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Exploring Health and Environmental Costs of Food Workshop Summary (2012) / Chapter Skim
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2 The Economics of Food Prices
Pages 7-12

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From page 7...
... , with a substantial change in food prices making a significant difference in the overall CPI. Because food prices are so volatile, with fluctuating food prices masking long-term trends in CPI, food is often removed from the CPI so that longer trends can be observed.
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From page 8...
... Prime among these factors are climate change and water scarcity. In addition to commodity and energy prices impacting short-term fluctuations in food prices, there are other underlying factors impacting longterm trends in food prices.
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From page 9...
... THE CONCEPT OF EXTERNALITIES: COSTS AND BENEFITS NOT REFLECTED IN MARKET PRICES Costs not included in the market price of food are called external costs, or externalities. The technical definition of an externality, according to Smith, is "a cost or benefit not transmitted through prices that is incurred by a party who did not agree to the action causing the cost or benefit." General types of externalities associated with food include ecological effects, environmental quality, GHG emissions, animal welfare, social costs associated with labor, and public health effects.
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From page 10...
... According to Smith, however, this pales in comparison with the direct and indirect health costs associated with food consumption patterns later in the food life cycle. Even though they have no market value, monetary estimates can be assigned for some of these costs.
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From page 11...
... Smith agreed that taxes can be used to internalize external costs, but cautioned that a food tax typically has to be very high in order to change consumer behavior enough to affect the targeted health outcome. Another question was about how energy costs should be factored into an analysis of the cost of food given that the actual cost of energy in the United States does not reflect the "true" cost of energy.
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From page 12...
... 2011a. A revised and expanded food dollar series: A better understanding of our food costs, ERR-114.
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Key Terms

  • external costs
  • energy prices
  • food dollar
  • health costs
  • market prices

  • food life
  • food production
  • energy costs
  • commodity prices
  • potential external

  • average external
  • animal feed
  • index price
  • increasingly larger
  • soil erosion

  • term trends
  • larger proportion
  • pesticide exposure
  • organic foods
  • ghg emissions

  • food smith
  • food depends
  • food waste
  • food tax
  • expanded food

  • food consumption
  • food include
  • fluctuating food
  • food commodity
  • external health


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