The Week has a great story (hat-tip: Alex Tabarrok) about how Feeding America, which runs the largest network of food banks and is the third largest non-profit in the U.S., drastically improved its operations by adopting a market approach to solve its food distribution problem.

Supermarkets usually donate food directly to their local food bank. But large food manufacturers often donate to Feeding America headquarters, which then allocates this food across its nationwide network of food banks…

Before 2005, Feeding America allocated food centrally, and according to its rather subjective perception of what food banks needed. Headquarters would call up the food banks in a priority order and offer them a truckload of food. Bizarrely, all food was treated more or less equally, irrespective of its nutritional content. A pound of chicken was the same as a pound of french fries. If the food bank accepted the load, it paid the transportation costs and had the truck sent to them. If the food bank refused, Feeding America would judge this food bank as having lower need and push it down the priority list. Unsurprisingly, food banks went out of their way to avoid refusing food loads — even if they were already stocked with that particular food.

It shouldn’t be difficult to see the warped incentive structure and information shortfalls that would plague such a system. Indeed, the author notes:

This Soviet-style system was hugely inefficient. Some urban food banks had great access to local food donations and often ended up with a surplus of food. A lot of food rotted in places where it was not needed, while many shelves in other food banks stood empty. Feeding America simply knew too little about what their food banks needed on a given day.

After seeking the advice of four University of Chicago economists, Feeding America adopted an internal price and auction system to take advantage of the vastly superior ability of price signals to transmit information.

Here’s how the new system works:

Every day, each food bank is allocated a pot of fiat currency called “shares.” Food banks in areas with bigger populations and more poverty receive larger numbers of shares. Twice a day, they can use their shares to bid online on any of the 30 to 40 truckloads of food that were donated directly to Feeding America. The winners of the auction pay for the truckloads with their shares.

Then, all the shares spent on a particular day are reallocated back to food banks at midnight. That means that food banks that did not spend their shares on a particular day would end up with more shares and thus a greater ability to bid the next day. In this way, the system has built-in fairness: If a large food bank could afford to spend a fortune on a truck of frozen chicken, its shares would show up on the balance of smaller food banks the next day. Moreover, neighboring food banks can now team up to bid jointly to reduce their transport costs.

Note everyone was thrilled with the idea, however:

Initially, there was plenty of resistance. As one food bank director told Canice Prendergast, an economist advising Feeding America, “I am a socialist. That’s why I run a food bank. I don’t believe in markets. I’m not saying I won’t listen, but I am against this.”

But the Chicago economists managed to design a market that worked even for participants who did not believe in it. Within half a year of the auction system being introduced, 97 percent of food banks won at least one load, and the amount of food allocated from Feeding America’s headquarters rose by over 35 percent, to the delight of volunteers and donors.

I can’t help but wish for some follow-up with Ms. Prendergast to see if her experience with the market system, and its superiority over the prior approach, has caused her to rethink her preference for central planning over markets. I argue in my column at EveryJoe this week that greater exposure to functioning markets, such as those popular in the emerging sharing economy, poses a threat to the political left. So her answer could help determine if I’m right.

You wouldn’t know it from the popularity of Thomas Piketty’s anti-capitalism treatise, or the Pope’s routine railing against free markets, but the world is getting ever more prosperous. The dramatic decline in global poverty in the last few decades is nothing short of remarkable.

According to a recent World Bank report, extreme poverty is expected to fall below 10% by the end of 2015, which will be a first in human history. I mentioned a few other improvements in a recent EveryJoe column chastising the Pope for spreading economic ignorance:

Across a variety of metrics, life continues to get better and better. Extreme poverty – measuring those living on $2 per day or less – has been cut in half since 1981 and will be all but eliminated by 2030. Global GDP per person has never been higher. Pick a measure of human wellbeing and it’s virtually the same story over and over again: life expectancy is up, infant mortality rates have plummeted, women are better represented in governments than ever before, etc. etc.

The world is simply not the horrible place the pope describes. It is better than it ever has been and we have precisely those institutions that he savages to thank for it.

Over at Cato, Ian Vásquez ties the decline in global poverty to the spread of economic freedom:

Using updated methodology, the World Bank recalculated poverty figures back to 1990. The new data track closely with previous Bank figures, which I use in the graph to show the fall in poverty since the early 1980s when 43 percent of the world’s population was extremely poor…The drop in poverty also coincides with a significant increase in global economic freedom, beginning with China’s reforms some 35 years ago and the globalization that followed the collapse of central planning in the late 1980s and early 1990s.

Much more could be said on that point, but there are any number of examples demonstrated the superiority of market freedom when it comes to producing wealth (Argentina versus Chile, Venezuela versus Singapore, etc.). Yet the more things get better, the more we seem to worry that they’re not. As the totality of social problems decreases, we devote more energy to those that remain. Which in many ways is healthy. A benefit of being better off overall is that we need not tolerate things which we had no choice but to accept in the past.

But we must be careful not to lose perspective. Exaggerating current problems can lead to poor policy choices if it causes us to disregard the means by which we achieved our current prosperity in the first place.