Feeding the Planet while Sustaining
Ecosystems:
Redefining Agricultural Efficiency
Joshua Farley
Community Development and Applied Economics
Gund Institute for Ecological Economics
University of Vermont
Ecological Boundaries and
Agriculture
Essential and Non-substitutable
Resources

Food, water, energy, ecosystem services


Critical thresholds



Essential to human survival with no adequate
substitutes
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
Trade-offs: Life
sustaining
benefits
Value:
Increasing
rapidly with
decreasing
quantity.
Trade-offs:
Resilience,
increasingly
important
benefits
food security, household security
Value: shift from
marginal to total
value (e.g.
diamond-water
paradox)
physiological threshold: e.g. starvation
Opportunity cost
Physiological Boundaries/Thresholds and
the Demand curve
Value: low and stable
Trade-offs: relatively
unimportant benefits
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
Physio thresh w/ equal distribution
Eco thresh nitrogen
Eco thresh carbon
Trade-offs:
Starvation
now or in
future
1245 1800
2700
Sustainability and justice vs. preferences
Marginal market costs
(Market supply curve))
Physiological boundaries for rich
Price
Market Supply and Demand
Poor people have no
demand
Market Allocation of Essential
Resources on an Unequal Planet

Does it maximize utility?


Is it efficient (Pareto efficiency)?



The perversion of utility
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
efficiency
technical
efficiency
ecological
efficiency
Food Security
• 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
• 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