Around one-third of all food produced for human consumption is never eaten. Environmentalists argue this is unacceptable but Dr Cameron Murray, himself a ‘fervent environmentalist’,  investigates why food-waste is actually an essential global food insurance policy.

One issue that occupies the minds of environmentalists from across the political spectrum is food waste. Around one-third of all food produced for human consumption is never eaten. To environmentalists, this is astonishing and terrible.

But, unfortunately, they are completely wrong. And I say that as a fervent environmentalist.

It is actually a world with zero food waste that is a terrible place to be. We absolutely do not want to be that world.

The reason is this.

Food waste is, in practice, a tremendously important global food insurance policy. In a world of zero food waste, if a natural disaster, such as a flood or drought, hits some of the most productive agricultural regions, both food production and food consumption will fall dramatically. There is no buffer. If production falls, food consumption falls by an equal amount.

If a flood, for example, wiped out a quarter of world food production one year, in a world with zero food waste the per person food intake must also fall on average by 25%. It would be an absolute humanitarian tragedy by any measure.

However, in a world where one-third of the food produced is wasted, either on the farm, during distribution, or in processing and cooking, that flood would have the same effect on food production, but a much smaller impact on overall food consumption. Reducing waste at each point in the food production chain could regain most of that 25% of food that was lost to flood.

The below table show this basic comparison. Country A is the idealised zero food waste utopia, producing 100 units of food, and consuming it all, in the Before scenario. Country B is the current world, consuming only two-thirds of the food produced, and ‘wasting’ the rest. Notice that in the situation before the natural disaster, Country B produces far more food, and this production requires vast swathes of land to be brought into production, something with considerable environmental cost.

But look at both countries in the After scenario, where an unforeseen disaster wipes out a quarter of food production, it is Country B that comes out on top. Country B is able to consume more than Country A, perhaps as much as before, by using the food waste as a type of insurance, able to be drawn on when needed.

This is important. As a world, we can’t use traditional insurance for such situations. Being paid out financially by an insurance policy is useless if there is no food to buy. You still starve.

This is also why most countries heavily subsidise and incentivise agricultural production. Letting markets alone decide what to produce each year will not create the genuine over-supply needed to act as a buffer against bad times.

Indeed, countries with the most food waste are generally the most economically efficient. Europe and North America waste almost 300kg of food per person per year. In sub-Saharan Africa and southern Asia, food waste is around half of that. Yet it is Europe and North America that are overall the most economically efficient in terms of converting resource inputs to outputs.

The above scenario also abstracts away from the many distributional issues at play in our food system as well. But reducing food waste overall won’t solve these either. If the problem is distribution, focus on distribution.

Indeed, if land degradation from agriculture is the underlying concern that makes reducing food waste an attractive idea, we should focus directly on the problem by making rules that control land uses to ensure better environmental outcomes. Indirect approaches should be a last resort.

Reducing food waste, like many pro-environment ideas, seems plausible and obvious on the surface but ignores crucial systematic issues.

Dr Cameron Murray

Dr Cameron Murray

Cameron Murray holds a PhD from Queensland University and channelled his interest on corruption and rent-seeking into a book, Game of Mates: How Favours Bleed the Nation, which charts grey corruption in Australia. Murray's other interests concern environmental economics and property markets; he writes about these in detail for MacroBusiness, IDEAeconomics, and his personal blog, Fresh Economic Thinking.

Twitter: @DrCameronMurray

How do you spend your days?

Writing mostly. Also teaching the bright minds of tomorrow realistic economics at the University of Queensland. Chasing the kids. Sometimes time for football and rock-climbing.

Why is this important to you?

The political environment in the developed world is rapidly becoming more polarised than it has been for over half a century. I see this as a dangerous situation that makes it harder for people to get good information that is not tainted with views from the extremes.

What drove you to focus on economics. Was there a particular moment you can remember that led you to this field?

Observing the wilful blindness within large companies and organisations who seemed to have a knack for ignoring the obvious sent me crazy! As I began to see this more in our public policy debates I realised how much value can be gained by taking a step back and having an objective and systematic look at the world. Economics allows you to do this. If you can survive the first few years of indoctrination and keep your open mind, there is a lot of useful research going on in the field.

What drives you professionally?

Making a difference. I actually was close to leaving economics to become a medical doctor in 2012 so I could at least know I was helping someone. But I decided instead to stay in economics and focus on corruption and related topics that I knew might not make a direct difference to many people but could make a systematic difference if I could share the knowledge widely.

In your opinion what are the three biggest problems facing the developed and developing world?

For the whole world, the number one problem is the ongoing battle over the economic surplus.

Institutions that have funnelled wealth, income, and power, up the distribution are reaching their social limits. Between nations, decades of trade imbalances will likely reverse as previously rising nations stabilise, and new nations embark on rapid industrialisation. The losers from major changes to the distribution of global wealth will not be happy.

If you hadn’t become an economist what would you have done?

Become a medical doctor.

What led us to this moment in history?

Chance and luck, just like always. Though I do believe there are long term patterns that repeat in the great arc of civilisation.

What are the lessons we failed to learn during and since the 2008 crisis?

That finance is not an output of the economy, but an input to it. We had a chance to go back to basics and remember that the real economy is about producing things that people value.

Can you list some ‘baby steps’ out of the current economic mess?

Boost public spending on tax authorities so they can bring international firms into line. Vote out major parties to allow the diverse voices of the minor parties to rise up and reset the scope of public debates.

If you were a President / Prime Minister what would your first three pieces of policy be?

First, ensure that when political decisions result in windfall gains to private entities that these gains are taxed or sold by the government to recoup their value. Second, create a public bank with a mandate for investment in value-added export industries and renewable energy generation and distribution.

Third, ratchet up taxes on land, wealth, and inheritance.

Tell us something you have been wrong about?

I never thought the Sydney property market would be at a $1 million median price by 2016. I thought Trump would do better than expected in the election, but not win it.

Name the book that changed you.

Ultra Society by Peter Turchin. It made me stop thinking of economic growth as a competitive process, but a cooperative one. As an economist trained to see competition and understand its merits, I have now broadened my view to see how in fact competition and cooperation work together.

What would you do differently if you were to start all over again?

Nothing. Life is a lesson. It’s not something to be optimised. I want to make all the mistakes again… maybe a few more as well.

Give our readers, members and subscribers a piece of advice that has served you well.

From my Dad, about taking on new and challenging projects - “If it was easy, everyone would do it.”

Anything you would like to plug? Now is your chance.

My personal blog is fresheconomicthinking.com. Also, read macrobusiness.com.au, and follow me on Twitter @DrCameronMurray.
Dr Cameron Murray

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One thought on “Long Live Food Waste

  1. Amazing!!
    Greed is good, corporations are persons, and now waste is insurance!

    The issue is resilience in terms of internal and external shocks. How about creatively designing a distributive and regenerative system that adapts, matches and trade with each other so that unused resources flow to unmet needs.

    In so doing surplus in one area can flow to deficits in others, while at the same time reducing the amount of fertilizers and pesticides and water that is wasted and damaging to the environment.

    Waste is now a commodity that is being monetized which is good for money value but bad for life value! SMH!!!

    What will they think of next???

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