Market Power

Musings by an academic economist on the power of markets and the power over markets.

Sunday, February 06, 2005

The Comparative Advantage for Fruit

This weekend was shopping weekend. Yesterday I went to the butcher shop 8 miles up the road in Nicollet, Mn to get some fine meats and deli items. Today I went to Cub Foods to get the rest. My wife asked me to get some peaches and nectarines, and I found a display with some peaches and nectarines from South America. They were quite a bit more expensive ($1.58 a pound) than those we can get in the summer, but at least I had the opportunity to get them.

The fact that we trade with other nations makes this sort of pedestrian purchase possible. The other choices would be 1. to only have peaches and nectarines available in the summer 2. set up greenhouses so they could be grown domestically year round. Since no-one has done the latter, I'll bet that it wouldn't be cost effective to do this. The fruit would probably cost something like $4.00 a pound (I'm guessing). But by trading with the South American farmers, we get peaches and nectarines (no, not Peaches and Herb) year round and we free up some of our resources to do other things. In exchange, the South American farmers get income that they can spend.

Lastly, the example shows us that who has a comparative advantage in a good may change back and forth. At one time of year, the US may have it. At another time of year, another country may have it.