Eggs for 79¢ a dozen?
Ground beef for $1.99 a pound?
Many of us know in our gut that these prices cannot reflect the true cost of food. We know that the seemingly cheap food delivered by the industrialized global food system results in environmental degradation, exploited labor and chronic health problems. Yet, coming up with numbers to estimate the “true” cost of food is difficult, since polluted waterways and poorly treated farmworkers do not come with price tags.
Supporters of industrial food point to its benefits and argue that our living standards would be lower without it. They contend that cheap food is delivered thanks to two important economic principles. For one, economies of scale mean that bigger is better as larger farms can more efficiently utilize land, energy and other resources to grow food at a lower per bushel or per pound cost than small farms. Second, as international trade has increased, facilitated by inexpensive transportation and trade agreements, areas of the world that are relatively better at growing apples, grow apples. Places that are relatively better at growing wheat, grow wheat. Places that are better for grazing animals, raise cattle or sheep. Everyone benefits when regions take advantage of their relative endowments – the climate, type of soil, skills of workers and other attributes. As the agriculture sector has become industrialized, along with food processing industries, food is more plentiful and inexpensive, advocates claim. Moving away from industrialized food will lead to increased food insecurity, higher prices, and environmental degradation as more land and fossil fuels will be required to grow less food.
Industrial food would be a miracle if not for one detail: external costs. The prices shoppers see at the supermarket reflect private costs such as wages and the cost of land, tractors, tools, seeds and other inputs. They may also reflect government subsidies. But they do not usually reflect what economists refer to as “externalities.” Externalities, or external costs, are unintended consequences of an economic activity that are borne by the natural environment, communities, or other third parties. Advocates for industrial food argue that the benefits outweigh these costs but a closer look at the extent of these costs and the difficulties in measuring them may make cheap food not taste so good.
External Costs Abound
Pesticide usage, including herbicides, insecticides, and fungicides, leads to one category of externalities, which includes:
- Contamination of surface and groundwater;
- Human health impacts such as neurological damage, cancer and acute and chronic pesticide poisoning;
- Loss of beneficial insects;
- Loss of biodiversity;
- Colony collapse disorder in bees;
- Current and future crop losses due to pesticide drift and the cumulative impact on soil health
- Emergence and spread of an increased number of herbicide-resistant weeds (superweeds) and superpests.
Concentrated animal feeding operations (CAFOs) also push costs onto the environment. CAFOs force such a large number of animals to live within a small space, resulting in hundreds of millions of tons of manure. Since living in close quarters facilitates the spread of diseases, CAFO farmers administer non-therapeutic antibiotics to the animals. Some farmers also dose animals with growth hormones. Antibiotics and growth hormones contaminate the manure, making what was traditionally an agricultural resource – as fertilizer – into a significant external cost. These “manure lagoons” leak into waterways and contaminate the water supply. Antibiotic-resistance is also a consequence.
CAFOs impact the communities in which they are situated. Noxious fumes from the manure lagoons cause air pollution. Ammonia, methane, volatile organic compounds among other pollutants impact the livability of rural communities as well as the health of the residents. Journalist David Kirby in his book Animal Factory follows rural communities where farms have transitioned from traditional livestock and dairy operations into CAFOs. While these stories are anecdotal, it is hard to deny the external costs borne by these communities as noxious fumes infiltrate homes in Yakima Valley, Washington, industrial dairies contaminate waterways in Illinois, and recreational activities such as fishing and swimming are destroyed by intensive hog farming on the Neuse River in North Carolina.
Inexpensive food may be undervalued by consumers, leading to waste. Each year, 14 million tons of food are thrown out each year, which is 106 pounds per person, according to the Environmental Protection Agency. Little of it is composted; almost all of it is incinerated or landfilled. While wasting food may feel immoral in a world where millions go hungry, it also has external costs. Landfills and incinerators produce greenhouse gases, particularly methane, which is twenty times as harmful to the atmosphere as carbon dioxide.
Greenhouse gas emissions released throughout the stages of industrial food production from petrochemical fertilizers through manure lagoons to waste, cause climate change. An oft-cited study published in the Annual Review of Environment and Resources found that food systems may account for as much as 29% of total anthropogenic greenhouse gas emissions, with the vast majority arising from agriculture production or land-use changes such as deforestation for crop production.
The industrialized food system has also facilitated dietary changes that have substantial costs to our well-being and the health care system. These dietary shifts have led to increases in various illnesses such as Type II Diabetes, hypertension, cardiovascular disease and osteoporosis. Food allergies and a number of chronic conditions are possibly linked to changes in our food consumption such as the presence of genetically-modified ingredients in food.
The true cost of food is also reflected in the people who grow crops and slaughter animals. In the U.S., about half of farmworkers are undocumented, according to an analysis of Department of Labor data done by the organization Farmworkers Justice. Given the reluctance of undocumented workers to participate in surveys, or to respond accurately, this is probably a significant underestimate. Undocumented workers, fearing deportation or worse, will tend to be unwilling to report abuse, workplace injuries, underpayment of wages, or other contract violations. A year-long investigation of female farmworkers by PBS’s documentary series, Frontline, documents not only the abuse they suffer from repeated rapes, but their fear in reporting the abuse. Even farmworkers with an H2-A visa are tied to their employer and are much more vulnerable than the average employee.
Small farmers might be said to exploit themselves. Power in the food system has led to lower farmgate prices making it more difficult to make a living at farming. The average small farm, according to the USDA, has negative farm earnings and is reliant on outside income. Many small farms commonly use outside income to invest in the farm to keep it going. Even small farms with moderate-sales earn nearly half their income off-farm.
Measuring External Costs
The low price of food at the supermarket is only the illusion of efficiency, given these externalities. But is it possible to assign dollar values to the array of costs? Several studies have tried to do just this. For example, a Dutch study estimated the “true” cost of pork. It found that conventional pork would need to be priced nearly one-third higher than it is currently sold in supermarkets in order to reflect all private and external costs. Cornell scientist, Dr. David Pimentel, concluded that pesticides cause $10 billion annually in environmental and societal damages in the U.S., including $2 billion alone in groundwater contamination.
Other studies have attempted to be even more comprehensive. In 2000, Jules Pretty and a number of other scholars attempted to measure the externalities arising from agriculture in the UK. They grouped external costs into seven categories, the first four of which concern damage to natural capital: (1) water (e.g. pesticides in drinking water); (2) air (e.g. nitrous oxide emissions); (3) soil (e.g. organic matter losses); (4) biodiversity and landscape (e.g. hedgerow and bee colony losses). The other three categories concern damage to human health arising from: (5) pesticides (acute and chronic effects), (6) nitrates and (7) microorganisms and other disease agents (e.g. antibiotic resistance). For 1996, the authors estimate that there were around $3.7 billion (approximately $5.6 billion in today’s dollars) in external costs, or $325 per hectare (nearly $500 in today’s dollars) of arable land or permanent pasture.
Guided by the framework of the UK study, Erin Tegtmeier and Michael Duffy, economists at Iowa State University, published a similar study on U.S. agriculture. Their findings had a lower per hectare amount due to the exclusion of costs such as bovine spongiform encephalopathy (BSE) and agency monitoring costs that were present in the UK study. They concluded that in 2002, somewhere between $5 and $15 billion ($6.6 to $19.7 billion in today’s dollars) were the external costs of agricultural production. U.S. agriculture accounts for about $192 billion of the annual GDP, so external costs could be as little as 3.5% of total output at the low end, or as much as 10% at the high end.
Given the long list of external costs, these numbers may seem surprisingly low. Though these studies may be thorough and systematic, difficulties arise in estimating costs as the authors of such studies are the first to acknowledge. For one, some of the estimates are known to be substantial underestimates, such as treating eutrophication of reservoirs and restoration of hedgerows in the British study. Moreover, external costs that are deemed impossible to calculate such as treatment of marine eutrophication and flood defenses are excluded. The data available only enable partial estimates in some cases. For example, records used to determine the impact of feedlot spills on fish kills were only available for ten states in the U.S. study. The British study did not have data on treatment of drinking water costs for the entire country so the estimate to rid drinking water of pesticides and other contaminants was incomplete.
Uncertainty also plays a role in limiting the accuracy of external cost estimates. The human and ecological costs associated with climate change provide a ready example. While scientists agree that the costs of climate change will be large, identifying exactly what form they will take and when is still deeply uncertain. Even if we knew precisely how any weather patterns would shift and the problems associated with them, putting dollar values on more frequent flooding from hurricanes or inability to grow food is complex. All this makes deciding how to put a price on carbon emissions very difficult. Is the social cost of a ton of carbon $37, as the White House says, or $900, as economist Frank Ackerman poses as a high-end estimate? Or is it $0, the implicit price, given the lack of regulation, and the price that might be posited by climate deniers? In the study on the external costs of U.S. agriculture, the authors assume a price of $0.98 per ton of carbon for a total of $451 million. If they had used the White House price for carbon, the climate change cost alone would be $17 billion doubling their entire estimate for the external costs of agriculture. A price of $900 per ton would result in $414 billion. In other words, the costs of industrial agriculture would clearly outweigh the benefits, assuming the benefits are mostly reflected in market prices.
The impact of other events is even less known than climate change. For example, the impact of pesticides as endocrine disruptors is unknown. The impact of the spread of genetically-modified seeds is unknown both in terms of human health and genetic pollution. What could be the impact of colony collapse disorder of bees? In the British study, bee colony losses are estimated at a few million dollars and in the U.S. study at $410 million. A study out of the UC-Berkeley found that pollinators impacted 35 percent of the world’s crop production. Like climate change, bee colony collapse could be catastrophic.
Putting a price tag on nature itself is fraught with challenges. Scholars in Ecological Economics estimated that ecosystems globally provide on average $33 trillion annually worth of services (or nearly $50 trillion in today’s dollars). In other words, ecosystem services are worth at least two-thirds of all the human-made goods and services produced annually in the global economy. Even if this type of estimate were solid, how a loss or partial loss of an ecosystem or biome will reverberate through the economy is difficult to project.
Many studies of costs simply have yet to be done or are rough approximations rather than detailed estimates. A European Union report asserts that a definitive study on the economic burden of nutrition-related health disorders is still needed and that available data on health care indicates that the cost is billions and billions of dollars.
Another source of underestimation occurs because many of the victims of external costs have no power. Undocumented farmworkers’ stories of working in U.S. fields and slaughterhouses are not fully known because of their vulnerability. Farmers in developing countries have little power in the marketplace when faced by the behemoths of the food industry that control many of the inputs to production as well as the markets for produce and meat. Contracted chicken growers in the U.S. are unwittingly replicating the sharecropping relationship between former slaves and plantation owners during the nineteenth and early twentieth centuries.
Likewise, animals have no power in the economy. How should we value animal welfare?
This doesn’t mean we shouldn’t attempt to identify these costs and even try to put a dollar value on them. Given the politicized nature of civic decision-making, and the low-power positions of those suffering from the current food system, making the costs known and even offering numbers might be seen as a sort of affirmative action plan for a better food system. Yet we should acknowledge that political difference may be based on values and no numbers will ever convince a supporter of the industrialized food system that we need change.
Moving toward more sustainable food
Given the numbers we do know and given the level of risk involved in continuing our current food system, the case can be made for moving toward greater sustainability. A more sustainable food system would need to produce abundant, healthy food, grown and processed by those who earn a living wage, and which would minimize the environmental impact such that the level of future generations’ well-being would be at least that of our own.
What is less clear is how we get from today’s food system to a more sustainable one. We often hear that consumers can make a difference by voting with their dollars. Many economists, though, would argue that relying too heavily on consumer choice will take too long. Climate change, increased competition over scarce resources, continued worker exploitation, animals unable to stand up on their own legs, contaminated water supplies, increased chronic health conditions, biodiversity loss, superweeds, and destroyed recreational areas will be the result.
Economists’ most typical solution to external costs of any economic activity is called a “Pigouvian” or corrective tax. If we can measure the externalities – for example, how much it would cost to clean up a polluted water supply – we can assess a tax on the activity causing the pollution that will provide the funding for the clean up. The tax will also serve to make a polluting method of production relatively more expensive, and cleaner methods of production relatively less expensive, changing incentives toward better behavior. This incentive-based mechanism underlines the importance of continued research on external costs of the food system.
“Pigouvian” subsidies can also play a role in subsidizing research and production methods that lead to positive spillover effects such as increased soil health or new information on organic pest management.
Governments, universities, and independent foundations can support research and development of alternative agriculture and identify pathways for scaling up successful experiments in no-till agriculture, permaculture, managed grazing or other promising avenues. These institutions may be implicated in the development of our current food system, but this only indicates the power that can be harnessed for positive change.
Regulations can also play a role by eliminating pesticides that are linked to chronic illnesses or disorders like colony collapse.
Though recent defeats of labeling laws in California and elsewhere sound a pessimistic note, food labeling laws combined with accurate information can help consumers make better choices.
Our global food system didn’t simply evolve. There is nothing predetermined about the system we have. Research went into developing, for example, new active ingredient pesticides and genetically modified organisms. Many of the choices made reflect power in the food system and the role of the profit motive. A more sustainable food system can only be brought about by countering the power in the current food system. Organizations like NOFA are already an active part of the alternative food movement, educating consumers and connecting them to producers while lobbying for more productive government policy. These activities must continue and grow.