Food Waste Economics

By: Christina Gayton

The hidden costs of lost calories

Every year, 40 million tons of food are thrown away in the U.S. alone. That’s the equivalent of 182 billion New York bagels, which is approximately enough to feed one billion people. Although day-to-day we may not think much of throwing away half an uneaten lunch, trashed food from Americans accounts for the largest percentage of landfill content- even more than plastic, paper, wood and glass. There are many externalities and costs attached to our food waste. To get a full picture of the economics of America’s trashed food, we need to first explore how and why food is wasted, then analyze the financial and external costs.

HOW FOOD IS WASTED

People waste food at four levels: producer, distributor, seller, and consumer. At these levels, three types of food get discarded: food gone bad, food we think is bad, and food we know is still consumable, but we don’t want.

When genuinely non-consumable food is thrown away, it is usually because of problems in packaging, storage and transportation at the production level, as well as consumers and sellers stocking more than needed. For the average U.S. household, approximately $2200 of food is tossed- roughly a fifth of the goods in every consumer’s shopping cart. Surprisingly, legitimately bad food is the smallest portion of food wasted. On average, 90% of tossed food can still be safely eaten.

The largest category of food trash is food we think is bad, but could actually still be consumed. This inclination comes down to aesthetics and expiration dates. First, aesthetically, producers and sellers are hesitant to deal with misshapen or bruised goods, even if they’re still edible. At the retail level, there is an emphasis on all individual products looking homogenous. So, when an item is considered distorted, such as a two-bodied pear, it won’t make the market shelves. Similarly, people often hesitate to consume food that looks slightly bruised or is past its sell-by date. However, bruises on produce, damaged boxes, and passed sell-by dates often only indicate a decrease in quality, not edibility. Nevertheless, the items are tossed.

Lastly, when we throw away food we know is still good, but we simply don’t want, it is often because the time, resources and money needed to donate the food or transport it to someone who would eat it outweigh the perceived benefits of doing so. For sellers in particular, companies like Walmart recognize that it is more cost-efficient to throw away the good than to spend money on a driver to transport the food to a homeless shelter. Furthermore, individually, why donate the blueberries you never ate if there’s a trashcan five feet from the fridge?

As we’ve noted, there’s a fair amount of food in landfills. Along with the sunk costs of purchasing said food, wasting it creates additional problems. These include resource expenditures, environmental externalities, and social costs.

RESOURCE COST

A substantial amount of money is wasted producing food that is never used. Additionally, one must consider the wasted labor, material resources, time and energy that go into food production. It’s nearly impossible to estimate the potential economic benefits from redirecting these resources, but the situation carries considerable gravity. The Food and Agriculture Organization of the United Nations (FAO) recently estimated annual losses of $1 trillion from resource costs.

ENVIRONMENTAL COSTS

In addition to squandered resources, there is the externality of environmental impact, both from resource overuse- like water scarcity and soil erosion- and from pollution. 95% of food waste goes to landfills, which produce methane, the leading culprit in climate change. The FAO estimates the environmental cost of food waste at $700 billion per year, which was calculated by quantifying carbon, land, and water costs and potential savings, along with the semi-quantifiable cost factor of biodiversity.

SOCIAL COSTS

The lost consumer surplus resulting from our food waste pushes up the price of food. This loss has a relatively greater impact on poorer individuals, as food costs account for a greater percentage of their income. Higher prices and lower quantities of food invariably cause nutritional deficiencies for lower-income people. This, in turn, may result in externalities like higher healthcare costs and lost productivity from individuals weakened by nutritional deficiency and food insecurity. This cost is estimated by the FAO to be approximately $900 billion per year. Adding this to resource and environmental costs, the FAO projects a combined annual cost of $2.6 trillion from America’s food waste.

POLICY

Several countries have implemented policies to combat food waste, such as France, where it is illegal for companies to throw away good food, and Italy, where wise food consumption results in tax breaks. In the U.S., at least ten cities and states have laws intended to curb food waste; for instance, some do so by limiting the amount of organic waste allowed in landfills, while others mandate composting and donating food.

The impact of food waste reduction policies is double-sided: on one hand, it creates savings from avoided unnecessary food purchases. On the other hand, reduced food demand and production leads to job loss, which was the case in Germany, where almost €30 billion was saved, but roughly 600,000 jobs were lost.

With these policies, even more externalities may arise. For instance, with a tax on food trash, consumers may buy less food to avoid waste, thus causing less production of food. This would then lead to higher food prices and less extra food available for donation.

Clearly, the costs surrounding food waste and policy to curb it are complex. Food waste has increased by 204% since 1960, but governments and businesses have been increasingly taking proactive measures to fight it, potentially resulting in a swarth of externalities we have yet to even recognize. Even so, after carefully analyzing the ways in which Americans waste food, as well as the ultimate costs and externalities, we can hopefully begin to illuminate the best possible solutions to this problem.

Works Cited:

Image Source: https://www.express.co.uk/news/uk/702674/British-households-waste-amount-food-every-year

10 Shocking Food Waste Statistics. (2017, April 20). Retrieved from http://www.theswagusa.com/2017/04/20/10-shocking-food-waste-statistics/

Ferdman, R. A. (2014, September 23). Americans throw out more food than plastic, paper, metal, and glass. Retrieved from https://www.washingtonpost.com/news/wonk/wp/2014/09/23/americans-throw-out-more-food-than-plastic-paper-metal-or-glass/?noredirect=on&utm_term=.d4e78660514c

Food Wastage Footprint. (n.d.). Retrieved from http://www.fao.org/nr/sustainability/food-loss-and-waste/en/

Frandsen, J. (2017, May 16). Here’s how states are working to curb food waste. Retrieved from https://www.pbs.org/newshour/nation/heres-states-working-curb-food-waste

Geise, H. (n.d.). Food Waste Blog | Spoiler Alert. Retrieved from http://blog.spoileralert.com/food-waste-bans

The Economic Impact of Reducing Food Waste in Germany, Poland and Spain. (2018). Retrieved from http://ec.europa.eu/environment/integration/research/newsalert/pdf/economic_impact_reducing_food_waste_germany_poland_spain_508na2_en.pdf