In 1776, Adam Smith argued that the marketplace, a guiding invisible hand, would govern the economy and producers to be more efficient for customers (Rittenberg & Tregarthen, 2012) Local food systems are great example for rural communities (Dove, 2015). A local food system is the farmer providing its foods directly to the customer using farmer’s markets, CSAs, restaurants, and other facilities. Efficiency is when the allocation of resources are maximized (Rittenberg & Tregarthen, 2012), therefore local food systems are able to provide farmers with efficiency.
Economic profit is the difference between total revenue and total costs(Rittenberg & Tregarthen, 2012). Farmers that sell their products locally are able to have fewer costs and therefore their profit margins are lower (Dove, 2015).
CSAs are the most profitable (Dove, 2015). Their gross sales per acres range from $9,084-$1,336 per acre. The farmers paid themselves one third of the revenue, which had a medium of $60,000. The range of salary ranged from $100,000 to $3,600. CSA with low-income shareholders, in New York, had $79,000 in the first year to $150,000 in the second year.
There is a barrier between farmers to institutions in regarding network building and connectedness(Dove, 2015). It could increase the farmer’s revenue $8,400 revenue. Participating farmers netted 60-70% using CSA and 85% using wholesalers.
Farmer markets benefit the local and state economy (Dove, 2015). Total direct sales from farmer’s market was $3.3 million in Oklahoma. Maryland’s farmer market direct and indirect economic impact was $307,249 in the community.
Net benefits are the benefit of the activity minus its opportunity costs (Rittenberg & Tregarthen, 2012). Farmer markets are able to provide 25% of farmers their whole revenue and have a 67% per dollar (Dove, 2015). CSA is the most effective net benefits with 85% per dollar. Wholesaling to other businesses is the least effective and are 58% per dollar.
In 2010, there was a multiple ways farmer markets was made available for their customers; and, they included: WIC Farmers’ Nutritional Program, Senior Farmers’ Market Nutrition Program (Dove, 2015). Farmers were able to serve nearly 900,000 seniors and 2.15 million WIC recipients. Farmers markets and CSA with programs for their customers have increased their farmer’s revenue to be $2.4 million in federal benefit and incentive purchases and federal food benefit redemption created nearly $1.5 million. In 2012, ‘Double Value Coupon Program’ from 25 states served 40,000 customers in 300 farmers’ market. Double Value Coupon Program created $900,000 for farmers income.
CSA are known for being an effective way for farmers to make a living and support better wages (Dove, 2015). In the CSA system, a consumer is able to buy some of the farm plantations. Some farmers are able to give this to the consumer by providing lower payments, payment plans, working shares, transportation assistance, and bartering. It is less risky than farmer’s markets.
Marginal decision rule
Local food systems should be evaluated by using marginal decision rule. Marginal decision rule means that if a customer should be expected to pay extra then there should be more provided.(Rittenberg & Tregarthen, 2012) The local food system will increase: (1) local job employment, (2) improve the local economy, (3) provide the customers with healthy affordable food, (4) promote healthier eating habits, and (5) healthier residences that can avoid medical issues (Dove, 2015). Local food systems would satisfy the marginal decision rule as the customer could get satisfaction due to healthier food options.
Transferable Property Rights
Transferable property rights are when the farmer is able to sell their rights to someone else(Rittenberg & Tregarthen, 2012). Local food systems have some parts that are transferable property rights (Dove, 2015). The customer can purchase the products directly from the farmer in both CSA and farmer’s markets. The farmer is able to give transferable property rights of their products to the other facilities by selling it to them; although, there may be fewer benefits.
Food systems are close to making farmers be able to efficient (Dove, 2015). Farmers should expand their business into all three but require networking. Food systems are need to have some improved networking for facilities and farmers.
Food system is able to be effective, but it will need to do some work. CSA is the best ways for the farmers to make money (Dove, 2015). Farmers market are the second and allow them to communicate with local customers. There needs to be more networking for the facilities and the local farmers. The marginal decision rule applies for the local food systems as it improves: employment, economy, healthier food, better eating habits, and healthier residences.
- Dove, J. A. (2015). The impact of contracting and property rights institutions on entrepreneurship in the United States. American Journal of Entrepreneurship,8(1). Doi:2164-9685
- Rittenberg, L., & Tregarthen, T. (2012). Principles of Microeconomics(Vol. 3). Irvington, NY: Flat World Knowledge. Doi:978-1-4533-2650-3