Peanut Butter, Pasta, and Relative Prices

EconTalk Extra
by Amy Willis
Canice Prendergast on How Pric... A Better Strategy for Feeding ...

EconTalk host Russ Roberts once again delved into the world of charity this week, chatting with the University of Chicago's Canice Prendergrast about an innovative allocation scheme he and a group of economists developed for Feeding America.

food fight2.jpg 1. Several times Prendergrast notes how the Feeding America served to educate all those involved. Speaking of the food bank managers, he says it was "not hard to educate them on the benefits of choice." At the same time, some managers were uneasy with using prices and an auction to determine the allocation of food. How did the structure of the system implemented by Prendergast and his team resolve this tension?

2. One of the benefits of the program that Prendergast notes is the newfound ability of local food banks to customize their requests for donations. Did you hear anything about the various foodstuffs discussed that surprised you (perhaps as Roberts was surprised by peanut butter)?

3. Roberts and Prendergast discuss the idea of cash transfers to the needy in lieu of goods. Revisit this episode with Chris Blattman. How do you think Blattman would assess the efficacy of the Feeding America program? Would poor people be better off if Feeding America scrapped the trucks altogether and focused on cash? Would such a substitution be possible?

4. Prendergast notes that one of the most important things he learned from his experience with this project was "learning how to listen." Have you had a similar such experience? What happened, and what lessons did you draw from it?

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COMMENTS (2 to date)
Kevin Leonard writes:

3. While I think cash gifts (aka "transfers") to poor people is a better idea on many levels than the menagerie of aid programs currently in use, I think it is important to remember the other beneficiaries of Feeding America's service; the donors - food industry producers.

The producers have excess inventories that might spoil and be wasted in the absence of an alternative market. Providing an outlet for these products has value. Prendergast and his colleagues have done a great service by facilitating a more efficient (less wasteful, more rational) way of deciding what products go where and at what price/cost.

Michael Byrnes writes:

1. The tension was resolved in a few ways. First, by awarding more "shares" to the food banks that provided for more people. Second, by designing a "single blind bid" auction system that was resistant to manipulation (unlike, say, eBay where last minute "sniping" is possible). Third, after a "purchase" with shares, those shares are redistributed evenly to all of the other food banks, so that each of the food banks gets some benefit from another bank winning an auction.

3. I think the system works well because it is an auction-based system and it is not the sole source of food to the food banks. Food banks would certainly be better off receiving enough cash to just buy the food the need or want, but it's not clear that that is possible here - a lot of the food donations they get are product overruns that would otherwise go to waste. I think the system works well as a means to allocate such donations, but it would work far less well if the banks had to get all of their food this way. Whatever cash they do receive can be used to acquire things that can't be gotten via their local donations or through this system.

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