True Cost Accounting

By considering all the external costs factored out of the cost of food, an economic principle called true cost accounting helps consumers understand the real cost of the food they buy.

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According to the tragedy of the commons, people (or companies and farmers) are motivated by self-interest, disregarding the long term, communal effects. Farms and companies that produce cheap food use resources and pollute without regard for the shared resources or the real cost of their practices as they affect the environment, the community, or society as a whole.


People buy food based on price, without asking why it is so cheap.


Health, social, and environmental costs constitute external costs. We pay for these through our taxes, through higher healthcare rates, and through pollution to the environment.


Extractive costs deplete our natural resources for the sake of production, taking without putting back.


These assessments allow us to “internalize” the external costs, making it possible to compare and contrast the true cost of every product in our food system.


By considering all of the external expenses factored out of the cost of food, an economic principle called true cost accounting helps consumers understand the real cost of the food they buy.


Excerpt from Lexicon’s Film Discussion Guide “True Cost Accounting”:

True Cost Accounting helps consumers understand the real cost of the food they buy by factoring in the health, social, and environmental impacts of production.

Discuss resources that people benefit from but that’s source, or principle, is being compromised or destroyed for generations to come.

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“Paying for Our Cheap Food Choices”

By Aine Morris, Sustainable Food Trust

The idea behind ‘true-cost accounting’ is to allocate a monetary value to the resources used, and impacts created, by different systems of food production. It seeks to allocate a value to ‘natural capital‘, and assesses both the positive and negative impacts of different systems of agriculture.

Link: Check out this useful information about the hidden costs of industrial food production.

“A True Cost of Food QA with Patrick Holden and Liz Earle”

Liz Earle talks with Patrick Holden CBE, Founding Director of the Sustainable Food Trust, about the true cost of the food we eat. Patrick is a former Director of the Soil Association, a sought-after speaker and campaigner for organic food and farming, and has the longest established organic dairy farm in Wales with a herd of 75 Ayrshire cows.

Link: Check out this useful information about the hidden costs of industrial food production.


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Information Artwork Text

Title: True Cost Accounting (or the real cost of cheap food)
Location: A corn field, somewhere in America
Featuring: Laura Howard-Gayeton and Tuilerie Gayeton
Image Credit: Douglas Gayeton for the Lexicon of Sustainability

True Cost Accounting is the practice that accounts for all external costs-environmental, social, and economic-generated by the creation of a product.

What’s not factored into the true cost of corn? Farm subsidies you pay through your personal income taxes, pollution of local drinking water due to contamination by petrochemical herbicides, pollution of waterways and oceans due to nitrogen fertilizer runoff, and loss of vital soil nutrients and top soil through mono crop farming practices are hidden costs.


Information Artwork Text

Title: External Costs
Location: Allied Textile Plant, Great Falls of the Passaic River, Patterson, NJ
Image Credit: Douglas Gayeton for the Lexicon of Sustainability

EXTERNAL COSTS The social and environmental costs excluded from a producer’s retail price.

The Nation’s first industrial park, built at the great fall’s of New Jersey’s Passaic River, which is now an EPA Superfund Site. In 1792, Alexander Hamilton helped found “The Society for Establishing Useful Manufacturers” (S.U.M.). The group built a waterway that harnessed the Passaic River’s embedded energy and powered a variety of manufacturing concerns. After 200 years, these industries abandoned the area, leaving behind heavily-polluted waterways that are still being cleaned up.


Find fun facts and quotations in our interviews with Lexicon thought leaders. And link back to the Lexicon so we can share your article!

1. John Bloom, Senior Director Organizational Culture at RSF Social Finance

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2. Dr. Michael Duffy, Extension Economist, University of Iowa

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Pull Quote w7 Duffy

True Cost Accounting at the Farm

By Tucker Taylor

When I began selling produce at farmers markets, Backyard Market Gardening by Andrew W. Lee was, and still is, a great inspiration to me. Lee writes,“It is not a sin to charge money for food. It’s important that we charge a fair price to earn enough to keep our farms financially sustained, and ourselves and our families fed, clothed and housed. It’s not the farmer’s responsibility to provide cheap food in this country…”

This was so empowering for me, having been raised in a price-conscious culture. If someone were to complain about how much I was charging for my produce, I would normally explain that, while we were building soils in the early stages, our yields were not quite as large as that of a conventional farmer. After reading Lee’s words I better understood that true cost accounting includes the health, social and environmental costs. I also understood that we were providing a livelihood for the crew by paying them a living wage.  Not only that, we were caring for an entire ecosystem by building soils, increasing plant diversity and, as a result, increasing animal diversity. In the end, helping to create community—of the plants, animals, and people working on and enjoying the fruits of the farm—by providing healthy, nutrient-dense food was the most visual aspect of our work.

Tucker TaylorTucker Taylor is an expert in certified organic farming, specialty produce, and sustainability. Taylor strongly believes in soil cultivation—with a healthy dose of compost—as the key to a good harvest. He is now the first Director of Culinary Gardens for Jackson Family Wines, where he spearheads the cultivation of all the company’s gardens globally. Prior to joining the Kendall Jackson family, Tucker oversaw landscaping at every property of the world-renowned chef Thomas Keller’s restaurants (French Laundry, Per Se, Bouchon, Ad Hoc), setting the standard for today’s farm-to-table fine dining. Follow him on Instagram @farmert
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This was a good day.  We felt like something special had happened — The ideal of what we hoped this trip would be. We started with Jason Woods — a fisherman/diver on fire for the cause of sustainable seafood and local economies.  We then met at the community garden of Alberta Salazar, a former strawberry laborer from Oaxaca.  Dinner combining the two stories ensued, and, with it, the story of food, labor and community in America unfolded.

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