Applying the System Asset Pricing Model
Decision Accounting

Applying the System Asset Pricing Model to Ultra-Processed Food: Measuring the System Welfare Cost of Engineered Dietary Harm

core
Core Claim

Every dollar of UPF processing-premium industry revenue is associated with $6.20 in system welfare

The System Asset Pricing Model (SAPM) translates CAPM logic to welfare economics: system-adjusted payoff = private payoff minus system beta times welfare at risk. For ultra-processed food, private payoff is 293B/yr from snack and SSB margins; system beta is 6.2 [5.2–7.6]; system welfare cost is 1.81T/yr.

bridge
SAPM Bridge

CAPM becomes SAPM: price risk → welfare risk

CAPM: E[Ri] = Rf + βi(E[Rm] – Rf). SAPM: ΠSA = Π – βW·W. System beta measures covariance of private payoff with system welfare destruction.

extraction
Scale of Extraction

UPF supplies 60% of US calories; processing premium extracts $293B/yr

Farmers receive 1.3¢ of every soda dollar and 9.7¢ of every snack dollar. The remaining 90–99% is the processing premium: corporate margins disconnected from nutritional value. The Hall et al. RCT showed 508 excess kcal/day on a UPF diet.

failure
Why Pigou and Coase Fail

Diffuse harm, captured regulator, infinite transaction costs

Pigouvian taxation requires a benevolent regulator; 95% of the Dietary Guidelines Advisory Committee had industry COIs. Coasean bargaining requires low transaction costs; organizing 330M consumers against Coca-Cola and the ABCD grain oligopoly is impossible.

channels
Six Channels

Metabolic disease alone costs 1.10T/yr; five other channels add 0.71T

Channel 1 (metabolic disease) is anchored by Hall et al. RCT and Rockefeller Foundation $1.1T estimate. Channels 2–6: addiction/behavioral hijacking, agricultural distortion, environmental degradation, governance capture, intergenerational harm.

beta
Aggregate Beta

βW = 6.2 [5.2–7.6]; 100% of Monte Carlo draws show βW > 3.7

Channel-weighted system beta: SW = 1.81T / Π = 293B = 6.2. 100,000 Monte Carlo draws confirm βW > 5.0 in 94% of runs. Break-even mitigation rate μ* = 0.87: 87% of damage must be eliminated before net positive social value.

frontier
Pareto Frontier

Marginal expansion is catastrophically value-destroying

The Pareto System Frontier is strongly concave: marginal βW (10.0–12.9) exceeds average βW (6.2) by a factor of 1.6–2.1. Each additional dollar of processing-premium extraction destroys more welfare than the last.

rank
Cross-Domain Rank

UPF ranks second-highest βW domain calibrated, below PFAS

UPF βW = 6.2 exceeds Bitcoin (5.0), frontier AI (7.4), auto emissions (6.8), and antimicrobial resistance (2.1). Only PFAS (35.2) is higher. The industrialized food system receives far less regulatory scrutiny than comparable domains.

class
Classification

Institutional failure, no impossibility theorem, high system beta

Under the PST classification grid, UPF is an institutional failure: welfare cost arises through established market institutions and captured regulatory bodies. No formal impossibility blocks intervention; Chile, Mexico, UK, Finland, and Brazil have shown regulation works.

change
What It Changes

SAPM reveals a $1.52T/yr negative system-adjusted payoff that standard metrics miss

Conventional metrics (consumer surplus, employment, GDP) show UPF as successful. SAPM corrects three errors: treating revealed preference as revealed welfare, netting processing premium against zero instead of cooperative baseline, and zeroing out governance capture costs. The binding constraint is political, not theoretical.

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