Lately I’ve been thinking about the location of farmers markets in NYC – as related in my last posting – and broader issues of supermarket location, eating, food access, and healthy food. I come back to the same point each time: food is provided by profit making entities, which includes farms, big corporations (processors), supermarkets, and so on. I am going to abstract from farms for this train of thought. What is the overriding goal of these entities? Making profits. In fact, it is more than making profits: it is maximizing profits (note that this principle holds for both privately and publicly owned firms). They are businesses, after all, and our basic introduction to economics course carefully lays out the rules firms follow as they seek to maximize profits (or expected profits, although the topic of uncertainty usually does not come up until an intermediate class).
I would argue that firms are not locating in food deserts, or not providing fresh produce or other forms of healthy food for good reason: profits are higher when a store locates out of a food desert, or sells beer and lottery tickets instead of carrots. We all understand this intuitively, although sometimes we forget this point. As an economist, I am often astonished by people who are surprised by firm behavior. I have to ask: why do we expect firms to act otherwise?
If we have a social goal of improving food access, and the private market fails to do so, then policy intervention is warranted. Interestingly, nonprofits (who seem to be acting without policy prompting) are the agents driving the improvement in food access. Does the failure of policy result because society does not agree on the principle that each human is entitled to access to healthy food? Or is the problem that the policies in place do not provide sufficient incentives for the supply side (ie provision of food), and instead rely on a mix of demand side levers (food subsidies, education)? Right now, I am unable to provide a reasonable explanation.
Does this line of reasoning remind you of corporate social responsibility? Can we, and should we, rely on corporations to meet our environmental and social goals? I think not.