Industrial Food and Econ 101 – the case of externalities

Externalities – the language of Econ 101

What are externalities?

Defined in two widely used textbooks:

“An externality occurs when some of the costs or the benefits of a good or service are passed onto or “spill over to” someone other than the immediate buyer or seller. Such spillovers are called externalities because they are benefits or costs that accrue to some third party that is external to the market transaction.”¹

 

“….a negative externality, a cost that individuals or firms impose on others without having to offer compensation.”²

OK, so what does this refer to? External costs include pollution, degradation and exhaustion of the earth, injuries and deaths during production, billions of hours of human attention spent feeding the online advertising industry, mindless consumption driven by marketing campaigns, and on and on. The single-use plastics industry, plastic bags, packaging, food utensils, for example, knows full well that virtually none of their products are recycled. They end up in dumps, incinerators, and waters all around the globe. These are what “spill over” into our lives.

One should note the error in Economics: Principles, Problems and Policies definition suggesting that it is a “third party” that suffers these external costs. It is everyone.

Most notorious and important among “external costs” are those imposed by the fossil fuel industries. These companies have known for more than fifty years, from their own scientists, that this is true. Yet, we used more of their products last year than at any time in history.

What is not said here is that externalizing costs to the maximum technically feasible is a required, compulsory strategy for every capitalist enterprise. Barring some government ban or regulation of a particular externalized cost, every firm engaged in the production of goods and services must maximize its externalization of costs to maintain and increase its profitability compared to its competitors. This profitability requirement is reinforced by the perverse incentives of CEOs and other top management experience with their supersized pay packages that are directly connected to the immediate financial success of their companies.

What About Industrial Food??

So, how does this play into the global phenomenon of industrial production of foods, in particular, ultraprocessed foods (UPF). From a recent NYTimes article that returned this issue to my attention:

Ultraprocessed foods made using industrial methods and ingredients you wouldn’t typically find in grocery stores — like high-fructose corn syrup, hydrogenated oils and concentrated proteins like soy isolate. They often contain additives like flavorings, colorings or emulsifiers to make them appear more attractive and palatable. Think sodas and energy drinks, chips, candies, flavored yogurts, margarine, chicken nuggets, hot dogs, sausages, lunch meats, boxed macaroni and cheese, infant formulas and most packaged breads, plant milks, meat substitutes and breakfast cereals.³

UPFs are a huge portion of our diets. Studies vary in their findings, in part based on geography. In the US, over 50% of our daily food intake are UPFs.⁴ In US children from 2 to 19 years old, the portion of UPF calories in their diets is over 67%.⁵

Recently, articles and podcasts about UPFs have focused on the evidence that they are a cause of a global surge in obesity, diabetes, and heart disease. The science is difficult. Here is a recent podcast from  the NYTimes: “A Turning Point for Ultraprocessed Foods – The wide-ranging category includes sodas, processed meats, many breakfast cereals, snack foods and frozen meals.”

From my point of view, just based on our evolutionary history, these facts should be cause for some caution. For 290,000 years before the beginning of our mass societies, we gathered, husbanded, and cooked a wide array of fresh foods. Our predecessors in the hominim line spent several million years doing similarly. So, our digestive system and metabolism are not accustomed to foods with such densities of fats, sugars, and salt as commonly found in UPFs. Introducing these foods in such a brief span of less than a hundred years is going to present troubles to organisms accustomed for hundreds of thousands of years to different foods. This looks like a classic case of evolutionary maladaptation. Adaptations that were advantageous under an earlier set of conditions become a negative under new conditions. In this case, the sudden change from local, naturally occurring minimally processed foods to UPFs.

But, the industrial food system doesn’t have to be concerned about these external costs. They will never be held accountable.

Don’t think for a minute that this is a one-off. Just look to the chemical industries. Over 350,000 chemicals and mixtures of chemicals have been registered for production.⁶ Only a small handful of this massive number have been investigated for safety.⁷

1. McConnell, Campbell, Stanley Brue, and Sean Flynn. Economics: Principles, Problems and Policies. 18th ed. McGraw-Hill Irwin, 2009. p.90
2. Krugman, Paul R, and Robin Wells. Macroeconomics. 4th revised edition. New York, NY: Worth Publishers, 2015. p.271
3. https://www.nytimes.com/2024/05/06/well/eat/ultraprocessed-foods-harmful-health.html?smid=nytcore-ios-share&referringSource=articleShare
4. Wolfson, Julia A, Anna Claire Tucker, Cindy W Leung, Casey M Rebholz, Vanessa Garcia-Larsen, and Euridice Martinez-Steele. “Trends in Adults’ Intake of Un-Processed/Minimally Processed, and Ultra-Processed Foods at Home and Away from Home in the United States from 2003–2018.” The Journal of Nutrition 155, no. 1 (January 1, 2025): 280–92. https://doi.org/10.1016/j.tjnut.2024.10.048.
5. Wang, Lu, Euridice Martínez Steele, Mengxi Du, Jennifer L. Pomeranz, Lauren E. O’Connor, Kirsten A. Herrick, Hanqi Luo, Xuehong Zhang, Dariush Mozaffarian, and Fang Fang Zhang. “Trends in Consumption of Ultraprocessed Foods Among US Youths Aged 2-19 Years, 1999-2018.” JAMA 326, no. 6 (August 10, 2021): 519–30. https://doi.org/10.1001/jama.2021.10238.
6. Wang, Zhanyun, Glen W. Walker, Derek C. G. Muir, and Kakuko Nagatani-Yoshida. “Toward a Global Understanding of Chemical Pollution: A First Comprehensive Analysis of National and Regional Chemical Inventories.” Environmental Science & Technology 54, no. 5 (March 3, 2020): 2575–84. https://doi.org/10.1021/acs.est.9b06379.
7. Muir, Derek C. G., Gordon J. Getzinger, Matt McBride, and P. Lee Ferguson. “How Many Chemicals in Commerce Have Been Analyzed in Environmental Media? A 50 Year Bibliometric Analysis.” Environmental Science & Technology57, no. 25 (June 15, 2023): 9119–29. https://doi.org/10.1021/acs.est.2c09353.