Sunday, May 28, 2006

Time for a shave

Whole Foods is big and getting bigger. WalMart will start selling organic food. Where will it all end?

Most economists are happy to have consumer choice be exogenous and mysterious. It is all in the eye of the beholder. So why agonize over the merits and demerits of all of the choices that people make?

Because agonizing over these choices is an ancient preoccupation that will not go away. The New Yorker of May 15 includes "Paradise Sold : What are you buying when you buy organic?" (by Steven Shapin). "What particular fungi, and trace elements lurk in the soil of your sustainable community farm? Does your friendly local farmer use a tractor or a horse? If a tractor, does it use fuel made from biomass? If a horse, are the oats it eats organic? If the oats are organic, does the manure with which they were grown come from organically fed animals? How much of this sort of knowledge can you digest?"

Are people making good or bad choices? Are they paying too much? Are the workers being compensated adequately (are the cash and noncash compenents of their pay the right ones)? Do the owners and/or the managers earn to much? How about the many distributors involved in the various supply chains? Many more such questions can be posed and debated ad nauseum.

I have not read Michael Pollan's The Omnivore's Dilemma, just his NY Times Magazine version. But I have read Tim Harford's The Undercover Economist, who reminds us that it is all about price discrimination. If there are enough people willing to pay enough extra for any attribute of any product, including the "organic" history of bananas (or whatever), then let them.

Occam's razor wins again.