3 Reasons Why Freakonomics is Wrong About Local Food

3 Reasons Why Freakonomics is Wrong About Local Food

Local food is bad for your health, bad for the environment and bad for the economy, not to mention its potential risk for the well-being of billions of poor people worldwide. As strange as you find this description of local food, these are probably the conclusions you would reach from reading Steve Sexton’s Freakonomics article, The Inefficiency of Local Food.

“Local food consumers should understand that they aren’t necessarily buying something that helps the planet, and it may hurt the poor,” he concludes. His article is mainly focused on explaining how inefficient local food is and why it is a poor alternative to the current food system.

Local food is far from perfect and a constructive critique should always be welcome, yet Sexton provides an analysis that ignores some substantial points that taken together, put a big question mark on his conclusions. I’d like to highlight three of them.

The hidden costs behind specialization and comparative advantage

“The case for specialization is perhaps nowhere stronger than in agriculture, where the costs of production depend on natural resource endowments, such as temperature, rainfall, and sunlight, as well as soil quality, pest infestations, and land costs… Forsaking comparative advantage in agriculture by localizing means it will take more inputs to grow a given quantity of food, including more land and more chemicals—all of which come at a cost of carbon emissions.”

It’s no wonder that economists like Sexton worship the concepts of specialization and comparative advantage – they make perfect sense in a perfect world. Unfortunately, our world is not perfect. There are many problems with specialization, starting with the fact that it is always about money as Evan Fraser and Andrew Rimas explain in their book, Empires of Food. They explain that in the US, specialization created a food regime that is defined by “the creation of huge, unnatural monocultures – massive regions of the planet devoted to single strains of crops, kept alive only by the flowering toxicity of agrochemicals.” Rural geographers, they add, call this “spatial homogeneity.”

Take California, for example. Sexton uses California as an example for the virtues of specialization, stating that “California, with mild winters, warm summers, and fertile soils produces all US-grown almonds and 80 percent of US strawberries and grapes.” Fraser and Rimas also use California as an example, but this time for the seemingly unseen damages of specialization. They mention the fact that California is heavily dependent on irrigation for watering its crops, which cause enormous damage to the state’s soil and aquifers.

You won’t find these environmental damages, whether we’re talking contaminated groundwater (also a result of massive use of fertilizers) or eroded soil, in Sexton’s equations because these are externalities. We all pay for them eventually, but they’re not included in our calculations of the costs of agriculture production. The same goes for global warming and social ruin, as well as the heavy subsidies given to agribusiness. These “ignored” costs make the existing food system unsustainable and thus less effective for the long-term.

The real economies of scale

Sexton claims that economies of scale creates efficiency because “large operations are also more efficient at converting inputs into outputs.” He mentions UC Davis research that concluded that there are “significant” scale economies in modern agriculture and that small farms are “high cost” operations. The danger, he believes, is that “absent the efficiencies of large farms, the use of polluting inputs would rise, as would food production costs, which would lead to more expensive food.” In other words, local food systems can’t produce cheap food.

This isn’t necessarily so. First, there are the ignored externalities again, which means the costs Sexton talks about are not the real ones. In addition, he assumes that local food growers, which usually are also smaller, will use the same unsustainable practices that agribusiness does, like using fertilizers and other polluting inputs. In reality, this is not the case and most of the local small growers implement practices that are much more sustainable, even if they’re not growing organic produce.

It’s true that if you ignore externalities, local food usually can’t compete on price with agribusiness, partly due to economies of scale. But even under these circumstances, we have examples for competitive local food, based on innovation in both production (Small Plot Intensive (SPIN) farming, a super-efficient urban agriculture approach aimed to support one-half to one-acre farms) and distribution (BrightFarms or the latest changes in Sysco logistical systems).

When it comes to hunger, the current food system is the problem and not the solution

Finally, Sexton claims that the inefficiency of local food, which translates to higher costs on certain foods, may be “the wrong prescription for the great health problems in the developing world, where millions remain undernourished.” As the food crisis of 2007-2008 revealed, he adds, winning the war on human hunger requires a constant commitment to getting more food out of less land, water, and other inputs.

This argument is the most problematic. We still have a severe hunger problem in developing countries, with 925 million people who do not have enough to eat. I didn’t know we’re winning this war thanks to the existing food system, and therefore any shift to local food systems is, in effect, a threat to making the world hunger-free. I guess Sexton didn’t read the latest Worldwatch Institute’s 2011 State of the World report, which suggested that “the key to alleviating world hunger, poverty and combating climate change may lie in fresh, small-scale approaches to agriculture.”

This report shows how much the economic approaches Sexton relies on in his analysis are dated and have very little to do with the complicated food reality worldwide. This reality shows how local food systems are healthier, sustainable and eventually more effective choice, whether Sexton likes it or not.

Raz Godelnik is the co-founder of Eco-Libris, a green company working to green up the book industry in the digital age. He is also an adjunct professor in the University of Delaware’s Alfred Lerner College of Business and Economics.