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True Cost Accounting

Consumers who want to shift their buying habits to foods that are sustainably grown need to know the real price of food, but that requires establishing a price for these external costs. If they can't be seen--or measured--it's as if they don't exist. Therefore, consumers who buy the cheapest food in the supermarket unwittingly do the greatest social, economic, and environmental harm. — Douglas Gayeton

By considering all the external costs factored out of the cost of food, an economic principle called true cost accounting helps consumers understand the real cost of the food they buy. What is the true cost of our food? What are we really paying for when we opt for cheap food choices?

From farm to table, we pay a sizable external cost for our goods. How can we reduce these external costs? Where do we begin? Some point to tagging the true price on the food stuff. Others suggest that by accurately assessing the life cycle — that is, by tracking the cost of the entire production — consumers will be educated to make their own ethical choices. And this means will confidently be able to charge a fair price for their goods.

This week's terms

The Commons

Cultural and natural resources that are accessible to all members of society. This shared wealth is fundamental to the survival of man. The idea is that these resources are held in common, not owned privately. To care for the commons is to acknowledge our past and to strive for the future.

Tragedy of the Supermarket

People buy food based on price, without asking why it is so cheap. This is the tragedy of the supermarket and a key component in true cost accounting.

External Costs

Health, social, and environmental costs constitute external costs. We pay for these through our taxes, through higher healthcare rates, and through pollution to the environment. 

Life Cycle Assessments

These assessments allow us to "internalize" the external costs, making it possible to compare and contrast the true cost of every product in our food system. 

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