Economic analysis of localvore choices

Lynne Kiesling

Last night the KP Spouse and I spontaneously decided to go out to dinner. We went to Chalkboard, our favorite restaurant near our house, and I ordered a salad as a starter (and amazingly delicious Hawaiian Ono as a main course, yum yum). We were chatting with the chef later (it being a slow Wednesday in August), and I complimented him on the flavor and texture of the lettuce. He said “I picked it about 5 minutes before you ate it”, which led to an impromptu tour of his garden behind the building. We’ll have to go back in a couple of weeks when the beans are ripe …

We love the freshness of the flavor and the choice and spontaneity we get from locally-grown produce at restaurants like Chalkboard, out of our own garden, and from the northern Illinois farm from which we buy a share of veggies annually. Freshness, flavor, and variety are the benefits to us of growing and buying local produce.

At some level I guess that makes us localvores, and as foodies and oenophiles I guess that’s unavoidable given the current trends in cooking and eating. Some recent articles and responses to them have me thinking more analytically about the true environmental and economic impact of local food choices.

Stephen Budiansky stirred up quite a storm last week in his New York Times opinion piece about the economic impact of localvore food production and consumption decisions. Like me, he grows some of his own food and buys local produce, but also like me, he takes an analytical perspective on the combined economic and environmental impact. On the benefit side are the clear freshness and flavor benefits — being able to pick produce at its peak ripeness rather than weeks early to facilitate transportation will maximize flavor.

The arguments have gotten more fraught in comparing the costs of local versus distant produce, both in environmental costs and economic costs. In particular, one of the arguments used to support local produce is its reduction in carbon footprint relative to distant produce. No evidence really exists to support this contention, which ignores two types of efficiency that reduce both the economic cost and the environmental impact of food grown at a distance: economies of scale in production and economies of scale in distribution networks and transportation. Economies of scale in agriculture mean that specializing in a crop and farming it intensely leads to higher yields per acre, and if that farming occurs away from dense population centers, then transportation and distribution networks deliver that produce to those markets. They do so at a scale that makes the incremental carbon footprint of a pound of produce positive but very small, because of the economies of scale in distribution and transportation networks (particularly with the kind of real-time logistics that Walmart has innovated and has propagated throughout industry). And that efficiency may even be so high that relative to local van/truck transportation of local produce, the relative carbon footprint of distant produce is smaller. Thus analyses of environmental and economic impact of distant produce relative to local produce suggest that economies of scale lead to lower production and distribution costs and small incremental environmental impact.

Here’s a more explicit example. When I pick up my CSA share 4 blocks from my house, a van has delivered probably 120 or so boxes to 2-3 dropoff locations from the farm 90 miles away. Assume the dropoff location is equidistant from house as Whole Foods is (a valid assumption). What’s the transportation carbon footprint of my CSA produce compared to the equivalent amount I would buy at Whole Foods?

But Budiansky points out an environmental impact of food that is really important, and is independent of local vs. distant:

The real energy hog, it turns out, is not industrial agriculture at all, but you and me. Home preparation and storage account for 32 percent of all energy use in our food system, the largest component by far.

A single 10-mile round trip by car to the grocery store or the farmers’ market will easily eat up about 14,000 calories of fossil fuel energy. Just running your refrigerator for a week consumes 9,000 calories of energy. That assumes it’s one of the latest high-efficiency models; otherwise, you can double that figure. Cooking and running dishwashers, freezers and second or third refrigerators (more than 25 percent of American households have more than one) all add major hits. Indeed, households make up for 22 percent of all the energy expenditures in the United States.

Yes. Storing and cooking that food is where, at the margin, we expend most of the energy in the food supply chain, and that fact gets lost in a lot of discussions of local vs. distant produce. And that storage and cooking make more of us healthier, our produce more long-lived (you should see the local beets that I’ve roasted and frozen for winter, gorgeous!), and our meals and lives more delicious and fulfilling. As Jonathan Adler points out in his comment on the column, “Indeed, were it not for increases in agricultural productivity over the past several decades, hundreds of millions (if not billions) of additional acres would be under plow.”

Steven Landsburg also commented critically on Budiansky’s column, and he rightly points out that Budiansky focused on the energy life cycle of food to the exclusion of all of the other aspects of food choices:

Budiansky ignores all that to focus strictly on energy consumpion. But the quality of our lives depends on a lot more than energy consumption, so Budiansky’s narrow-minded computations are strictly loco.

How, then, could one ever hope to do the right computation? How can we possibly gather enough information to compare the opportunity costs of land, fertlizers, equipment, workers, transportation and energy costs (among many others) and reach a conclusion about which tomato imposes the fewest costs on our neighbors?

Well, it turns out there’s actually a way to do that. You do it by looking at a single number that does an excellent job of reflecting all those costs. That number is known as the price of the tomato.

Of course Landsburg is correct in that argument. But with the condescending tone he uses and by not addressing in more detail the externality-uncompensated cost argument with respect to whether or not there are unpriced costs (and benefits) that are Pareto-relevant in food markets, he’s not going to persuade anyone that doesn’t already agree with him! Budiansky’s energy analysis could help Landsburg make the argument that, say, per pound of tomatoes, the magnitude of that unpriced cost is low enough that at the margin it would not change the amount of production. Landsburg asserts that in the next sentence, but he doesn’t acknowledge that Budiansky’s energy analysis helps him support that assertion.

Russ Roberts also commented on Budiansky’s column, although I do object to the “localvores are loco” meme and tone that he and Landsburg choose to use; such language is patronizing and counterproductive. In fact, I had a long exchange with a good friend of mine who is a chef, wine distributor, and committed localvore, and he objected strenuously to the tone in Budiansky’s column as being too dismissive. I don’t have any problem with Budiansky’s tone, so I couldn’t agree with him on that. He and I could agree that excess fertilizer runoff and wetlands destruction associated with large-scale farming are both environmentally and economically bad — and I can’t wait until we pull together the bootleggers-and-Baptists coalition of localvores and economists to get rid of the disastrous farming subsidies that create such outcomes!

However, I think in all of these commentaries there is a nugget of insight about localvore choices. A lot of supporters of local production are supporters because for them it is a moral cause (whether it’s small local farms, carbon, sustainability in general, industrial animal treatment, etc.). It’s not only, or for some not even, an analytical consideration, so successfully refuting the energy argument through analysis is not going to change those minds. I may not share those moral sensibilities, and I don’t accept any associated judgments of choices that individuals make that deviate from those moral sensibilities. I would also not support any public policy that enshrines these moral sensibilities. But as we continue to buy local produce, own shares in veggie and meat CSAs, and enjoy local restaurants using local produce, these decisions will propagate through markets, and production patterns will shift through market processes in ways that reflect either the moral or aesthetic preferences that inform those choices. How is that loco?

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6 thoughts on “Economic analysis of localvore choices

  1. I forgot to add that to the extent their moral sensibilities are grounded in incorrect beliefs about the environmental impact of local vs. distant produce, then communicating that analysis is important and should, ideally, lead to a change in behavior. So when I ask “how is that loco?”, I’m not talking about that.

  2. I suppose I focus on tone because my economics pedigree includes only a smattering of Micro and Macro courses and, well, it’s easier to throw rotten tomatoes (that should have been canned before they rotted) than pick apart the math.

    My problem with his tone stems from the fact that it is a poorly written argument which my high school English teacher would have rejected on form alone. I quote your quote:

    “The real energy hog, it turns out, is not industrial agriculture at all, but you and me…Indeed, households make up for 22 percent of all the energy expenditures in the United States.”

    This is the first and last sentence of two connected paragraphs that he uses to make a point about energy use. His ‘hammer blow” is the fact that US households use 22% of energy in this country, but that number has next to nothing to do with the string of stats he presents in that paragraph. Let’s assume that’s 100% accurate. My high school teacher would have asked what portion of that 22% is dedicated to food storage and how much went to heating, flat screen tv’s, computers, etc. He builds a to a false crescendo, implying that energy use in the kitchen is a major part of all household use.

    In a country that is famous for NOT cooking at home, this is a bad use of statistics to say the least. If the topic were not so inflammatory, a decent editor at the NYT’s would have demanded complete logic, but they did not. This is massively succesful as writing to pick a fight, or, in the parlance of our times, stir a pot that will lead to clicks on our site and generate ad revenue. This same research could have been used to communicate a thoughtful piece on choices to make at the store with comments on the relative energtic value and footprint of items to buy locally vs from elsewhwere, but it’s not.

    Over on http://www.grist.org, Tom Philpott points out that the Locavores cited in the piece don’t really exist, and I have to agree. Most locavores I know do their best to eat from farms located in their proximity but I don’t know anyone who is 100% local other than the occasional writer who is writing to make a point. Read Tom’s description of locavores, and I think you’ll see that I am exactly what he describes. After all, though I am “a committed locavore” I import and distribute wine, but that’s a whole different story. http://www.grist.org/article/food-fight-do-locavores-really-need-math-lessons/P7

  3. Excellent post. I like the discussion about the moral sensibilities in support of local production and consumption versus the price (or actual resource consumption). What is often used as justification by localvores is unsupported and over simplified. Each individual will value freshness and other aspects of food differently, and should be able to pay different prices for their specific basket of attributes.

  4. Interesting piece.

    I am an economist who is also a foodie and inclined towards localvorism for aesthetic and gastronomic (but not moral or environmental) reasons, although I continue to be amazed at how well supermarkets have responded to the demand for much better, more varied and more exotic produce. It is really remarkable.

    One of the things that I marvel at is the emergence of the plastic clamshell packaging that protects greens, tomatoes and fresh herbs, for example, from the rigours of transportation and distribution far better than previous methods and allows produce to be preserved at home for far longer than was typical previously. The resultant reduction in waste and in resources devoted to production and transportation could be substantial.

    At the end of the day, I will buy the best produce regardless of how far it travels.

    I would make a few additional points.

    First, from a general sustainability perspective, I would have thought it beneficial to economize on the amount of land used for purposes of food production, particularly if one is concerned about the intrusion of farming on wildlife habitat. I am assuming that this is a point in “big farming’s” favour.

    Second, with respect to resource use that may not be fully reflected in market prices, it would, in the absence of methods to internalize the externalities, seem advisable to pursue combined farming/transportation techniques that make most efficient use of the “under-priced” resources. This suggests to me that farming and distribution models that take advantage of economies of scale in energy use, in particular, are to be preferred in general if one’s concern is the environment. It also seems reasonable to assume that public ownership of roads is a subsidy to transportation of produce from both near and far and to externality-producing energy use in general. I am wondering whether environmentalist localvores should favour greater use of private toll roads as a means to reduce the negative externalities associated with energy use.

    Third, I am assuming that fertilizer or pesticide run-off can be a problem regardless of whether the farms are near or distant. Greater use of genetically-modifed food varieties may address some of those concerns (while raising others no doubt).

    Lastly, and this is not intended to be nasty, but merely as an observation: I am always amazed at the attention as an environmental issue localvorism gets, often from people who a) have air-conditioned homes, b) use electric or gas-powered lawnmowers, rather than push-mowers, and c) have multiple cars.

  5. I’d like to be a localvore. But how would I manage coffee? Tea? Chocolate?.

    Is my locally made, artisan sour dough bread local if the wheat for the flour is grown some distance from where I live?

    Interesting, thought-provoking post!

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