Bad economics and local food

Steve Sexton, writing on the Freakonomics blog, has an interesting post on the inefficiency of local food:

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.

He goes on to argue that, for most crops, a “return” to more localized production would spell disaster for the environment and food prices. The blog post is a summary of a longer piece he published in the Agricultural and Resource Economics Update, published by the University of California Giannini Foundation of Agricultural Economics. Sexton takes the “locavore” movement to task for failing to appreciate the fundamental economic principles at work in modern agribusiness, including economies of scale and comparative advantage. In addition, his analysis concludes there would be a massive increase in land use for agriculture, fertilizer input, and carbon footprint.

However, his analysis makes the assumption that each state would grow their own share of commodity crops. By approaching the question this way, it seems to me that his analysis seeks to package the current production system into state-sized units, the result of which is to conclude that it would be better to keep it the way it is.

This is not at all what I think anybody means when they talk about local food. How many local food proponents have you heard arguing that the problem with high-fructose corn syrup is that the corn is grown in another state, and that it would be better if Ohioans drank soda with all-Ohio HFCS? Yet that is exactly the model he is testing. And that is obviously not the important or even relevant part of our food system. The problem is not that my HFCS is not local, the problem is that HFCS is super-cheap because of our current ag policy and replaces more nutrient-dense calories for too many kids and adults.

I also take exception to the way he compares yield from the days when farms raised more commodity crops to yields on large, monoculture farms today (in the full analysis). To even suggest that yields from the 1930s would be relevant today is misleading, even if he admits today’s yields would be far higher. Just the difference in yield brought about by hybrid cultivars developed in the 1960s make this comparison a nonstarter. In fact, I’m not even certain there would be any reduction in yield due to the scale of the farm with modern cultivars, I’m having trouble thinking why there would be.

Regardless of what the predictions are for the future of local food, a recent report from the USDA showed local farms accounted for $4.8 billion in sales in 2008, far beyond earlier estimates. I guess somebody should tell these farmers they’re wasting their time, local food won’t work. I wonder how much of the $4.8 billion was local dent corn?

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