Yes, Food Banks Embracing the Free Market Economy is a Really Good Thing

Posted on June 21, 2016 by Emily Monaco

EMILY MONACO2 DAYS AGO

At first glance, the association of charitable organizations like food banks and the capitalist free market economy may seem backward, but the truth is, the free market economy is one of the best things to have happened to food banks, at least, if you look at Feeding America as an example.

Feeding America is the nation’s largest domestic hunger relief organization, providing more than 3.6 billion meals to people throughout the United States. It is, at its core, a food bank network, connecting 200 food banks to 60,000 food pantries and meal programs, providing them with donations from grocery stores, food producers, and farms.

But while Feeding America may be a charity, the source of its success is rooted in the very idea of the free market economy and the intervention of a team of economists from the University of Chicago, including Canice Prendergast.

The Implementation of a Free-Market Strategy

According to a Slate article, when Prendergast arrived, the organization, then known as Second Harvest, used a far more regulated market system for food distribution, which is in-line with food banks around the world. A donor company would notify the association that a load of food was available, and it would be offered to an individual food bank based on need and proximity to the pickup locale, also taking into account the quota of food that each food bank was entitled to each year. While the system was good, it was far from optimized, and that’s where the team of economists came in.

The system, as it was, treated all food the same and worked based upon pounds of food rather than variety or type. There were frequent errors whereby one food bank would end up with far too much of one type of food or with a type of food that couldn’t be adequately stored, i.e. milk, where there was no refrigeration, and would have to be discarded.

Prendergast and his team believed that they had the solution to these problems: a system of credits or points allocated to each individual food bank that would be used to bid on individual shipments, based on the need of each bank. The idea was unpopular at first, especially with smaller food banks afraid that they would be squashed by the larger banks with more credits, but with a few modifications, devised by sociologist Harry Davis, the system took its final form.

As opposed to a bidding war, a sealed bid auction would be held for every donation, and the shares from the winning bid would be attributed to the other food banks in the Second Harvest network. With the psychology of the market changed from a rat race competition to a win-win situation for all, the plan suddenly seemed far fairer, and it was put into place.

The Results for Food Banks

Today, in large part due to the fast turnaround of its free-market strategy, Feeding America is instrumental in rescuing some of the approximately 6 billion pounds of fresh produce that arewasted every year in America. Individual banks request only the donations that they can distribute effectively, meaning that far less of this food is wasted. Last year, 967 million pounds of fresh produce were distributed to people in need.

This is a huge contrast with other countries, such as the UK, where fresh produce is nearly never distributed because of an inability to store and hand it out in a timely fashion. Ninety percent of 70 UK food banks surveyed in 2015 said that less than a quarter of their food was fresh; a third were unable to hand out fresh food at all, according to the Independent.

Feeding America is able to distribute far more food than before on the whole. After the implementation of this free-market economy style of distribution, the supply of food donations increased by 50 million to 100 million pounds, 12 million of which can be traced directly to the experiment.

While the heart of Feeding America remains resolutely that of a charity organization, letting some elements of capitalism slip in has actually made it more productive and better able to serve the hungry.