“Are you kidding me?!” That was Susannah Morgan’s response to the phone call from Feeding America’s donation distribution center telling her to expect a semi truckload of 5 gallon buckets of pickles. Susannah was running a food bank in Alaska that belonged to the charity’s national network, and she depended on Feeding America to supplement the donations she got from local merchants. And yes, Susannah’s food bank was always in need of vegetables – but fresh vegetables, not pickles! (Do pickles even count as vegetables?)
The dispatcher sympathized with Susannah, but explained that her food bank was at the top of the list and pickles were the first thing Feeding America had received that would make it all the way to Alaska without spoiling. So, did she want them?
Because she knew the rules of the game, Susannah sighed and said she’d accept the shipment, even as she was mentally scrambling to figure out which soup kitchens she could pressure into making pickles a regular part of every meal. The rules, you see, say that when you’re at the top of the list, you’re offered a shipment of whatever is available at the time. You can refuse – because your food bank has to pay the trucking cost – but if you do, you go back to the bottom of the list. Plus, if you refuse, Feeding America may perceive your food bank as being less desperate for supplies and move you to a lower priority list. Not good. Faced with those incentives, Susannah accepted the pickles, and turned for sympathy to her Idaho food bank colleague who had recently accepted a truck load of potatoes. That’s right. Potatoes. In Idaho.
Fortunately, the directors of Feeding America were as unhappy with the misallocation as the food bank managers were, and they hired a team of economists from the University of Chicago to analyze the problem. The economists quickly determined that it wasn’t just a case of dumb people doing dumb things. Instead, the glitches in the system were the predictable outcome of the centralized decision-making rules Feeding America had adopted. The Chicago team proposed an institutional make-over. With the food bank managers’ reluctant approval, they created a decentralized, market-like process with daily online auctions where managers used fake money, called “shares,” to bid for the available truckloads of food.
As NPR’s Planet Money reports, the system worked well – well enough, in fact, to make even the most skeptical managers into enthusiastic supporters of the new rules of the game. This Hot Topic begins with Planet Money’s recent”Pickle Problem” episode, and uses the tools of economic reasoning to compare the ability of centralized vs. decentralized (market) institutions to process dispersed, ever-changing bits of information to satisfy people’s wants and needs – and to get Feeding America out of a pickle.
|In A Pickle (Students)
In A Pickle (Teacher Guide)
The FTE thanks Caroline Parrish (Hebron High School, Carrollton, TX) and Karen Yancy (Joshua High School, Cleburn, TX) for the idea, design, and original draft of this Hot Topic. Their lesson was edited, with permission, and any errors are the responsibility of FTE staff, not the authors. (Questions or comments? Please contact firstname.lastname@example.org.)