COLUMBUS, Ohio — Economic impact analysis using input-output models like IMPLAN is now the most common method for estimating the economic impacts of local food system investments. The outputs of these analyses are metrics such as employment, business revenue, and household income.
While this analysis is useful, it doesn’t answer a question that may be of interest to local food system practitioners: Will this investment make society better off?
Cost-benefit analysis, or applied welfare analysis, is a tool in economics that can help us answer that question. In a new JAFSCD article, “Cost-benefit analysis as a tool for measuring economic impacts of local food systems: Case study of an institutional sourcing change,” Dr. Zoë Plakias describes the methodology of cost-benefit analysis (CBA), compares and contrasts it with economic impact analysis, and outlines how the CBA methodology can be used to estimate the net benefits of local food system investments. To do this, she uses a specific institutional sourcing change at Ohio State University as a case study.
- Cost-benefit analysis could play an important role, in addition to the project evaluation toolkits used by local food system stakeholders.
- CBA can answer different questions from economic impact analysis and can demonstrate net benefits and highlighting key trade-offs of local food system investments.
- Estimates suggest that the sourcing change at Ohio State yielded negative net benefits, but several important categories of impacts were left out due to a lack of data.
RECOMMENDATIONS FOR POLICY, PRACTICE, AND RESEARCH
- Universities should consider conducting similar analyses in partnership with relevant campus experts to advance this research and enhance their positive impact on society.
- More research is needed to make the data necessary for CBA available to local food systems stakeholders; in particular, methods for rigorous and holistic quantitative measurement and the valuation of localized social and environmental impacts are needed.
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