A critique of the objective function utilized in calculating the Thrifty Food Plan

Abstract

The Thrifty Food Plan (TFP) is the basis of benefit allocations within the USDA’s Supplemental Nutrition Assistance Program (SNAP), which administers nearly $70 billion in benefits to over 42 million people annually. To produce the allocation of food within the TFP, the USDA uses a mathematical optimization model that solves for the daily apportionment across various food groups. The model is constrained by nutritional and consumption requirements to produce an “optimal” allocation. Despite the importance of the TFP, the computational solution developed by the USDA has received insufficient attention, with only a handful of articles written on the TFP optimization model. Here, we run three alternative objective functions that are simpler than the one used by USDA. Our first alternative objective function minimizes the sum of squared errors between the consumed market basket of goods and an allocated market basket of goods, the second alternative objective function minimizes the sum of the absolute value of the difference between the consumed market basket of goods and an allocated market basket of goods, and the third alternative objective function minimizes the weighted absolute deviation of allocations and actual consumption expressed as a proportion of observed consumption. A clear theoretical advantage of either of our methods is that they eliminate the need to arbitrarily set allocated consumption to non-zero values, as is the case for the logarithmic objective function used by USDA. In an operational sense, we find that our model formulations produce an allocation that fits actual consumption better than the objective function employed by the USDA.