Cost-benefit analysis as a tool for measuring economic impacts of local food systems

Case study of an institutional sourcing change

Abstract

Universities continue to expand their local food sourcing, but the impacts of these sourcing changes are ambiguous. Some academics have measured these impacts using input-output analysis methods to track economic indicators that may be of interest to local communities. However, these studies do not capture nonmarket benefits of local food system investments or answer the broader question of whether local sourcing benefits society as a whole, both of which can be addressed using cost-benefit analysis. This paper explores cost-benefit analysis as an additional tool for measuring the economic impacts of local food investments, using a sourcing change by The Ohio State University as a case study. It builds on recent theoretical applied economics literature on the welfare impacts of local food sourcing and sheds light on important trade-offs of local sourcing that institutions and other buyers may want to consider. Employing data provided by Ohio State University Dining Services and the U.S. Department of Agriculture, I use a Monte Carlo simulation approach that accounts for uncertainty and allows for exploration of many scenarios. In more than half of the scenarios, local sourcing yields a net loss to society. However, additional research is needed by economists and others to enable local food system stakeholders to more easily and accurately conduct this work and add cost-benefit analysis to their project evaluation toolkit.