Download - Food Security and Economics
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Food Security and Economics
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Why Economics?
• Food is produced and consumed by people.
• The functioning of the food system depends on the choices these people make.
• Economics studies production and consumption choices.
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Economics and Food
• Everything about food is determined by the decisions people make. • Food production: decisions by farmers. • Food consumption: decisions by all of
us. • People do not always choose what we think they SHOULD.
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Economics and Food
• Economics studies people’s production and consumption choices.
• Are people making “the right” decisions when it comes to (the production or consumption of) food?
• If not, what can “help” people make the “right” decisions?
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Food Related Choices
• Food related choices take place in complicated economic environments created through national and international policies and institutions, market forces, and subject to strong psychological and physical signals.
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Economics and Food
• The functioning of the food system depends on the choices these people make.
• The net results of all of the decisions people make regarding food is the way food is produced and distributed around the world.
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Economics and Food
• Is food production and consumption • Efficient? • Fair? • Equitable? • Sustainable?
• What institutions/policies are required to reach a “better” outcome?
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Economic Challenges in Food
• Poverty <— food production and consumption.
• Poverty —> food production and consumption.
• Sustainability 1: Feeding the growing population
• Sustainability 2: The environmental impact of food production
• Distribution, consumption and health
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I. Food as a
Consumption Good
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Some facts about food consumption
• Expenditure on food usually rises as incomes increase.
• However, the share of expenditures out of total expenditures generally decreases (Engel’s law).
• The nutritional quality of food consumed does not necessarily improve with income (complex!).
• Improved nutrition in early life is a wonderful economic investments.
• In today’s world, hunger (malnutrition) and obesity exist side by side.
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Malnutrition
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Obesity
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Quantity consumed
Util
ity (b
enef
it) A typical economic good delivers utility to its consumers.
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Food is different…
Quantity consumed
Util
ity (b
enef
it)
A typical economic good delivers increasing utility to its consumers.
Food has very sharp increasing benefit at low quantities and very low increasing benefit at high quantities.
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Calorie Consumption
Low Income
High Income
Are our food consumption choice efficient? Are they rational?
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• Is global food production distributed • Efficiently? • Equitably?
• Which institutions are responsible?
• Which policies can do better?
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Food (cereals) is a highly strategic and political product
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Food is also a highly strategic and political product:
National government engage in widespread interferences in agricultural markets: • Stockpiling • Subsidies on Production and Consumption • Distribution Systems • Import Bans • …..
As a result, agricultural markets are highly distorted, both nationally and internationally.
World Trade Organization agreements treat agriculture differently than other products.
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II. Food Production
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Source: http://persquaremile.com/ using FAO data
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FAO Index of Net Food Output per Capita, 1961-2000
80
90
100
110
120
130
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150
160
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
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1985
1987
1989
1991
1993
1995
1997
1999
World E SE Asia South Asia Sub-Sahara
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Click HERE
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III. Food and Sustainability
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• Concerns about sustainable development are not new.
• First brought up in the context of food by Thomas Malthus, 1798: – Population grows exponentially – The expansion of cultivated land has limits
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• Concerns about sustainable development are not new.
• First brought up in the context of food by Thomas Malthus, 1798: – Population grows exponentially – The expansion of cultivated land has limits à food production per capita will eventually drop until food scarcity drives food consumption down to “survival” levels.
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Malthus’s prediction
- - - Forecast
Global PopulationFood Production
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But then came the demographic transition…
— Actual - - - Forecast
Global PopulationFood Production
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And the Green Revolution…
— Actual - - - Forecast
Global PopulationFood Production
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It’s not over yet… Global Population is still rising…Growth is slowing down and the climate is changing…
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— Actual - - - Forecast
Global PopulationFood Production
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Why was Malthus wrong?
• The Green Revolution: rapid increases in yield per unit of land
• Green Revolution
• Demographic transition: fertility rates (and population growth rates) eventually drop as income rises
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A disruption of global food productionwill make global prices rise quickly
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• Green Revolution: Increases in crop yields through increased use of fertilizer and irrigation.
• However:
– Uneven coverage
– Unsustainable at scale
• Where green revolution took place: water depletion, high energy use, pollution
• Where green revolution did not take place: extreme poverty, low yields.
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The Global Nitrogen Cycle
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Inputs (Water, Nitrogen, etc…)
Crop Yield
Environmental Damage
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Inputs (Water, Nitrogen, etc…)
Crop Yield
Environmental Damage
No Green Revolution
Green Revolution
(Developing)“Developed”
World
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Inputs (Water, Nitrogen, etc…)
Net Social Value = Value of Crop Yield – Value of Environmental Damage
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Inputs (Water, Nitrogen, etc…)
Net Social Value = Value of Crop Yield – Value of Environmental Damage
No Green Revolution
Green Revolution
(Developing)
“Developed” World
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Time / Development
Crop Yield Input Use (Environmental Damage)
Pre-GrowthGreen Revolution
“Evergreen” Revolution
Sustainability?
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Economic Challenges in Food
• Poverty <— food production and consumption.
• Poverty —> food production and consumption.
• Sustainability 1: Feeding the growing population
• Sustainability 2: The environmental impact of food production
• Distribution, consumption and health
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Changing Food Choices
• Factors affecting food production: • Poverty • Externalities, incentives
• Factors affecting food consumption: • Poverty • Psychology