Stacked near the check-out counter of my local food co-operative are gallons of apple juice. There are two stacks; one of commercial apple juice and another of organic apple juice. The commercial juice sells for $3.50, the organic juice for $6.50. Each week, when I step up to the counter, m hand hovers between the two stacks. Invariably, my fingers come to rest on the neck of the commercial juice, and I feel that I am being cost-conscious. "The organic juice is simply too expensive," I tell myself.
It is not just juice that brings on this hesitancy. I behave in this fashion whenever a price difference appears between an organically-produced item and its non-organic equivalent. And I imagine that there are many such "cost-conscious" shoppers, each with their hands wavering.
Are we really cost-conscious shoppers when we behave in this way? Are we "getting a good deal" when we choose the commercial product? The higher price of organic foods partly reflects the small number of organic farmers. However, it also reflects other factors which we might refer to as stewardship costs. To illustrate this, let us ask the reverse question. Why are the prices of commercial products so low? There are some significant production costs absent from the prices of commercial items. These include the costs of soil degradation and soil erosion, the water pollution costs of fertilizer runoff, the costs of ground-water depletion, the national-security costs of over-reliance on imported fossil fuels, the health and depreciation costs of herbicide and pesticide use, the agricultural-security costs of reduced plant-species diversity, and the cultural cost of factory farming. Economists have a term for these costs. They are known as "externalites." These costs are not borne by the commercial farmer as part of the production process. They are borne by other individuals or groups, or even by future farmers. They are thus external to commercial-farm production and are not reflected in the prices of commercial-farm products. This, in part, explains why commercial food items are so inexpensive relative to their organic counterparts.
In contrast to commercial-farm production, organic-farm production internalizes many of these costs. Natural soil maintenance (composting), a greater amount of hand care and labor-intensive techniques, integrated pest-and-disease control, and culturally-rich small farms all involve costs that become incorporated into the prices of organic products. When we purchase these goods, we are being "cost conscious" in a very true sense. We are paying for what others would not pay in external costs if we had purchased the commercial equivalent.
The recognition of these stewardship costs is quite profound. As it stands, the agricultural system of the United States is guilty of an error of conception that was identified by E.F. Schumacher in his well-known easy "Buddhist Economics." Simply put, the U.S. agricultural system mistakes capital for income. It treats the environmental and natural-resource capital of the United States---which includes the soil, species diversity, ground water and fossil fuels---as income available on an annual basis into eternity. Organic farming corrects this misconception, treating our environment and natural resources as what they are: capital. The higher prices of organic foods reflect capital-maintenance or stewardship costs. Paying these higher prices, we exercise true cost consciousness.