#72 2005 · Feeding America · Food bankingcostly-signal
Feeding America let food banks bid fake money for truckloads instead of taking turns, and paid them to accept what nobody wanted
the problem
Centrally planned food shipments matched no food bank's real needs
background
Feeding America's network moves donated food to more than 200 member food banks nationwide, and for years did it the way a government agency would: a central office decided who got what, in what order, based on incomplete information about which banks actually needed potatoes versus produce versus protein that week. The predictable result was mismatched shipments — potatoes routed to Idaho, which already grows more than it can use, hot dogs arriving without buns — and food quietly spoiling in warehouses whose managers had no real say in what they'd been sent.
The obvious fix was better central planning: more data, smarter dispatchers, tighter logistics. University of Chicago economist Canice Prendergast proposed something else — stop planning it centrally at all.
the move
In 2005 Feeding America replaced its queue-and-allocate system with an internal market. Every food bank gets a budget of a synthetic currency called 'shares' and bids against other banks for truckloads of food as they become available, revealing what it actually wants instead of accepting what a planner assigned. Crucially, bids can go negative: a food bank can be paid in shares to take a truckload of, say, unwanted pickles, so undesirable donations get absorbed by whichever bank values the shares more than it dislikes the pickles, instead of rotting because no one had standing to refuse them.
the payoff
The market now allocates roughly 300 million pounds of food a year across the network. Food banks self-sort by real local need rather than a planner's guess, and the negative-price mechanism specifically solved the chronic problem of unwanted donations sitting unclaimed until they spoiled.
what came after
Published as Canice Prendergast, 'How Food Banks Use Markets to Feed the Poor,' Journal of Economic Perspectives 31(4), 2017, and covered by NPR's Planet Money ('The Pickle Problem'), the system is now a standard teaching example of fixing a matching problem inside a nonprofit through market design rather than more resources or better central planning.
filed under
references
- [1]Wikipedia — Feeding AmericaWikipedia, 2026en.wikipedia.org
- [2]Prendergast — How Food Banks Use Markets to Feed the Poor, Journal of Economic PerspectivesAmerican Economic Association / JEP, 2017aeaweb.org