Wednesday 10 June 2009

It's not easy being green

Art Carden recently released a paper basically applying the socialist calculation debate argument to environmental calculation. In a world without comprehensive Pigovean taxes on environmental externalities at their sources, it's well-neigh impossible for the green consumer to know whether he's helping or hurting the environment through his consumption decisions. It's the Mises argument in reverse. In the socialist calculation debate, Mises says socialism fails because we can't impute prices to capital goods without prices for consumer goods and consequently we can't rationally allocate capital across sectors. In the environmentalist calculation debate, we can't rationally allocate an environmental price to a consumer good without having environmental prices on capital goods.

In the fully Pigovean world, prices fully convey information about costs including environmental costs. Outside of that world, we probably still do best by looking only to prices as the best potential aggregation of knowable costs.

And so Patri Friedman today points us to a rather nice article on the fallacy of locally-grown produce.
Locally grown produce is rarely efficient. Apply a little mathematics to the problem, and you’ll find that the ugly alternative of giant suburban distribution centers accomplishes the same thing - fresh produce into stores on the same day it’s picked - but with much less fuel burned.

This even extends to local farmers’ markets like you may have in your town, where all the family farmers personally bring their produce to the market to sell. Imagine a map with the market in the center, and the round-trip routes driven by all ~20 vendors radiating out from the market, like the arms of a starfish. Applying our Traveling Salesman model to this map, it’s clear that the farmers’ market is the least efficient model possible, if you are measuring efficiency in terms of delivery miles driven and gallons of diesel burned. To properly restructure this model to be as efficient as its proponents believe it to be, you’d drive a single truck in a calculated route to visit each farm in the morning, sell all the goods in a single store, and then discard or donate the leftover food (why double the driving miles to return perishable goods to the farmers?).

Don’t get me wrong, I love farmers’ markets. We go to our local one sometimes and it’s a fun family event for us. We love the giant, wonderful tomatoes and strawberries that you can’t get at the supermarket. I’d hate to see the experience replaced by the efficient alternative I just described, but then, I understand that farmers’ markets are more of a premium boutique community experience than an efficient (or “green”) way to buy food. The real reasons to enjoy your farmers’ market have nothing to do with it being somehow magically environmentally friendly. It’s the opposite.

Too often, environmentalists are satisfied with the mere appearance and accoutrements of environmentalism, without regard for the underlying facts. Apply some mathematics and some economics, and you’ll find that a smaller environmental footprint is the natural result of improved efficiency.
To a first approximation, we do best simply by using existing price signals about relative scarcity and ignoring worries about food miles or other such considerations. Firms in private markets have every incentive to economize on costs. So long as external costs are positively correlated with internal costs - like how carbon emissions correlate with how much you spend on petrol - it's risky to second-guess prices.

I still frequent the farmers' markets in Christchurch (Lyttelton or Riccarton Bush on Saturdays, Riccarton Market on Sundays), but only because we tend to get better produce there than we do at the supermarket. Of course, if I were in Winnipeg, I'd be going to the rather nice market at the corner of Waverly and Bishop Grandin instead and would especially be trying out their new ice cream shoppe. Information contained in the price of airline tickets is sufficient to keep me shopping at Lyttelton, New Zealand instead -- the carbon costs of flying to Winnipeg are pretty second order considerations.

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