of warming would lead to an unacceptable amount of climate disruption, whether or not economists believed that the benefits of the associated fossil fuel use outweigh its costs.
Even for those who agree that weighing benefits against costs is a reasonable way to make decisions, in practice, and in the local food critiques in particular, benefits and costs that do not have market values are often ignored. In particular, the critics fail to take many external costs—those that producers and consumers impose on third parties, and are therefore not reflected in market prices—into account. These authors observe that the bulk of the environmental impacts from agriculture come from the production phase but only use this observation in discussing the merits of comparative advantage. They do not critically examine production practices that routinely poison farmworkers, deplete soil nutrients, destroy rural communities, breed herbicide-resistant weeds, impoverish farmers, and contaminate waterways destroying marine life and biodiversity.
Finally, the role of power in the food system is conspicuously absent from the CASTE analysis. Its absence is not surprising; power is a concept that does not fit easily into a framework focusing on the freedom of autonomous and equal individuals to make utility-maximizing decisions. In that framework, the market is simply an institution that coordinates production and distribution decisions through its near-magical capacity to gather information about consumers’ preferences and producers’ costs. Yet, looking through the conceptual lens of power relations—between agribusiness and contract farmers, farm owners and farmworkers, food corporations and low-income consumers, the government and immigrant workers—gives us a clearer picture of who determines what costs and benefits are created in the food system and how these costs and benefits are distributed. Paying attention to power allows for the possibility that the falling food prices attributed to comparative advantage and economies of scale may be related, instead, to the ability of the powerful to offload social and environmental costs onto the relatively powerless.