The True Cost of Agriculture: Fixing the Food System Through Better Measurement

A common misconception about the social science of economics is that it's all about money. Economists do talk a lot about money of course, but really, money is just a mechanism used in attempt to quantify value - i.e., to measure the relative importance of the stuff we care about as a society. Economics, therefore, isn't so much about money as it is about the assessment of value.

Unfortunately, economic analyses often render an incomplete picture of value, measuring only the parts for which markets exist. For instance, an industrial egg farm might yield a profit of $2 million - but this figure doesn't represent the actual value to society since it fails to include social costs created by the facility such as pollution, damage to human health, threats to animal welfare, adverse socioeconomic impacts on surrounding communities, etc. Were all these costs accurately assessed and included in the analysis, the farm would no longer be so profitable.

In response to the failure of traditional economic analysis to effectively assess total value, the practice of "true cost accounting" has emerged. Essentially, this involves measuring the so-called hidden costs of products or practices in order to more effectively assess their actual value to society. Among the leaders in true cost accounting for environmental values is The Economics of Ecosystems and Biodiversity (TEEB), a global initiative that strives to assess the values of biodiversity and ecosystem services and make them visible to decision makers.

Recently, TEEB applied the true cost accounting framework to agriculture, releasing the TEEB for Agriculture and Food (TEEBAgFood) Interim Report. The project's lofty goal is to inform the decision-making processes that shape our food system so that we're able to meet future demand for food while safeguarding natural and cultural resources, and guaranteeing food security for the global population.

TEEBAgFood - a Framework for Assessing the Food System

There is a common perception that economics papers are dry and dense. This is not a misconception, and - I won't lie - the TEEBAgFood report is not an exception to the rule. The report is, however, exciting because it represents a significant first step toward more effectively evaluating global agricultural practices and policies in order to improve both in the future.

The TEEBAgFood report doesn't attempt to make any broad-stroke assessment of the total economic value of global agriculture, or of the values of its many positive and negative impacts. Instead, TEEB uses the report to present a universal framework for conducting future economic analyses, describing the parameters, the assumptions, the challenges and the limitations. Big-picture summary: evaluating the costs and benefits of agriculture is exceptionally complicated, extremely challenging and must be done with the explicit acknowledgement of the limitations of the analysis.

Among the major valuation challenges identified by TEEB are:

  • The sheer complexity of the task - the food system is extremely complicated, as are its interconnections with the environment, human health, water, energy and social systems. Keeping track of all the moving parts and all the ripple effects is really tough.
  • Imperfect information - while we know a great deal about the impacts of agriculture, there's still much that we don't completely understand (e.g., the human health impacts of long-term exposure to very low levels of multiple air pollutants, or the effects of new pesticides on bee populations).
  • Geographic differences - given extreme variations in the physical environment across the globe, the impacts of agricultural production can vary dramatically depending on location. For instance, a mid-size dairy farm in the arid southwestern US would impose a greater strain on local water resources than a comparable farm in the Northeast.
  • System dynamics - since the world's ecosystems are complicated and undergoing constant change, agricultural systems shouldn't be evaluated solely on the basis of their interaction with the current environment; instead, assessments should consider the impacts of agriculture under future conditions (e.g., as a result of shifting weather patterns induced by climate change).
  • Agricultural production variations - different agricultural production techniques have wildly varying impacts on the environment, humans and social systems. As a result, agricultural production systems must be evaluated separately (for instance, industrial production of tomatoes in a monocrop system vs. organic tomato production on a small-scale biodiverse farm, vs. tomato production on a rooftop farm, etc.)

Despite the challenges, TEEB remains committed to the herculean task of assessing the real economics of food production. Using the framework laid out in TEEBAgFood, TEEB intends to conduct additional research, further assessing the externalities of agriculture, and providing evaluations of policy interventions related to food production.

Toward a True-Cost Food Future

From the layperson's standpoint, highly technical, esoteric reports like TEEBAgFood can be frustrating; the information within this report is valuable, but it's geared toward policymakers and business leaders who make decisions at a much broader scale than most of the rest of us. In this case though, that's the idea - TEEB hopes that by making hidden environmental values more apparent to those who make Big Decisions about how our food is produced, we'll be able to shift agricultural production from its extremely unsustainable current course toward a system that better reflects our collective interests and maximizes the actual value to society.