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
2700
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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
Physi
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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