Why Opacity Pays

The previous article ended on an uncomfortable question. Akerlof showed that opacity impoverishes markets. Spence and Stiglitz showed how to escape it — through signaling, through sorting. So everyone should have an interest in transparency: producers, buyers, states. Then why is opacity so resilient? Why does it survive fifty years of economic theory, thirty years of food scandals, twenty years of labels?

The most honest answer fits in three words: because it pays.

To understand to whom, and why this isn’t a scandal but a structure, we need a fourth economist. Ronald Coase, Nobel laureate 1991, didn’t work on hidden information like the previous three. He asked a question even more elementary — so elementary that no one had asked it before him.

The Hundred-Year-Old Question

In 1937, Coase is twenty-six years old, and he publishes an article titled “The Nature of the Firm.” His question: if the market is so efficient, why do firms exist at all? Why doesn’t everything simply get exchanged directly, individual to individual, on the open market?

His answer founded an entire branch of modern economics: because using the market is costly. Finding the right supplier costs something. Checking what they sell costs something. Negotiating costs something. Making sure the contract will be honored costs something. Coase gave these frictions a name: transaction costs. And from them he drew a law of immense reach: organizations — firms, cooperatives, supply chains, intermediaries — do not exist by accident or by parasitism. They exist wherever they reduce transaction costs. And they reorganize every time those costs change.

Keep this law in mind. It explains the entire structure of the food supply chain — and it foretells what’s happening to it right now.

What Middlemen Are Really For

Let’s apply Coase to what separates a market gardener from a plate.

Between the two: wholesalers, national wholesale markets, buying groups, processors, distributors. The easy narrative — heard at every farm crisis — sees this chain as an accumulation of parasites. Coase forbids that ease. If these links exist, it’s because they solve real problems: aggregating volumes that no restaurateur will ever go and fetch farm by farm, smoothing out seasonality, guaranteeing payment, running cold-chain logistics, absorbing unsold stock. All of this is real transaction cost, and whoever takes it on deserves their margin. A food chain without intermediaries isn’t an ideal — it’s sixty-seven million consumers doing the farm rounds themselves.

But Coase also lets us ask the question the easy narrative misses: within each link’s margin, what portion pays for a service rendered, and what portion pays for something else?

Because there is one particular transaction cost in food, the most expensive of all: verifying. Where does this batch come from? What has it been through? Is what the delivery note says true? For a century, answering these questions was so costly that almost no one paid to do it. And when verification is prohibitively expensive, whoever sits in the middle of the chain holds something precious: they alone know what they bought, from whom, and in what condition. Upstream doesn’t see where its output goes; downstream doesn’t see where its supply comes from. Between the two, information stops — and that interruption has a price.

This is what should be called the opacity rent: the fraction of a margin that pays for neither logistics, nor aggregation, nor risk — only for the fact that no one can compare. It is the monopoly of no single profession. It isn’t dishonesty: it’s a Coasean equilibrium, perfectly rational, in which information asymmetry persists simply because dispelling it cost more than enduring it. No one built opacity. It is the residue of everything that was too expensive to verify.

What Happens When a Cost Collapses

Here is why Coase is the most timely economist in this series. His law doesn’t just say why chains exist — it says what happens to them when a transaction cost collapses. Answer: they don’t disappear, they reorganize around the new cost.

History has confirmed this every time. The shipping container collapsed the cost of transport: world trade reorganized itself. The internet collapsed the cost of finding information: entire matchmaking professions reinvented themselves — travel agencies didn’t disappear, but none of them still lives off simply holding a catalog the customer couldn’t otherwise access.

Now, we saw in the article on Spence which cost is collapsing in food: the cost of proof. Sensors for a few euros, production events timestamped the moment they occur, artificial intelligence that continuously cross-checks what an auditor used to verify by spot sampling. Verification, once prohibitively expensive, is trending toward zero marginal cost.

Coase’s law then allows a precise prediction — one more subtle than “the end of middlemen.” When the cost of verification collapses, every link in the chain sees its margin exposed to a new question: what exactly does it pay for? Whoever’s margin pays for a real service — logistics, volume, risk, cold chain — has nothing to fear: their usefulness instead becomes visible, hence defensible, perhaps better paid than before. Whoever’s margin contained an opacity rent sees that component, and only that component, melt away. Transparency doesn’t eliminate the links. It eliminates the shadow between the links — and re-prices each one for what it truly contributes.

That is why food transparency will arrive neither through virtue nor through decree, but through economics: not when everyone wants it, but when verifying costs less than not verifying. We’re almost there.

The Registry as Infrastructure

This is exactly VeraTrace’s wager: to build the infrastructure that moves verification from the regime of the audit — rare, expensive, by spot sampling — to the regime of the stream — continuous, automatic, at near-zero marginal cost. A registry of those who prove, where a product’s passport travels with the product, from plot to plate, through every link.

And this must be said plainly, because Coase taught us as much: this registry is not directed against the chain. The wholesaler who keeps the cold chain intact, the wholesale market that aggregates the output of three hundred farms, the distributor who puts the product within reach — all of them render services that proof will finally make visible, and therefore worth paying for. The only thing the registry makes impossible is charging for someone else’s ignorance. That’s bad news for one component of margin. It’s bad news for no profession at all.

What remains, then, is the ultimate question of this series. If proof becomes the central asset of the food supply chain — more valuable than the brand, more durable than the label — then: who owns it? Who governs the registry? Recent history is littered with agricultural-data platforms that died from answering this question poorly. It so happens that one economist devoted her life to the governance of what no one should own alone — and that she was the first woman ever to receive the Nobel Prize in Economics. Meet Elinor Ostrom.