Thursday, July 24, 2014

Pineapples, mangoes & a side of variables

Are we the only people who find the abbreviation "Econ 101" for Economy 101 kind of funny?

Can we go back for an instant to the grand econ 101 lesson about two farmers and their crop? In Europe, they might use tomatoes and potatoes or some other produce, we'll stick with the U.S. original pineapples and mangoes.

This is what the professor said:
Farmer Joe produces mangoes at 25 cents apiece and pineapples at 50 each.
Farmer Sue produces mangoes at 20 cents apiece and pineapples at 60 each.

The lesson to be learned, said the professor, is that Sue is better off if she buys pineapples from Joe, and Joe does better if he buys mangoes from Sue. This way they can both specialize on what they do best.

True as a mathematical and fourth grade logic exercise, but econ 101?

We cannot even compare the prices without a weight based comparison.
Do they need or want each others product?
Energy input, including transportation?
Pesticides, herbicides...?
What are they doing with the produce besides selling it to each other?
So, doing something cheaper than the other guy means "doing it best"?

The real lesson to us is this Econ 101 teaches how to ignore variables. But that's okay. And if this way of farming ever leads to a mango bubble, turn the surplus into booze, get very drunk and forget all your troubles.




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