Local Agriculture, Global Ecosystems, and Human
Description: Local Agriculture, Global Ecosystems, and Human Survival Local Food Summit. Anne Arbor, Michigan. March 31, 2014 Joshua Farley Community Development and Applied Economics Gund Institute for Ecological Economics University of Vermont
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slide1. Local Agriculture, Global Ecosystems, and Human Survival Local Food Summit. Anne Arbor, Michigan. March 31, 2014 Joshua Farley
Community Development and Applied Economics
Gund Institute for Ecological Economics
University of Vermont
Professor Visitante Especial
Universidade Federal de Santa Catarina<br>
slide2. Planetary Boundaries and Conventional Agriculture<br>
slide3. How do we solve this problem? How serious is the problem?
Essential and non-substitutable resources
Ecological thresholds
Economic/physiological thresholds
Can markets solve it?
Economic efficiency and just distribution
Ecosystem services
Technological advance
What is the role of local agriculture?<br>
slide4. Essential and Non-substitutable Resources Food, water, energy, ecosystem services
Essential to human survival with no adequate substitutes
Schelling, 2007
Critical thresholds
Ecological
Physiological
Inelastic demand
Large changes in marginal value with small changes in quantity
E.g. grain prices in 2007<br>
slide5. Ecological Thresholds and the Supply Curve Must sum together all costs: labor, capital, biodiversity loss, nitrogen, climate change, etc. (marginal cost) Economic output (fossil fuel economy)<br>
slide6. Social/Physiological Boundaries<br>
slide7. 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 Opportunity cost Economic output (fossil fuel economy)<br>
slide8. Irreconcilable Thresholds?<br>
slide9. Market Solutions? Negative externalities
Must be internalized for efficient allocation
Monetary valuation (implies substitutability)
How do we account for changing values?
Army of technocrats providing data to politicians? $ $<br>
slide10. Market demand in an unequal world Competition and self interest
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
1% in retail prices ~.08% in consumption
1% raw food prices, .001% consumption<br>
slide11. 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 = preferences weighted by purchasing power<br>
slide12. Market Demand, Unequal World 2700 Physio thresh w/ equal distribution Eco thresh nitrogen Eco thresh carbon 1245 1800 Trade-offs:
Starvation now or in future Sustainability and justice vs. preferences<br>
slide13. Market Supply and Demand Marginal market costs
(Market supply curve)) Poor people have no demand Physiological boundaries for rich Price food output<br>
slide14. Market Allocation of Essential Resources on an Unequal Planet Does it maximize utility?
The perversion of utility
Is it efficient?
Does it maximize monetary value?
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<br>
slide15. Market Equilibrium on a Full and Unequal Planet? Equilibrium result of negative feedback loops
Scarcity price increase decrease in demand; increase in supply equilibrium
No prices for non-market goods (most threats to planetary boundaries
Essential resources
Price increase decrease in demand
Finite resources on full planet (food, energy, land, stocks)
Price increase increase in supply (or only at cost of future supply)
Speculation
Price increase increase in demand
Dis-equilbrium, redistribution from positive feedback loops <br>
slide16. Solutions Redefining agricultural efficiency to identify leverage points
Assessing the role of local agriculture in pushing those levers<br>
slide17. 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?<br>
slide18. Ecological Economic Efficiency What is the desirable end?
Normative judgement
What are the costs?
economic technical ecological
efficiency efficiency efficiency<br>
slide19. Allocative efficiency
Producing the right foods with the right resources on the right land
Distributive efficiency
Ensuring these foods go to those with the greatest physiological need
More equitable distribution of wealth?
Alternatives to price rationing?
Local agriculture?
Community gardens, CSAs, Farmers markets (elitist or popular) Food Security<br>
slide20. Throughput broadly defined
Water, energy, fertilizers, labor, capital, land
Cannot rely on non-renewables
Requires major investments in R&D, extension
Economics of information
Minimize costs, maximize benefits
Land grant universities
Markets fail to account for future generations, the poor, the environment
Local agriculture
Sharing knowledge
Guiding research agenda<br>
slide21. Minimizing impact of throughput on ES
Minimizing agrotoxins, fossil fuels, erosion
Accounting for non-market benefits
Open access and public goods
Cooperation required
Local agriculture
Internalizing externalities
Restoring ecosystem services<br>
slide22. Summary & Conclusions Must define appropriate goals for agricultural systems on crowded, finite planet
Must tailor economic institutions to goals and resource characteristics
Local agriculture is likely to be more efficient economically, technically and ecologically<br>
Community Development and Applied Economics
Gund Institute for Ecological Economics
University of Vermont
Professor Visitante Especial
Universidade Federal de Santa Catarina<br>
slide2. Planetary Boundaries and Conventional Agriculture<br>
slide3. How do we solve this problem? How serious is the problem?
Essential and non-substitutable resources
Ecological thresholds
Economic/physiological thresholds
Can markets solve it?
Economic efficiency and just distribution
Ecosystem services
Technological advance
What is the role of local agriculture?<br>
slide4. Essential and Non-substitutable Resources Food, water, energy, ecosystem services
Essential to human survival with no adequate substitutes
Schelling, 2007
Critical thresholds
Ecological
Physiological
Inelastic demand
Large changes in marginal value with small changes in quantity
E.g. grain prices in 2007<br>
slide5. Ecological Thresholds and the Supply Curve Must sum together all costs: labor, capital, biodiversity loss, nitrogen, climate change, etc. (marginal cost) Economic output (fossil fuel economy)<br>
slide6. Social/Physiological Boundaries<br>
slide7. 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 Opportunity cost Economic output (fossil fuel economy)<br>
slide8. Irreconcilable Thresholds?<br>
slide9. Market Solutions? Negative externalities
Must be internalized for efficient allocation
Monetary valuation (implies substitutability)
How do we account for changing values?
Army of technocrats providing data to politicians? $ $<br>
slide10. Market demand in an unequal world Competition and self interest
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
1% in retail prices ~.08% in consumption
1% raw food prices, .001% consumption<br>
slide11. 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 = preferences weighted by purchasing power<br>
slide12. Market Demand, Unequal World 2700 Physio thresh w/ equal distribution Eco thresh nitrogen Eco thresh carbon 1245 1800 Trade-offs:
Starvation now or in future Sustainability and justice vs. preferences<br>
slide13. Market Supply and Demand Marginal market costs
(Market supply curve)) Poor people have no demand Physiological boundaries for rich Price food output<br>
slide14. Market Allocation of Essential Resources on an Unequal Planet Does it maximize utility?
The perversion of utility
Is it efficient?
Does it maximize monetary value?
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<br>
slide15. Market Equilibrium on a Full and Unequal Planet? Equilibrium result of negative feedback loops
Scarcity price increase decrease in demand; increase in supply equilibrium
No prices for non-market goods (most threats to planetary boundaries
Essential resources
Price increase decrease in demand
Finite resources on full planet (food, energy, land, stocks)
Price increase increase in supply (or only at cost of future supply)
Speculation
Price increase increase in demand
Dis-equilbrium, redistribution from positive feedback loops <br>
slide16. Solutions Redefining agricultural efficiency to identify leverage points
Assessing the role of local agriculture in pushing those levers<br>
slide17. 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?<br>
slide18. Ecological Economic Efficiency What is the desirable end?
Normative judgement
What are the costs?
economic technical ecological
efficiency efficiency efficiency<br>
slide19. Allocative efficiency
Producing the right foods with the right resources on the right land
Distributive efficiency
Ensuring these foods go to those with the greatest physiological need
More equitable distribution of wealth?
Alternatives to price rationing?
Local agriculture?
Community gardens, CSAs, Farmers markets (elitist or popular) Food Security<br>
slide20. Throughput broadly defined
Water, energy, fertilizers, labor, capital, land
Cannot rely on non-renewables
Requires major investments in R&D, extension
Economics of information
Minimize costs, maximize benefits
Land grant universities
Markets fail to account for future generations, the poor, the environment
Local agriculture
Sharing knowledge
Guiding research agenda<br>
slide21. Minimizing impact of throughput on ES
Minimizing agrotoxins, fossil fuels, erosion
Accounting for non-market benefits
Open access and public goods
Cooperation required
Local agriculture
Internalizing externalities
Restoring ecosystem services<br>
slide22. Summary & Conclusions Must define appropriate goals for agricultural systems on crowded, finite planet
Must tailor economic institutions to goals and resource characteristics
Local agriculture is likely to be more efficient economically, technically and ecologically<br>