Transcript Global inequality and essential resourcesx

Global Inequality and Essential Resources:
Focus on Food
Joshua Farley
Community Development and Applied Economics
Gund Institute for Ecological Economics
University of Vermont
Planetary Boundaries and
Conventional Agriculture
How do we solve this problem?
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How serious is the problem?
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Can markets solve it?
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Essential and non-substitutable resources
Ecological thresholds
Economic/physiological thresholds
Economic efficiency and just distribution
Ecosystem services
Technological advance
What other options exist?
Essential and Non-substitutable
Resources
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Food, water, energy, ecosystem services
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Essential to human survival with no adequate
substitutes
Schelling, 2007
Critical thresholds
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Ecological
Physiological
Essential and Non-substitutable
Resources
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Inelastic supply
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Supply very difficult to increase regardless of
price
Inelastic demand
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Quantity demanded does not respond to price
Large changes in marginal value with small
changes in quantity
E.g. grain prices in 2007
Example of Inelastic Supply
Oil production and oil prices from 2003 to 2010. Oil prices more than tripled
between January, 2005 and July, 2008, while total production increased by
less than 3%.
Ecological Thresholds and the Supply
Curve for Food (or Fossil Fuels)
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
Economic output (fossil fuel economy)
Irreconcilable Thresholds?
Market Solutions?
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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?
$
$
Market demand in an unequal
world
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Competition and self interest
Americans spend 6.7% of income on food
for home consumption
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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
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Market demand in an unequal
world
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Many poor countries spend >70% of
income on food for home consumption
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Perhaps 50% spent on raw food?
How do poorer countries react when wheat
prices triple?
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Elasticity of demand ~.7
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Arab spring
Budget share and elasticity
Market demand = preferences weighted
by purchasing power
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
food output
Poor people have no
demand
Market Allocation of Essential
Resources on an Unequal Planet
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Does it maximize utility?
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Is it efficient?
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The perversion of utility
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
Market Equilibrium on a Full and
Unequal Planet?
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Equilibrium result of negative feedback loops
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Essential resources
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Price increase  decrease in demand
Finite resources on full planet (food, energy, land,
stocks)
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Scarcity price increase  decrease in demand; increase
in supply equilibrium
No prices for non-market goods (most threats to planetary
boundaries
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Price increase  increase in supply (or only at cost of
future supply)
Speculation
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Price increase  increase in demand
Dis-equilbrium, redistribution from positive feedback loops
Solutions
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Redefining agricultural efficiency to
identify leverage points
Assessing the role of agroecology in
pushing those levers (if there’s time)
Redefining Goals: Efficiency
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What is efficiency?
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Ratio of benefits/costs
Agriculture
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Food production/land; food/labor
Most efficient system ever?
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Energy in, energy out?
Economics
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diminishing MB, rising MC. MC=MB
Maximizing monetary value
How do we do this for food?
Ecological Economic Efficiency
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What is the desirable end?
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Normative judgement
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
• Distributive efficiency
• Ensuring these foods go to those with the
greatest physiological need
• More equitable distribution of wealth?
• Alternatives to price rationing?
• Throughput broadly defined
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Water, energy, fertilizers, labor, capital,
land
Cannot rely on non-renewables
• Requires major investments in R&D, extension
• Economics of information
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Minimize costs, maximize benefits
Land grant universities
Markets fail to account for future generations, the
poor, the environment
• Minimizing impact of throughput on ES
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Minimizing agrotoxins, fossil fuels, erosion
Accounting for non-market benefits
Open access and public goods
Cooperation required
Summary & Conclusions
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Must define appropriate goals for
agricultural systems on crowded, finite
planet
Market allocation is highly inefficient
economically, technically and ecologically
Must tailor economic institutions to goals
and resource characteristics