Econ 101 and The "Problem With Food"

Why does organic fruit cost more? If they don’t have to spray chemicals on it, shouldn’t it cost less?

— Johnston man

That's from today's Des Moines Register column called "Two Cents Worth." People can call or email their two cents about anything.

This particular bit made both my husband and me laugh out loud. And engage in vigorous eye-rolling.

But then I thought "Hmmm. Not so funny. And not even about "organic." This, in a nutshell, is the Problem of Thinking About (or Arguing About or Debating) Food Here in the US."

Why does a loaf of bread cost what it costs? Why do potatoes cost what they do? Why steak? Why a box of mac 'n cheese?

Because "food" -- the food on your table, the stuff you actually EAT every day --- is the end product of a looong chain of events, a chain that includes:

farmers, seed dealers, farm labor (or, more to the point, lack thereof), planting, tending, harvesting, shipment of said harvest from field to (probably) a storage point to its buyer to a plant (yes, even raw foodstuffs end up in a processing plant), to another storage site, to another storage site to a grocery warehouse to a grocery loading dock to a grocery store shelf or refrigerator case to your cart to a grocery bag to your house.

And in between are literally dozens of other expenses:

packaging, the designers of said packaging, the accountants who figure the cost of using red ink versus black on said package, the people (in-house or otherwise) who figure out how to promote/market the goods, the staff that manages all the paperwork and communications and make sure the utility bills get paid and the managers of those people and the VPs who manage the managers and the maintenance of the building that houses all those people and the parking lot where they park and the wages of the folks who clean up those offices and . . . .

Presumably you get my point. At the heart of the food on YOUR table --- organic, raw, processed, whatever --- lies a bewildering array of costs.

Sure, you can avoid all those layers of cost by growing your own food or by shopping only and exclusively from a local farmer (but make sure to add in YOUR time and labor for picking up said food and then turning it into edibles).

But most of us don't get our food that way. Most of us get our food via the middlemen known as "grocers." And they get their food from a bunch of other middlemen. And . . . .

On and on and on.

So. Why does organic food cost so much if organic types don't "spray?" Michael Pollan says it's because demand exceeds supply. Maybe.

But the more important reason (and one I focused on in the meat book because I believe it's important) is that "organic" and "local" and other "small" foods have higher shipment/moving/processing costs because less of it is sold and grown. The American food system is designed to reduce the costs of alllll those layers I outlined above. But there's no comparable, large-scale system for "small foods" (I think I just invented a term).

So when the small fooders grow and move their foods, they don't enjoy what amounts to economies of scale. If we somehow turned the food system upside down, so that small foods were the norm and big foods were the exception, the price of small foods would go down in large part because the system would be organized to maximize the efficiency of making, moving, storing, retailing those foods.

The point I set out to make (before, heh, I got so distracted) is that consumers are clueless about the processes that turn raw materials into food. It's not so much that they're "distant from their food sources," as that they don't see food as a good-like-any-other-good. So they don't understand that simple Econ 101 applies to food on the table, the same way it applies to making shoes, TVs, and shampoo.

They don't understand the connection between scale and cost. (And, yeah, they also don't understand that there are no fields of hamburger, ready to eat. And that even potatoes require shipping and handling.)

Food is a thing like any other thing. It may be our most important "thing," but in the end, it's a thing. And the basics of economics apply.

Update: I'd no sooner posted this than the incomparable Jag Bhalla weighed in on Twitter to remind me of the complexities of Econ 101 (aka It's Not That Simple, Stupid). And so I should clarify my intent with this blog post: to focus on the bare basics. ANY supply chain is burdened by a host of other "costs," many of which are rooted in the nature of capitalism and others of which are rooted in the nature of the surrounding society/culture.

See Bhalla here and here.