According to market principles, the customer is always right even if they are ill-informed or irrational. It is their money and they can spend it how they like.
But what if their ignorance or irrationality leads to an outcome that is ethically or morally dubious? That’s the dilemma facing farmers considering whether to produce organic food.
Organic food is generally defined as food produced without the use of artificial pesticides or fertilisers. Certification regimes usually allow 'natural' pesticides and fertilisers such as manure, but not man-made pesticides or fertilisers produced from phosphate rock mined near Mount Isa.
Commercially oriented farmers grow organic food because there is a market for it. In nearly all developed countries it accounts for two or three per cent of the total, although it can be much more when subsidised by the government. However, the influence of organic food extends well beyond its market share. A significant proportion of the population views the consumption of organic food as a matter of virtue, comparable to recycling garbage or installing a tank to hold rainwater.
There are various perceptions underlying this. Modern agriculture is said to be unsustainable, with pesticides and fertilisers accumulating in the environment. Conventionally grown food is said to contain pesticide residues, which are blamed for a multitude of modern illnesses. Organic production, by contrast, is claimed to be not only environmentally sustainable but delivers healthier, more nutritious and better tasting (if not better looking) food.
None of these is objectively true. Modern agriculture is absolutely sustainable, with yields that increase year by year. Modern pesticides and fertilisers simply do not accumulate in the environment. There are no residues at all in most conventional food and certainly none that are remotely hazardous. And a plant neither knows nor cares whether a phosphorus or potassium molecule originated from a mine or a piece of cow manure.
Organic production does not necessarily stand up to close scrutiny either. Permitted organic pesticides such as copper, sulphur, pyrethrum and rotenone can cause worse problems than man-made pesticides, while organic cultivation techniques tend to be quite intensive, leading to the risk of erosion and either a lot of manual labour or the use of more fuel.
The suggestion that organic food tastes better may relate to the fact that plants adapted to withstand attack by insects and fungi produce their own internal pesticides. However, the claim that organic food is more nutritious is now shown to be absolutely false.
Researchers from the highly regarded and long-established London School of Hygiene and Tropical Medicine have just published a major paper in the American Journal of Clinical Nutrition that reviewed 162 scientific studies published over 50 years. The researchers found there was no significant difference between organically and conventionally produced food in terms of nutritional superiority. That is about as conclusive as it gets.
None of this means there is anything wrong with producing organic food. As long as customers will put their money where their opinions are, there is a market. But there is one extra factor to consider that relates to the concept of social responsibility. On average it takes three to four times as much land to produce the same quantity of organic food as conventional food.
If the whole world converted to organic food production, as some supporters advocate, the world would struggle to feed itself. At a minimum, the area used for farming would have to vastly expand to allow for the yield losses due to poorly controlled weeds, fungi and insects.
This is no threat to Australian consumers; our farmers produce well over twice the amount of food required to feed the population. However, it is an issue for people in countries where the price of food governs how often they eat, and where they are finally beginning to live a little more like us after decades of grinding poverty.
The reality is that for every farmer who converts to organic production and thus produces less food, there is upward pressure on food prices. Ultimately, the effect is felt in places like Bangladesh and Cambodia.
In some respects the choice facing farmers is similar to growing tobacco. There is a legal market for tobacco, and smokers have every right to smoke if they choose. Misguided or not, it should be nobody else’s business, just like choosing to consume organic food.
But land used to grow tobacco can also be used for producing food, just as land used for organic food can be used to produce much more food conventionally. There is a market need to be met, but also a moral issue to consider.
Farmers take their social responsibility quite seriously, which is why modern agriculture is sustainable and the food they produce safe to consume. There would scarcely be a farmer in Australia who did not aim to leave his or her farm in better shape than when they acquired it, and many are immensely proud of the fact that on average they each feed over a hundred people. But choosing what to grow is one thing; making that choice in the context of moral issues caused by ill-informed and irrational consumers is another.
David Leyonhjelm works in the agribusiness and veterinary markets as principal of Baron Strategic Services, which provides consulting and market information services, and Baron Senior Placements, which provides executive recruitment services. For the past 20 years he has commented on the agricultural inputs market in Rural Business magazine.