Agriculture and Human Values 21: 27–35, 2004. © 2004 Kluwer Academic Publishers. Printed in the Netherlands. Expressing values in agricultural markets: An economic policy perspective David S. Conner Department of Applied Economics and Management, Cornell University, Ithaca, New York, USA Accepted in revised form October 30, 2002 Abstract. Many mechanisms now exist for consumers to express progressive values in purchasing decisions. Although demand for such goods has grown, these goods remain the purview of small niche markets. Focusing on the market for agricultural goods (and the choice between the paradigms of industrialized versus sustainable agriculture), this paper discusses three major reasons (market failures, entry barriers, and biased policies) why it is difficult for consumers to express their values for a more sustainable system in this way, and why policy change is needed to create a fairer playing field. The current policy, voluntary labeling, is inadequate. A new set of policies, including taxes and subsidies to correct market failures, is needed to create opportunities for consumers to support values such as health, community, and stewardship. Key words: Consumer values, Market failures, Markets, Organic label, Policy, Sustainable agriculture Abbreviations: SA – Sustainable Agriculture; IA – Industrialized Agriculture David S. Conner, PhD, is a Research Associate in the Department of Applied Economics and Management, Cornell University. He is a member of the Emerging Markets Group and the Northeast Organic Network (NEON). His research interests include local organic agriculture, consumer education and preferences, experimental eco- nomics, and policy analysis. He was an organic farmer and farm manager in Pennsylvania before returning to academia. Introduction In recent years, we have witnessed the growth of organic and sustainable agriculture and other products that appeal to consumers’ values. Increasing numbers of consumers are purchasing products that are friendly to the environment, produced without animal testing, return fair wages to workers and producers, etc. Labels touting traits such as “green,” cruelty-free, fair trade, no child labor and reflecting other progressive values are common today. Voluntary labeling has become the de facto policy for the expression of such values in the marketplace; it is up to the consumer to seek out and purchase goods with favorable traits, usually at greater search and monetary cost. Despite its rapid growth over the last decade (up to 20% per year, according to Dimitri and Greene, 2000), the market for organic and sustainable agriculture remains a niche market, quite small (about 2%) com- pared to the total sales of food (Dimitri and Greene, 2000; Cook, 1999). We should be heartened by past success, yet far from satisfied: the majority of goods purchased, in and out of agriculture, can usually safely be assumed to have the lowest permissible environ- mental and social standards unless otherwise noted (Grossman, 1981). Many believe that globalization has exacerbated this “race to the bottom” (e.g., Daly, 1999). Lowering these standards in pursuit of “com- petitiveness” may be a good way to sell products in the global economy, but it is less effective in sustaining a place where people would want to live. In days past when most of what people bought was produced in one’s own village or region, information on how a product was produced was easy to come by and the impacts would be felt much more immediately; those producing in a dangerous or exploitative manner could be boycotted and shamed by their neighbors, and the problem could be easily corrected. With the advent of specialization and integrated global economies domi- nated by trans-national corporations, information is harder to acquire, the impacts are less direct, and over- looking such breaches in values in exchange for a low price is much easier. This trend has brought both more choice and more responsibility to the consumer, who must trade off between lower price and higher ethics within a constrained budget. This paper focuses on the market for sustainable agricultural (SA) products. It discusses questions such as, why do so few people seem to express their values in the marketplace in this way? Why is it so difficult for such products to compete in the mainstream industrial food markets? Are voluntary labeling initiatives, such