For most of its history, Feeding America, the nation’s largest nonprofit, relied on a broken system to distribute its 220 million pounds of food per year. It ignored existing stocks and donations, flooding fully stocked food banks in Idaho with potatoes and warehouses in Alaska with five gallon buckets of pickles.
To fix how America fed its hungry would require the economics of market design. The new system increased food supply by 100 million pounds annually, equivalent to feeding an additional 60,000 people every day. It is one of the clearest successes of market design so far.
Get the print magazine Subscribe for $100 to receive six beautiful issues per year. Subscribe
The failures of centralized food allocation
The old system, used since the late 1980s, created a ‘goal factor’ metric based on poverty rates and population size and then allocated food in direct proportion to this need. Food banks would receive calls or emails announcing they had been assigned a load, often with conditions like required pickup dates.
This centralized approach created systematic waste and misallocation. The system treated all pounds of food as identical. A pound of carrots received the same allocation priority as a pound of peanut butter despite vast differences in nutritional value, transportation costs, and demand. Potato chips were particularly problematic: they require ample space but offer poor nutrition.
The system operated in ignorance of what food banks needed. Food banks received an average of 20 percent of their food from Feeding America with the rest coming from local sources that headquarters knew nothing about. This created duplication and waste: a food bank might receive eggs from Feeding America the same week they had already received eggs from somewhere else.
The system also couldn’t account for the fact that some food banks had strong ties to local food sources while others had no alternatives, meaning that the ‘food rich’ banks received excess food while the ‘food poor’ ones often only received products they didn’t need.
Feeding America also had no visibility into food banks’ storage constraints or inventory levels, consigning lots of food to the trash. Sending cheese or produce to a food bank with a full fridge resulted in those products spoiling. Donors often gave food close to expiration dates, and the centralized system couldn’t quickly match time-sensitive donations with food banks that needed them. Most perversely, if food banks refused unsuitable loads it still counted against their need measure. This forced food banks to accept unwanted goods to maintain their ranking in the allocation queue, punishing waste avoidance. Despite these issues Feeding America could hardly say ‘no’ to a donation without risking the donor relationship altogether.
A choice system
... continue reading