Well-Intentioned or Counterproductive? The Inefficiency Debate About Locavore Food

America loves its local farmers' markets.

An increasingly common staple of urban and suburban weekends, the offerings of fresh produce and home-made products attracts a frequently affluent clientele bent on eating better and feeling they are doing something positive for the environment just by being there.

In much of Europe and many other parts of the world, such markets are food shopping as it has always been known. In the US, it is a quaint throwback, now attracting some serious attention. And that may a problem.

The question is not whether organic or natural products are better. It is a question of scale. Supermarket chains are investing heavily in organic products, some even opening all-organic stores. They are also beginning to make such products available in their mainstream locations so that customers of all economic and demographic segments have access.

But there is a belief that smaller farms are inherently superior. The issue raised by concerned economists is that to be successful they must also be more expensive - and the cumulative impact of their exclusionary pricing and fuel usage could offset the environmental benefits.

Those arguments may well be true. But they studiously ignore some of the reasoning behind the support for the locavore movement. And as we have learned over the past few decades, the behavioral may well trump the statistical. Adherents will argue that the point is not purely economic; that creating a sense of community, of support for a more healthful lifestyle is important, too. That, particularly as the population ages, it will make demands that could be perceived to be economically irrational but personally satisfying.

The inefficiency arguments appear well-grounded and their warnings must be heeded. But it would also be imprudent to ignore the locavore supporters. As a society we have learned to mistrust purely data-driven arguments. The financial crisis and recession have taught us that the system can be gamed. Watchful citizens are not sure but that some inefficiencies might be worth the additional burdens they impose, especially when compared with the trade-offs demanded as an alternative. JL

Steve Sexton comments in Freakonomics:

Two members of Congress earlier this month introduced legislation advancing a food reform movement promising to help resolve the great environmental and nutritional problems of the early 21st century. The intent is to remake the agricultural landscape to look more like it did decades ago.

But unless the most basic laws of economics cease to hold, the smallholder farming future envisioned by the local farming movement could jeopardize natural habitat and climate change mitigation efforts, while also endangering a tenuous and temporary victory in the battle against human hunger.
The “Local Farms, Food and Jobs Act” sponsored by Senator Sherrod Brown of Ohio and Representative Chellie Pingree of Maine, throws about $200 million to local farm programs. That’s a rounding error in the $3.7 trillion federal budget. But the bill follows on a federal rule that gives preference to local farms in contract bidding for school lunches. It also builds on high-profile advocacy by Michelle Obama, who has become a leader of the food reform movement, joining the likes of Michael Pollan, the author of The Omnivore’s Dilemma, and famed-chef Alice Waters. The bill’s introduction came as the world population hit 7 billion, a milestone that provides a stark reminder of the challenge agriculture faces to feed a world population expected to grow to 9 billion by 2050. Experts estimate that in the next 50 years, the global food system likely needs to produce as much food as it did in the previous 10,000 years combined.

Amid heightened concern about global climate change, it has become almost conventional wisdom that we must return to our agricultural roots in order to contain the carbon footprint of our food by shortening the distance it travels from farm to fork, and by reducing the quantity of carbon-intensive chemicals applied to our mono-cropped fields.

But implicit in the argument that local farming is better for the environment than industrial agriculture is an assumption that a “relocalized” food system can be just as efficient as today’s modern farming. That assumption is simply wrong. Today’s high crop yields and low costs reflect gains from specialization and trade, as well as scale and scope economies that would be forsaken under the food system that locavores endorse.

Specialization and Trade

Economists have long recognized the welfare gains from specialization and trade. The case for specialization is perhaps nowhere stronger than in agriculture, where the costs of production depend on natural resource endowments, such as temperature, rainfall, and sunlight, as well as soil quality, pest infestations, and land costs. Different crops demand different conditions and vary in their resilience to shocks. So California, with mild winters, warm summers, and fertile soils produces all U.S.-grown almonds and 80 percent of U.S. strawberries and grapes. Idaho, on the other hand, produces 30 percent of the country’s russet potatoes because warm days and cool nights during the season, combined with rich volcanic soils, make for ideal growing conditions.

In 2008, according to the USDA, Idaho averaged 383 hundredweight of potatoes per acre. Alabama, in contrast, averaged only 170 hundredweight per acre. Is it any wonder Idaho planted more acres of potatoes than Alabama?

Forsaking comparative advantage in agriculture by localizing means it will take more inputs to grow a given quantity of food, including more land and more chemicals—all of which come at a cost of carbon emissions.

It is difficult to estimate the impact of a truly locavore farming system because crop production data don’t exist for crops that have not historically been grown in various regions. However, we can imagine what a “pseudo-locavore” farming system would look like—one in which each state that presently produces a crop commercially must grow a share proportional to its population relative to all producers of the crop. I have estimated the costs of such a system in terms of land and chemical demand.

My conservative estimates are that under the pseudo-locavore system, corn acreage increases 27 percent or 22 million acres, and soybean acres increase 18 percent or 14 million acres. Fertilizer use would increase at least 35 percent for corn, and 54 percent for soybeans, while fuel use would climb 23 percent and 34 percent, for corn and soybeans, respectively. Chemical demand would grow 23 percent and 20 percent for the two crops, respectively.

A locavore-like production system would require an additional 60 million acres of cropland, 2.7 million tons more fertilizer, and 50 million pounds more chemicals
In order to maintain current output levels for 40 major field crops and vegetables, a locavore-like production system would require an additional 60 million acres of cropland, 2.7 million tons more fertilizer, and 50 million pounds more chemicals. The land-use changes and increases in demand for carbon-intensive inputs would have profound impacts on the carbon footprint of our food, destroy habitat and worsen environmental pollution.

It’s not even clear local production reduces carbon emissions from transportation. The Harvard economist Ed Glaeser estimates that carbon emissions from transportation don’t decline in a locavore future because local farms reduce population density as potential homes are displaced by community gardens. Less-dense cities mean more driving and more carbon emissions. Transportation only accounts for 11 percent of the carbon embodied in food anyway, according to a 2008 study by researchers at Carnegie Mellon; 83 percent comes from production.

Economies of Scale

A local food production system would largely upend long-term trends of growing farm size and increasing concentration in food processing and marketing. Local “food sheds” couldn’t support the scale of farming and food processing operations that exist today—and that’s kind of the point. Large, monocrop farms are more dependent on synthetic fertilizers and tilling operations than small polycrop farms, and they face greater pest pressure and waste disposal problems that can lead to environmental damage.

But large operations are also more efficient at converting inputs into outputs. Agricultural economists at UC Davis, for instance, analyzed farm-level surveys from 1996-2000 and concluded that there are “significant” scale economies in modern agriculture and that small farms are “high cost” operations. Absent the efficiencies of large farms, the use of polluting inputs would rise, as would food production costs, which would lead to more expensive food.

Health Implications

And, as we try to tackle obesity, locavorism is likely to raise the cost of precisely the wrong foods.

A local food system would raise the cost of food by constraining the efficient allocation of resources. The monetary costs of increased input demands from forsaken gains from trade and scale economies will directly bear on consumer welfare by increasing the costs of food. And, as we try to tackle obesity, locavorism is likely to raise the cost of precisely the wrong foods. Grains can be grown cheaply across much of the country, but the costs of growing produce outside specific, limited regions increase quickly. Thus, nutrient-dense calories like fruits and vegetables become more expensive, while high fructose corn syrup becomes relatively cheaper.

Finally, higher costs on certain foods may be a solution to the big health challenge in the developed world. But higher prices on any food are precisely the wrong prescription for the great health problems in the developing world, where millions remain undernourished. As the food crisis of 2007-08 revealed, winning the war on human hunger requires a constant commitment to getting more food out of less land, water, and other inputs.

From roughly 1940 to 1990, the world’s farmers doubled their output to accommodate a doubling of the world population. And they did it on a shrinking base of cropland. Agricultural productivity can continue to grow, but not by turning back the clock. Local foods may have a place in the market. But they should stand on their own, and local food consumers should understand that they aren’t necessarily buying something that helps the planet, and it may hurt the poor.