What happens when America's food banks embrace free-market economics?

November 4, 2015 6:50 PM

Feeding America is a network of food banks that feeds more than 46 million people. In 2005, four professors at the University of Chicago helped replace their centralized distribution system with an auction-based one, allocating "shares" to each bank to bid on donated food. The Week reports on a more detailed paper describing the transition to the new system and its overall success. [via]

Moving to the new system did require some persuasion:

As one food bank director told Canice Prendergast, an economist advising Feeding America, "I am a socialist. That's why I run a food bank. I don't believe in markets. I'm not saying I won't listen, but I am against this." But the Chicago economists managed to design a market that worked even for participants who did not believe in it.

The end result has been an improvement over the centralized scheme, whereby "a lot of food rotted in places where it was not needed, while many shelves in other food banks stood empty." Now:

Within half a year of the auction system being introduced, 97 percent of food banks won at least one load, and the amount of food allocated from Feeding America's headquarters rose by over 35 percent, to the delight of volunteers and donors.

Describing the centralized system as "Soviet-style" is not a complete exaggeration. The central headquarters' misallocation of food resembles the Soviet Union's own allocation problems, illustrated by Francis Spufford in Red Plenty (previously on MetaFilter). And the share-based system is similar to the "shadow prices" that some Soviet cyberneticists wanted to use instead of direct allocation.

posted by Rangi (21 comments total)

Markets yes. Free? Look pretty highly structured and regulated to me.

Free markets would be if getting enough food shares meant you got to set the terms of the auction.

What it does highly resemble is a tightly regulated market, all the participants in which have a guaranteed basic income. (Guaranteed up to the point that you can bid away next period's income as an implicit part of the price of a winning bid.)
posted by PMdixon at 7:37 PM on November 4, 2015 [43 favorites]

if this works, the only reason it works is because there are no mechanisms by which the possession of shares can become the chief criterion determining whether or not you get more shares. the problem with market pricing isn't market pricing, not exactly, but instead the feedback loop that's produced when possession of the money commodity becomes the thing determining whether or not you get more of the money commodity.

I'm not one to cite Marx chapter and verse (oh, who am I fooling? of course I'm one to cite Marx chapter and verse), but this effect is sort of what Marx gets at with his analysis of the commodity form in chapters 1-3 of Capital, specifically the part where he's talking about exchange in terms of what he calls the C-M-C circuit versus the M-C-M' circuit.

what does this mean? okay, so there's two ways to go about exchange in a capitalist system. You can think of it in terms of selling a commodity to get money to buy the commodities you need to consume to live. This is the circuit most workers are in: we sell our labor time as a commodity for money, which we then use to buy food, clothes. shelter, entertainment, and whatever other commodities we need to survive. Commodity-Money-Commodity, or C-M-C.

Capitalists don't relate to exchange in quite the same way, though. Instead of using money to buy commodities to consume. they instead use money to buy commodities that they can then sell for more money. This is the Money-Commodity-More Money cycle, or M-C-M' (pronounced "Em Cee Em Prime"). Under early mercentile capitalism, typically a merchant would buy a commodity one place, move it to somewhere else where it could be sold for more, and then sell it there, resulting in more money, that can be plowed back into the business in order to make bigger deals going forward. In developed industrial capitalism, capital holders buy labor time as a commodity from workers, which they then use in combination with their capital (land, buildings, supplies, machines) to produce commodities that can be sold for more money than the capitalist paid for the labor they used.

The key difference between C-M-C and M-C-M' is that C-M-C is a finite process — try as hard as you might, you can only eat so much food in one life — while M-C-M' is potentially infinite — one person can hold an arbitrarily large amount of money, and once you have the M-C-M' machinery in place, the only thing that limits the size of your M' is the size of the M you started with — and because your M' becomes your M for the next turn of the machine, you can expect ever-increasing returns. By its nature, the M-C-M' process tends to concentrate wealth in tinier and tinier circles, resulting in situations like the one we're in today, where nobody has any fucking money except for a few wastrels who inherited giant piles of the stuff , and we all have to work all day diligently servicing their wants in exchange for the cash we need to buy the commodities we need to live.

I suppose this is just a long way of saying that I'm intrigued by schemes like this (and by things like Allende's Cybersyn), but am vaguely annoyed by articles that describe them as being like capitalist markets. Systems that involve pricing but that do not involve feedback loops that concentrate "shares" (or whatever we call stand-ins for the money commodity) can't really be understood as resembling capitalist markets, because it is that feedback loop that gives capitalist markets their distinctive quality, and it is that feedback loop that makes markets that are "free" in abstract terms radically unfree in concrete practice.

please correct me if I'm missing key details or getting key parts of the argument wrong or if I'm just being reductive. it's been a while since I've read Capital, and well I'm also frankly obsessed, much more than Marx was, with how feedback loops in systems can produce effects that contradict what those systems superficially appear to be.
posted by You Can't Tip a Buick at 7:39 PM on November 4, 2015 [142 favorites]

tl;dr: what PMDixon said.
posted by You Can't Tip a Buick at 7:45 PM on November 4, 2015 [4 favorites]

Yeah I'm no economist, but on skimming the actual paper it seems while this is a market system (and an interesting one!) it's very very far from a free-market system:

They identify a well-known problem with market-based allocation:

Consumer choice as an allocation mechanism is predicated on one key premise: that "willingness to pay" by consumers is aligned with the objectives of the organization.⁹ … ⁹In most markets, this arises naturally: the person willing to pay most for a house is probably the one who should get it. Yet there are many settings where there is not enough trust that willingness to pay reflects social objectives. As one example, we do not allow people to buy kidneys for transplant, as we think that society should have other objectives in who gets a kidney than who is willing to pay the most.

They describe their system's success as contingent on a large amount of ad-hoc adjustment:

Before describing its details, it is important to note that its ultimate introduction lay
not in its broadest conceptualization. One indicator of this more generally is that
specialized currencies are very rare in reality.¹² Instead, the success of this innovation
lay in the myriad of tweaks and additional institutional details that were necessary
both for buy-in from the relevant constituents and re ected important considerations
on the ground. None of the academics involved in this redesign - the author included
– understood the many pitfalls that could have derailed the implementation of this
system successfully: for that they relied heavily and consistently on the food bank
directors and the staff of Feeding America. The new system would not have occurred
without a willingness to listen and adapt on both sides, and the patient and expert
moderating of one of our members, Harry Davis.

They use a form of "central bank" to regulate the money supply:

The resolution to these issues was that Feeding America would track one measure
of aggregate T – pounds supplied to the market – and adjust the money supply accordingly every year. This does not control volatility in the velocity of transactions,
nor changes in the quality of food being offered to the Choice System, but would at
least allow some adjustments based on total donation of pounds to the system.

And they use daily redistribution of wealth based on social welfare goals:

All shares that are spent in a given day are reallocated at midnight. The shares are reallocated according to the same goal factor formula, where those in greatest need are topped up at a greater rate than those who are less needy.

I think it's a sign of how heavily the Robber Barons have established themselves in the public discourse that this draft report of a mostly-successful but highly managed artificial market system, where the conclusion section takes pains to temper its success with mentioning the rarity of successful interventions of this kind and the limitations they observed, gets relabeled as "free-market economics" by Alex Teytelboym, who takes pains to mention 4 times in 10 paragraphs that this is all thanks to the Chicago School of Economics, all hail Milton Freedman, regulations are a sin.
posted by traveler_ at 8:41 PM on November 4, 2015 [28 favorites]

You Can't Tip a Buick: "if this works ... with how feedback loops in systems can produce effects that contradict what those systems superficially appear to be."

I award you the You Can't Tip a Buick Memorial Award and/or Punishment for Excellence in Whatever the Hell That Thing You're Doing Is for this comment.
posted by Eyebrows McGee at 8:45 PM on November 4, 2015 [26 favorites]

Instead of being about markets/capitalism to me this seems to be more about the for-some-reason still extremely revolutionary idea of using structured data methods to find out what people actually need and then tailoring your offer to that instead of going off a hunch. Both in their approach to designing and maintaining the system and in how the system itself works, it hinges on letting people tell you things, and then listening. Like yes if you figure out a way to let people tell you what they need instead of deciding for them based on a second-hand guess, yes, it will be a lot more efficient. I'm always amazed that after all this time we're still always reinventing the wheel with this every day. It shouldn't be something we have to continually stumble on by accident. It always makes everything work better. In a way it's its own form of emotional labor. The things people can tell you DO have value and it does behoove you to figure out a way to collect it. These auctions are just a metaphor for letting the individual individual banks tell the distributor what they need in a structured way.
posted by bleep at 9:19 PM on November 4, 2015 [11 favorites]

It's not surprising that this market works efficiently, after all it's been consciously designed to be like the spherical-chicken-in-a-vacuum at the centre of the EMH. In the real world, information- and power-assymetries abound, resulting in favourable outcomes for big and/or insider participants. And of course, for many of these favoured players, the market strategy is based on generating or increasing these asymmetries.
Whilst the paper itself is quite specific in the architecture of the market that they are proposing, I'm deeply sceptical about the message that will be heard by the usual media bobbleheads and Very Serious People, especially when Chicago economics is involved. Will it be "highly regulated markets may achieve efficiency whilst limiting effects of asymmetries, it might be a good idea to see if some other markets could do with some regulation" or will it be "Yeehaw! Free markets for everything up to and including bodily organs and grannies"? I know what my money's on.
posted by Jakey at 9:20 PM on November 4, 2015 [6 favorites]

I'm just shocked to see Chicago school economists manage something without burning it to the ground.
posted by Pope Guilty at 9:40 PM on November 4, 2015 [11 favorites]

I went to the food bank and all they had were spherical chickens in vacuums.
posted by miyabo at 9:40 PM on November 4, 2015 [7 favorites]

it is that [M-C-M'] feedback loop that makes markets that are "free" in abstract terms radically unfree in concrete practice

this fits in well with notions of predistribution and capital/wealth/land-value taxation as corrective shared ownership! (to fund basic incomes and underprovisioned public goods ;)

incidentally, marginal 'willingness to pay' is a component of efficient pricing for information goods, which btw if income/wages weren't stagnating -- or were guaranteed! -- that willingness to pay would be higher, improving market function and making them more 'free' in practice :P

I'm always amazed that after all this time we're still always reinventing the wheel with this every day. It shouldn't be something we have to continually stumble on by accident. It always makes everything work better.

Who Gets What and Why: The Hidden World of Matchmaking and Market Design by Alvin Roth
posted by kliuless at 9:54 PM on November 4, 2015 [3 favorites]

It's "free" in the sense that there's no maximum bid. But yes, it's a lot more structured and centralized than an entire free-market economy. That's partly because the only concern is how to efficiently allocate donations: they have no influence over who donates what. If the food banks had to produce food as well, things would be more complicated.

(Imagining how it would work: instead of a centrally-held auction, each bank would produce whatever foodstuffs they're locally good at, sell some of it to the other banks, buy what they can't produce from those other banks, then give it away to the hungry and hope that donations will let them afford to produce more food. Which still relies on an outside economy making people rich enough to donate—without that, they'd have to charge their customers for revenue, and we'd be right back to a typical capitalist economy.)

Systems that involve pricing but that do not involve feedback loops that concentrate "shares" (or whatever we call stand-ins for the money commodity) can't really be understood as resembling capitalist markets, because it is that feedback loop that gives capitalist markets their distinctive quality, and it is that feedback loop that makes markets that are "free" in abstract terms radically unfree in concrete practice.

True. If you start with a free market and modify it to avoid concentrating wealth, though, don't you just end up with a standard welfare state? I.e. a government that breaks up monopolies, collected a progressive tax, and redistributes it to supply basic needs. Why drag in Marxist theory, with its seize-the-means-of-production, replace-markets-entirely, viva-la-revolution rhetoric?
posted by Rangi at 10:19 PM on November 4, 2015 [1 favorite]

You Can't Tip A Buick, that's an interesting analysis of the two kinds of exchange. I'm wary of imagining it as two kinds of people, though ("workers" and "capitalists"). It seems to me like most people combine both.

Consider a restaurant owner: her real estate and ovens and equipment are her capital, which she uses to earn money to expand her business; but she also puts in her labor, pays herself a salary, and buys necessities with it. Even a worker whose only capital is their labor can still invest in themselves by earning a degree, paying union fees, or otherwise improving their own value to earn a higher salary.

The real problem ends up being inequality: the hated capitalist running dogs aren't a different kind of person who the workers can just execute to fix everything, they just have a lot more capital than everyone else (and presumably got it through inheritance, theft, exploitation, or anything else besides fair trade). So then instead of literally seizing their capital and placing it under collective ownership, you let them privately manage it and redistribute a percentage of the profits.
posted by Rangi at 10:33 PM on November 4, 2015

Yeah, Rangi, you've just identified the petit bourgeois (the restaurant owner) who live in both cycles. Your laborer who gets an education...at her own cost... is still just a laborer, but one who can demand a higher rate for her time.

You're right otherwise, however, in that many of us live in both cycles, depending on the situation. That doesn't change the exploitation of any particular social exchange between labor and capital, even if a particular individual finds themselves on either side of the line, depending.
posted by notyou at 10:47 PM on November 4, 2015 [6 favorites]

This is fascinating. I wonder what else this system could work for in the voluntary or donation-based sectors.
posted by DarlingBri at 11:14 PM on November 4, 2015 [1 favorite]

Great comment from You Can't Tip a Buick...

It sounds like this has worked well. Markets can be incredibly good mechanisms to distribute goods fairly, as long as each buyer has roughly equal buying power. But it's also good to remember a couple of other things.

First, we shouldn't get sucked into the fallacy that capitalism = markets. According to Marx, who popularized the term capitalism, capitalism is a system of large-scale production for profit in which the workers are not the owners, which came to prominence after the French Revolution. Markets long pre-date capitalism. Some proposed alternatives to capitalism involve markets, like Market Socialism or Market Anarchism.

Second, while this might be a great way to get rid of surplus food, if you want to improve the lives of poor people, most economists would say there's an even better way to harness the power of markets. Give them money and let them buy what they know they need.
posted by TheophileEscargot at 3:57 AM on November 5, 2015 [6 favorites]

Why drag in Marxist theory, with its seize-the-means-of-production, replace-markets-entirely, viva-la-revolution rhetoric?

You know, it's crazy, but I don't think that's the part of Marxist theory that appeared in this thread!
posted by Rustic Etruscan at 5:41 AM on November 5, 2015 [8 favorites]

> Why drag in Marxist theory, with its seize-the-means-of-production, replace-markets-entirely, viva-la-revolution rhetoric?

If you somehow manage to shake off the Cold War caricatures (fostered by both lefties and righties) there's a world of fascinating insights and tools for understanding awaiting you in Marx. Now he was wrong about an awful lot, but but he saw many things clearly too. Remember, Isaac Newton spent years looking for the Philospher's Stone but his theory of Gravity works very well.
posted by benito.strauss at 7:55 AM on November 5, 2015 [7 favorites]

" In a way it's its own form of emotional labor. The things people can tell you DO have value and it does behoove you to figure out a way to collect it. These auctions are just a metaphor for letting the individual individual banks tell the distributor what they need in a structured way."

Heh. So far in my consulting career, the main value I offer is just … asking people questions about what they need and what they can commit to, and then listening to their answers. The only other thing is asking people, "How would we measure that?" So far, it's been pretty effective but I'm kinda surprised that people seem to listen more to someone outside a system than people actually doing the jobs that are required.

"Why drag in Marxist theory, with its seize-the-means-of-production, replace-markets-entirely, viva-la-revolution rhetoric?"

Have you ever actually read Marx? This system is basically socialism, and the Soviets were not Marxists — Lenin made pointed breaks with Marxist theory to support his vanguard notions, including, you know, centralization away from "soviets," which were all about local control.

This isn't Marxism, but it's related, and it sounds like you don't actually have a very good working understanding of Marx and historical materialism.
posted by klangklangston at 11:02 AM on November 6, 2015 [5 favorites]

Metafilter: This isn't Marxism, but it's related, and it sounds like you don't actually have a very good working understanding of Marx and historical materialism.

Oh God I'm so sorry
posted by PMdixon at 11:22 AM on November 6, 2015 [9 favorites]

The wealth of those societies in which the capitalist mode of production prevails, presents itself as "an immense accumulation of commodities," [1] its unit being a single commodity. Our investigation must therefore begin with the analysis of a commodity.

A commodity is, in the first place, an object outside us, a thing that by its properties satisfies human wants of some sort or another. The nature of such wants, whether, for instance, they spring from the stomach or from fancy, makes no difference. [2] Neither are we here concerned to know how the object satisfies these wants, whether directly as means of subsistence, or indirectly as means of production.

Every useful thing, as iron, paper, etc., may be looked at from the two points of view of quality and quantity. It is an assemblage of many properties, and may therefore be of use in various ways. To discover the various uses of things is the work of history. [3] So also is the establishment of socially-recognized standards of measure for the quantities of these useful objects. The diversity of these measures has its origin partly in the diverse nature of the objects to be measured, partly in convention.

The utility of a thing makes it a use-value. [4] But this utility is not a thing of air. Being limited by the physical properties of the commodity, it has no existence apart from that commodity. A commodity, such as iron, corn, or a diamond, is therefore, so far as it is a material thing, a use-value, something useful. This property of a commodity is independent of the amount of labour required to appropriate its useful qualities. When treating of use-value, we always assume to be dealing with definite quantities, such as dozens of watches, yards of linen, or tons of iron. The use-values of commodities furnish the material for a special study, that of the commercial knowledge of commodities. [5] Use-values become a reality only by use or consumption: they also constitute the substance of all wealth, whatever may be the social form of that wealth. In the form of society we are about to consider, they are, in addition, the material depositories of exchange-value.

Exchange-value, at first sight, presents itself as a quantitative relation, as the proportion in which values in use of one sort are exchanged for those of another sort, [6] a relation constantly changing with time and place. Hence exchange-value appears to be something accidental and purely relative, and consequently an intrinsic value, i.e., an exchange-value that is inseparably connected with, inherent in commodities, seems a contradiction in terms. [7] Let us consider the matter a little more closely.

viva la revolución baby
posted by Rustic Etruscan at 11:04 AM on November 10, 2015 [2 favorites]

it doesn't really get good until a little later on, though — chapter 3 is a fucking tour de force, IIRC.
posted by You Can't Tip a Buick at 4:34 PM on November 10, 2015