Why Are Kiwis So Cheap?

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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.

So I wrote to Will Masters, an agricultural economist at Purdue and co-editor of the journal Agricultural Economics.

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.

Modern views from Chicago-Booth
Give a nuanced view of truth,
Steven Levitt and John List
Made each of us a freakonomist.

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.

Bravo.

[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.]

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  1. Ryan Sandler says:

    Love the poem. :)

    It’s worth noting, though, that kiwis do actually grow in the U.S. In California at the very least.

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  2. rda says:

    I thought this was going to be about the frugality of New Zealanders.

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  3. Helen says:

    This makes me think of an interesting situation I observed when studying abroad in the UK last semester. In Scotland I could buy a pint of Guinness for ?2 or 3. But when I visited Dublin (where the Guinness factory is!), I couldn’t buy a pint for less than 6 Euro. Any ideas? Is this just Ireland capitalizing on tourists’ purchasing of its homeland drink?

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  4. Colin says:

    Sounds like it’s about time we give the US Postal Service some competition.

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  5. Sergey says:

    New Zealand famously got rid of all agricultural subsidies. Is this policy still going on?

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  6. Matt says:

    That poem made me super-proud of my Purdue econ degree.

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  7. Paul Clapham says:

    But, Colin, wouldn’t attaching a kiwi-fruit to a letter be kind of messy?

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  8. Geoff Cant says:

    I had the same first impression as rda – in New Zealand, the word Kiwi refers either to the bird, or to a New Zealander. If you’re talking about the fruit, then we call them Kiwifruit.

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