I’ve been eating a lot of kiwis lately. At the corner deli near my home, I can buy three for $1. They are delicious. Unless the stickers are lying, they come from New Zealand. At 33 cents apiece, a New Zealand kiwi costs less than the price of mailing a letter to the East Side. (And believe me, I consider a first-class stamp one of the greatest bargains ever.) How on earth can it cost so little to grow, pick, pack, and ship a piece of fruit across the world?
To make fruit matters more complicated, I can buy one banana (also imported) and one kiwi for about the same price as one apple, which may well have been grown as near as upstate New York. I talked about banana economics here; but the kiwi made me even more curious.
Most economists, as I’m sure you know, reply to such queries in verse, and Will is no exception:
Damn supply and damn demand:
Why cheap hogs and costly ham?
Bargain wheat, expensive flour,
The oldest villain’s market power.
Just one seller makes us nervous,
Like that U.S. Postal Service:
They may offer bargain prices,
But who disciplines their vices?
Middlemen have long been blamed
For every market that’s inflamed,
Yet better explanations come
From many a Hyde Park alum.
We let data speak its mind
No matter what Friedman opined
And find the price of fruit and veg
To be driven by the market’s edge.
Like the tail that wags the dog,
Marginal thinking clears the fog:
Sellers, buyers, traders too,
Interact and prices ensue.
A kiwi costs 33 cents
Simply because no one prevents
Another farm or New York store
From entering and selling more.
In contrast apples may be dear,
For reasons that will soon be clear:
Picking them’s below our station,
To lower costs we need migration.
Bananas have a different story,
Seedless magic, breeder’s glory,
Cheap to harvest and to ship,
Who cares if workers get paid zip?
Each crop’s method of production,
Where it grows and how it’s trucked in,
Satisfies some needs quite cheaply
While other costs will rise more steeply.
A buyer’s choices matter too,
For nonsense stuff like posh shampoo,
Prices are not down to earth,
The more you pay the more it’s worth.
Behavior is as behavior does,
Maybe some things are “just because,”
Much of life’s a mystery,
A habit due to history.
For prices, though, it’s competition
Plus tariffs set by politicians,
That determines whether we see
Such delightfully cheap kiwi.
[Addendum: A few commenters, and several other e-mail correspondents, wrote to say that I should really be referring to kiwifruits and not kiwis, since the latter -- especially in the headline -- could easily be mistaken to describe parsimonious New Zealanders rather than their furry little fruit. But I am an American, and in America we call the furry fruit "kiwi," just as our Australian friend Justin Wolfers calls a beet a "beetroot." So while I appreciate your efforts to improve my language, I believe it's best in this case to let things stand.]