Economically Optimal Food Waste

It is hard to turn around without seeing another story on food waste.  The latest was this Freakonomics blog post covering an article in Foreign Policy by John Norris.  Just prior to that was a widely discussed study by Harvard Law School, which focused on the effect of expiration dates on food waste.  A widely cited statistic comes from this UN FAO publication, which suggests a third of all food produced is wasted. 

Much could be said about the methodological short-comings of many of the studies on this topic, not to say anything about the ideological motivations behind many (but certainly not all) such claims (waste is taken as some sort of condemnation of capitalism; the problem of production is “solved”, and we just need to distribute more equitably – as if one can confiscate and redistribute without destroying the incentive to produce). 

Nevertheless, when thinking about the problems of global hunger and feeding a growing population, all solutions need to be on the table, and reducing was is one of them.  As some of these publications make clear, there are legal and industry practices that could be changed to reduce waste (crazy policies like Bloomberg’s ban on food donations to homeless shelters because of salt content is one obvious example), and we should never forget technological advancements that help prevent waste. (preservatives anyone?) 

But, we will never have zero waste. 

Why?  As my friend Bailey Norwood pointed out to me the other day: there is an economically optimal amount of waste. 

Do you ever buy milk with the expectation that some of it will get thrown out?  I do.  The cost to me of running out of milk and having to go out to buy more at midnight if one of my kids has a midnight craving is much higher than the cost of buying an extra half gallon which goes sour before it can be completely consumed.  Convenience, hassle avoidance, and extra trips to the store all are valuable to me; valuable enough that it occasionally makes sense to throw away a little milk.  Otherwise, I’d be throwing away my valuable time, sleep, and gas to the store.  One thing “wasted” is another thing gained (or at least not foregone).

At each and every phase of the food production, distribution, and consumption chain, similar calculations will reveal situations in which the benefit of preventing waste simply isn’t high enough to merit the effort.

I’m sure there must be some papers on this in the economics literature, but a quick search didn’t reveal much.  Some sort of modeling would be useful to identify the determinants of waste, and reveal when it is actually economically efficient to do something about it.

The Foreign Policy article has some useful discussion of factors that could fit well into an economic model of waste.  My intuition is that it is more likely to be economically optimal to waste when:

  • food prices are lower relative to fuel, storage, etc.
  • incomes are higher
  • food preserving technologies (e.g., infrastructure, refrigeration, sodium benzoate, etc.) are more expensive or less available
  • there is greater demand for freshness, appearance, etc. (likely correlated with income)  
  • laws encouraging waste are more prevalent