1. Feeding the Planet while Sustaining Ecosystems: Redefining Agricultural Efficiency Joshua Farley Community Development and Applied Economics Gund Institute for Ecological Economics University of Vermont

2. Ecological Boundaries and Agriculture

3. Essential and Non-substitutable Resources Food, water, energy, ecosystem services Food, water, energy, ecosystem services Essential to human survival with no adequate substitutes Essential to human survival with no adequate substitutes Critical thresholds Critical thresholds Ecological Ecological Physiological Physiological Inelastic demand Inelastic demand Large changes in marginal value with small changes in quantity Large changes in marginal value with small changes in quantity

4. Ecological Boundaries and the Supply Curve Must sum together all costs: labor, capital, biodiversity loss, nitrogen, climate change, etc. (marginal cost)

5. Social/Physiological Boundaries

6. 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 physiological threshold: e.g. starvation food security, household security Opportunity cost

7. Irreconcilable Thresholds?

8. Market demand in an unequal world Americans spend 6.7% of income on food for home consumption Americans spend 6.7% of income on food for home consumption 11.6% of food dollar goes to farmers 11.6% of food dollar goes to farmers <1% of income spend on raw food <1% of income spend on raw food How did you react when wheat prices tripled? How did you react when wheat prices tripled? Elasticity of demand to retail prices ~.08 Elasticity of demand to retail prices ~.08 Implies ~.001 elasticity of demand to raw food prices Implies ~.001 elasticity of demand to raw food prices

9. Market demand in an unequal world Many poor countries spend >70% of income on food for home consumption Many poor countries spend >70% of income on food for home consumption Perhaps 50% spent on raw food? Perhaps 50% spent on raw food? How do poorer countries react when wheat prices triple? How do poorer countries react when wheat prices triple? Arab spring Arab spring Elasticity of demand ~.7 Elasticity of demand ~.7 Budget share and elasticity Budget share and elasticity

10. Market Demand, Unequal World 2700 Physio thresh w/ equal distribution Eco thresh nitrogen Eco thresh carbon 12451800 Trade-offs: Starvation now or in future Sustainability and justice vs. preferences

11. Market Supply and Demand Marginal market costs (Market supply curve)) Poor people have no demand Physiological boundaries for rich Price

12. Market Allocation of Essential Resources on an Unequal Planet Does it maximize utility? Does it maximize utility? The perversion of utility The perversion of utility Is it efficient (Pareto efficiency)? Is it efficient (Pareto efficiency)? Would it be possible to re-allocate food from obese people to malnourished people without making anyone worse off? 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? Do we need to make subjective value judgments to answer this? Objective needs should take priority over subjective preferences weighted by purchasing power Objective needs should take priority over subjective preferences weighted by purchasing power

13. Solutions

14. Redefining Goals: Efficiency What is efficiency? What is efficiency? Ratio of benefits/costs Ratio of benefits/costs Agriculture Agriculture Food production/land; food/labor Food production/land; food/labor Most efficient system ever? Most efficient system ever? Energy in, energy out? Energy in, energy out? Economics Economics diminishing MB, rising MC. MC=MB diminishing MB, rising MC. MC=MB Maximizing monetary value Maximizing monetary value How do we do this for food? How do we do this for food?

15. Ecological Economic Efficiency What is the desirable end? What is the desirable end? Normative judgment Normative judgment What are the costs? What are the costs? economic technical ecological economic technical ecological efficiency efficiency efficiency efficiency efficiency efficiency

16. Allocative efficiency Producing the right foods with the right resources on the right land Shifting subsidies Distributive efficiency Ensuring these foods go to those with the greatest physiological need More equitable distribution of wealth? Alternatives to price rationing? E.g. California vs. Brazil Brazil, India, small farmers Both shift demand curve to the left Food Security

17. Throughput broadly defined Water, energy, fertilizers, labor, capital, land Cannot rely on non-renewables Requires major investments in R&D, extension How do we minimize costs of developing new technologies, maximize benefits? Economics of information Land grant universities Markets fail to account for future generations, negative externalities, public goods Competition and price rationing inherently inefficient Cooperation required Shifts supply curve to right Agroecology also shifts demand curve to left

18. Minimizing impact of throughput on ES Minimizing agrotoxins, fossil fuels, erosion Non-market benefits Open access and public goods Cooperation required Perennial polyculture, agroecology Restoring ecosystem services Shifts supply curve to right

19. Summary & Conclusions Markets fail to account for ecological degradation Markets fail to account for ecological degradation Markets fail to distinguish between needs and wants Markets fail to distinguish between needs and wants Bad idea to extend them to ecosystem services Bad idea to extend them to ecosystem services Markets promote unsustainable, unjust and inefficient agricultural systems Markets promote unsustainable, unjust and inefficient agricultural systems

20. Summary & Conclusions Must define appropriate goals for economic system on crowded, finite planet Must define appropriate goals for economic system on crowded, finite planet Must understand resource characteristics Must understand resource characteristics Appropriate economic institutions based on resource characteristics and goals Appropriate economic institutions based on resource characteristics and goals Cooperation required to solve ecological problems, achieve just distribution, produce required technologies Cooperation required to solve ecological problems, achieve just distribution, produce required technologies