Feeding the Planet while Sustaining Ecosystems:

Redefining Agricultural Efficiency

Joshua FarleyCommunity Development and Applied

EconomicsGund Institute for Ecological Economics

University of Vermont

Ecological Boundaries and Agriculture

Essential and Non-substitutable Resources

Food, water, energy, ecosystem services Essential to human survival with no

adequate substitutes Critical thresholds

Ecological Physiological

Inelastic demand Large changes in marginal value with

small changes in quantity

Ecological Boundaries and the Supply Curve

Must sum together all costs: labor, capital, biodiversity loss, nitrogen, climate change, etc.

(marginal cost)

Social/Physiological Boundaries

Physiological Boundaries/Thresholds and the Demand curve

Value: low and stable

Trade-offs: relatively unimportant benefits

Value: shift from marginal to total value (e.g. diamond-water paradox)

Trade-offs: Life sustaining benefits

Value: Increasing rapidly with decreasing quantity.

Trade-offs: Resilience, increasingly important benefits

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Irreconcilable Thresholds?

Market demand in an unequal world

Americans spend 6.7% of income on food for home consumption 11.6% of food dollar goes to farmers <1% of income spend on raw food How did you react when wheat prices

tripled? Elasticity of demand to retail prices ~.08

Implies ~.001 elasticity of demand to raw food prices

Market demand in an unequal world

Many poor countries spend >70% of income on food for home consumption Perhaps 50% spent on raw food? How do poorer countries react when

wheat prices triple? Arab spring

Elasticity of demand ~.7 Budget share and elasticity

Market Demand, Unequal World

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Trade-offs:Starvation now or in future

Sustainability and justice vs. preferences

Market Supply and Demand

Marginal market costs(Market supply curve))

Poor people have no demand

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Market Allocation of Essential Resources on an Unequal Planet

Does it maximize utility? The perversion of utility

Is it efficient (Pareto efficiency)? Would it be possible to re-allocate food from

obese people to malnourished people without making anyone worse off?

Do we need to make subjective value judgments to answer this?

Objective needs should take priority over subjective preferences weighted by purchasing power

Solutions

Redefining Goals: Efficiency

What is efficiency? Ratio of benefits/costs

Agriculture Food production/land; food/labor Most efficient system ever?

Energy in, energy out?

Economics diminishing MB, rising MC. MC=MB Maximizing monetary value How do we do this for food?

Ecological Economic Efficiency

What is the desirable end? Normative judgment

What are the costs?

economic technical ecological efficiency efficiency

efficiency

• Allocative efficiency• Producing the right foods with

the right resources on the right land• Shifting subsidies

• Distributive efficiency• Ensuring these foods go to those

with the greatest physiological need• More equitable distribution of

wealth?• Alternatives to price rationing?

E.g. California vs. Brazil• Brazil, India, small farmers

• Both shift demand curve to the left

Food Security

• Throughput broadly defined• Water, energy, fertilizers, labor, capital,

land• Cannot rely on non-renewables

• Requires major investments in R&D, extension

• How do we minimize costs of developing new technologies, maximize benefits?• Economics of information• Land grant universities• Markets fail to account for future generations,

negative externalities, public goods• Competition and price rationing inherently

inefficient• Cooperation required

• Shifts supply curve to right• Agroecology also shifts demand curve to left

• Minimizing impact of throughput on ES• Minimizing agrotoxins, fossil fuels, erosion• Non-market benefits• Open access and public goods• Cooperation required

• Perennial polyculture, agroecology• Restoring ecosystem services

• Shifts supply curve to right

Summary & Conclusions

Markets fail to account for ecological degradation

Markets fail to distinguish between needs and wants Bad idea to extend them to ecosystem

services Markets promote unsustainable,

unjust and inefficient agricultural systems

Summary & Conclusions

Must define appropriate goals for economic system on crowded, finite planet

Must understand resource characteristics Appropriate economic institutions based

on resource characteristics and goals Cooperation required to solve ecological

problems, achieve just distribution, produce required technologies