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December 13, 2006

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Maybe it's because I don't eat much chocolate of any sort, but I'm feeling gloomy and miserable: a species of dolphin has gone extinct.

rilkefan: that's awful. But cheer up: there's been a significant breakthrough in AIDS prevention:

"Circumcision appears to reduce a man’s risk of contracting AIDS from heterosexual sex by half, United States government health officials said yesterday, and the directors of the two largest funds for fighting the disease said they would consider paying for circumcisions in high-risk countries. (...)

Uncircumcised men are thought to be more susceptible because the underside of the foreskin is rich in Langerhans cells, sentinel cells of the immune system, which attach easily to the human immunodeficiency virus, which causes AIDS. The foreskin also often suffers small tears during intercourse.

But experts also cautioned that circumcision is no cure-all. It only lessens the chances that a man will catch the virus; it is expensive compared to condoms, abstinence or other methods; and the surgery has serious risks if performed by folk healers using dirty blades, as often happens in rural Africa. (...)

Circumcision should be used with other prevention methods, he said, and it does nothing to prevent spread by anal sex or drug injection, ways in which the virus commonly spreads in the United States."

Yeah, I was happy to see that, though I have a horrible fear you're going to post something a year from now about how many men in Africa are getting circumcised by unclean instruments and being infected. Or thinking they're protected and refusing to use condoms.

Anyway, Rilkekind gets to keep his gallbladder until further notice, so I'm going to go be happy.

Speaking of market-based solutions, there's a plethora of "socially responsible" mutual funds out there for investors who prefer not to have their money in ExxonMobil stock or somesuch.

In response, a couple enterprising conservatives came up with the idea of a "socially irresponsible" fund, which basically invested in the sort of companies that would piss liberals off. While they apparently attracted a lot of investors, sadly it seems that the fund simply didn't perform very well. The market always gets the last laugh.

Thanks for the link, Hilzoy. I take it we don't disagree. One small point after a quick and sleepy reading of your post: the preferences aren't *brute* preferences; they're preferences that are contingent on various beliefs about causal impacts and so on. The Econ. article, which I saw, was annoyed by, & meant to blog about, was doing the usual schtick of "aha! the actual effects of your granola behavior are not what you intend at all! let's all drive trucks." I can imagine, if certain halfway plausible claims about revenge effects are true, that the *sorts* of arguments the article offered would be convincing, maybe more so the more one likes consequentialism.

Good thing you drink diet coke.

I'm not opposed to every kind of thread-drift, but could people try not to segue from "circumcision" to "kids with machetes" too often?

and what exactly did FL mean by, or do you mean, by "kids with machetes" to begin with? Some references seem to suggest "children using machetes to hack at vegetable materials in pursuit of agricultural ends", see references to child labor. But then you have a reference at the end to children being "hacked with machetes", which suggests a very different thing.

Very different. Employing under-age children is not a good thing, and it was one of the liberal triumphs of the previous century to outlaw it in the face of resistance from corporate interests. However, employing children is relatively benign by comparison to hacking at them with machetes. We've gone from coca to Tutu very suddenly, and readers who are trying to calibrate their outrage-meters may not even know which scale to use.

Unless maybe "hacked with machetes" means some third thing altogether, e.g. that these are *digital* machetes whose operating code is being altered in unauthorized ways, and the children's code is also being...?

Please clarify.

The lack of support for Fairtrade among conservatives and libertarians (in the UK, too, I've noticed this) is due to the disconnect between what they claim to believe when asked to outline the moral principles by which they live, and the beliefs that are actually important to them and that they act on - or even bloviate about in coffee shops: I had to* spend an hour over lunch telling one particularly pompous libertarian that he had got his facts wrong before he finally quit. (I worked for Oxfam for a year: he'd read a couple of articles in the Economist.)

*"had to" - of course I could just have shut up and let him bloviate himself out. But I was trying to impress a girl. ;-)

I'm *extremely* sleep-deprived, so this might not make much sense, but: I didn't understand the Economist's argument. How does the subsidy induce more buyers to get in the market on anything other than the terms of Fairtrade? If FT coffee trades at $1.26 and non-FT at $1.21, then additional suppliers would be motivated to come in only at the FT price. If there is a glut of FT producers, then FT goods have to be sold on non-FT markets. This might depress the market on the short-run, but over time, these suppliers know that they'll end up getting $1.19 or $1.20 for their coffee, and they'll stop. All is fine: we just have two separate markets for coffee.

More generally, why assume these goods are substitutes? In some sense, they are not. Consumers willing to purchase one are either economically or ideologically not motivated to purchase the other.

Ara: I didn't understand the Economist's argument.

That's because, even sleep-deprived, you can see it is total cack.

Really, any time I hear this kind of argument that Fairtrade is BAD it usually means that some conservative or libertarian has just read yet another anti-Fairtrade article in the Economist, and is repeating it back at me: they like these arguments because it fits their deep-seated feeling that any action that does positive good for low-income people/ordinary workers must be bad.

Yes, Jes. I don't understand the conservative/libertarian opposition to market based solutions either. Look at emissions trading.

What it tells me is that the old quip about conservatism being and ancient and respectable intellectual tradition of finding justifications for selfishness has some truth to it.

FL: I am completely open to arguments of the form: as a matter of fact, what you think is good for X (X=the environment, social justice, etc.), but in fact it is not. Thus, I read an article a few years ago that said that paper bags, which a lot of people use because they're better for the environment, are actually worse once you factor in the energy used to transport them (since they're heavier), which apparently outweighs other advantages of paper over plastic. (Cloth being, of course, the liberal's best choice.) Fine: it seemed to check out, so when I didn't have the old cloth bag handy, I switched.

On the other hand, the Economist's argument seemed to be that (a) the point of FT is to drive prices higher (which it isn't); in fact, it will drive them lower on balance; so there, silly liberals! I took this to be just nuts, and nuts in a way that had to be driven by a failure to appreciate exactly how sympathetic conservatives ought to find this stuff. It's as though registering preferences via the market suddenly became a strange and suspect activity to them.

You are of course right that these aren't brute preferences, but then, neither is a preference for low-cholesterol food. While that does open up room for factual errors, it shouldn't alter the status of these choices as Ye Olde Standard Use Of The Market.

Ummm...lack of support for and opposition to: two different things. I reserve the right to promulgate the fickle and lazy aspects of the market.

Harald has it right, I think. The kneejerk reaction to consumer choice when it's employed for social justice purposes shows that with some people the appeal of the "invisible hand" argument is the justification it gives for being a selfish jerk. If someone brings up a way to use consumer choice in a non-selfish way, it hurts the cause and sullies the doctrinal purity of the Church of Rand. For people like this, the lack of information a price tag gives about working conditions or the harm to the environment isn't a bug in the capitalist system--it's a desirable feature.

Again, I have to chime in, here: I'd guess that according to Rand's own views on human freedom, she'd have declined to purchase anything that she knew had been produced using slavery.

That's if she was being consistent.

hilzoy sez:

> If I thought I had to choose between my
> sense of humor and having kids yanked
> out of school and sent to pick cocoa...

Why do you think they're being yanked out of school?

Personally, I think it would be great if all West African children had schools to go to. I suspect, though, that if the market for cheap cocoa were suddenly to disappear overnight, these kids would just be forced into some other kind of servitude.

hilzoy sez:

> If I thought I had to choose between my
> sense of humor and having kids yanked
> out of school and sent to pick cocoa...

Why do you think they're being yanked out of school?

Personally, I think it would be great if all West African children had schools to go to. I suspect, though, that if the market for cheap cocoa were suddenly to disappear overnight, these kids would just be forced into some other kind of servitude.

DJ: I'm actually not so sure. I suspect something like the following: some conservatives -- a non-negligible, though also non-100%, number -- have a stereotype of liberals. This view includes a bunch of psychological assumptions, to a much greater degree than liberal stereotypes about conservatives in general. Some conservative responses to things can (I think) best be read as: You (liberals) say we should do X; you must be saying it for this psychological reason; I think your psyche is all messed up; so I reply: do X? Hah!

Examples: there have been moments, on RedState, when I have thought that the mere fact that some proposal (X) will have good effects on distant people counts as a reason for some of them to reject X. (X will benefit the distant Botswanans. Oooooh, say the liberals: the Botswanans! They're the ones we really care about! America: it sucks. But Botswana makes us go all mushy inside! Plus, if X involves government action of some sort, then that just shows that liberals want government to do everything! One more job for the nanny state! -- Well, liberals: screw you and your Botswana-benefitting proposal! -- Note the absence of any reason to think that the proposal is in any way bad.)

(And note further the bizarre result that the mere fact that a proposal does good for someone ends up being a reason not to do it.)

Also: I suspect that a lot of conservative antipathy to diplomacy is like this. One reason to be suspicious of proposals to talk to some country is if you think that the people making the proposal are motivated by a desire to talk to everyone, to make everyone like us all the time, and never ever ever to use something so icky as force; combined with a secret disdain for our own interests that makes them unwilling to stand up for the US, ever, and might even make them eager to capitulate. Suppose you thought that liberals were like this: you might conclude that any proposal to engage in diplomacy was a sign of a secret desire to capitulate, and so oppose it. Of course, that would be stupid -- the alleged fault with liberals is being too eager to negotiate, which doesn't imply that there is no room for negotiation ever -- but in practice, for some conservatives (NOT ALL!!) I think that the result is a reflexive "No, dammit, we're going to stand tall and fight!", regardless of whether fighting is, in fact, the best thing to do.

Similarly here, I think. From the claim: "liberals think "oooh, those poor distant children, so unlike the preborn American babies whose murder I blithely support! I am convulsed with guilt, and will therefore make a big production out of buying Fair Trade products, while making everyone around me miserable", some people draw the conclusion: Fair Trade? Screw your Fair Trade! Especially given the suspicion that, qua liberal, this must involve some sort of meddling with the pure processes of the free market.

All I want to say is: no. All that's needed is a preference for no child labor. That's all. All the rest is extraneous.

I generally do not refrain from buying things on the grounds that the people who pay them are not well enough paid, unless there is an alternative that allows me to buy stuff made by people like the badly paid workers, only better paid. -hilzoy

It's a bit off the slavery topic, but I think this could use more clarification. For example, if Levis moves from the US to Mexico or the Marianas, I think that should encourage people to buy Carhartt (so long as it is still made in the US). This seems a different case that Peru vs Switzerland than you give, because it punishes corporations for seeking low wages through exploiting labor. That said, if Levis paid Mexican workers what they were previusly paying American workers, then I wouldn't have an issue. Would you disagree?

What Donald Johnson said.

I simply do not understand conservative hostility to social screening of personal economic decisions - you'd think it's exactly what they'd want, namely a private sector means of influencing the market to reflect the desires of the consumer. Actually, I don't understand how anyone can *not* socially screen their decisions about spending and investment while still claiming to be a moral person. If you're indifferent to the source of your wealth (either through investments or through savings on purchases) you're simply amoral. Really and literally - if morality is not a factor in making a decision which impacts other people that decision is not moral.

A lot of conservatives shrug this off based on simplified economic models that mystically make the simple act of participation in the market a moral good almost by definition, but they are wrong for reasons Hilzoy and others have already pointed out.

The Economist's logic is not clear, but I think it goes something like this.

Say non-FT coffee sells for $1.00, FT for $1.26. Now, there is some land that could produce non-FT coffee profitably if the price were $1.10, but prior to FT the land is used for something else. FT comes along and the land owner realizes that complying with FT will cost only $.10, so now this land is used for FT coffee, at a substantial profit. Hence more coffee is produced, and this is "inefficient use of resources" in the sense that the "natural" price is $1.00.

I'm not sure that's right. The whole notion of efficiency here rests on what consumers are willing to pay, not on any inherent characteristics of the land. If, for some non-FT reason, the price of coffee went to $1.12, the land in question would be used for coffee and economists would be happy about it. I don't see the difference.

Suppose car buyers develop a strong preference for leather seats instead of cloth, and the price of leather rises, more resources are shifted to leather production, etc. Looks just the same to me.

BY: that's why I think there has to be this implicit assumption: preferences for leather seats appropriately influence consumer choices, and thus incentives to producers; preferences for no child labor, by contrast, are illegitimate and weird, and acting on them is an attempt to mess with the free market.

Which I don't understand at all.

The standard libertarian line is that the law ought not impose moral choices beyond a basically level playing field, because moral choices should be made and acted upon privately. But then in practice any effort to deal with the marketplace as a moral rather than a purely self-interest-maximizing agent is denounced as meddling. It seems pretty clear that some free marketers haven't quite thought through what their language of leaving moral choice to private parties might mean in practice, and others don't actually want moral choices to affect the market at all, particularly not when it might inconvenience htem.

It seems to me that there is a vocal contingent of reasonably educated people who never really wanted to have to ever think about anything larger than their self-interest and entertainment, ever, and who find the current moment a good one for letting more and more of that out. I feel sometimes when I watch the right side of the blogosphere that I've stumbled into a live-action reenactment of John Carpenter's The Thing, as one individual after another dropst he mask of humanity. Some simply revel in the brutality, some gussy it up with intellectual but amoral posing, but it always comes down to the same thing: any other concern of any sort is worth heeding if, and only if, it absolutely doesn't hinder self-gratification of the immediate kind. Nothing else can be allowed to impinge on the seizing of what one wants.

It seems less and less likely to me that skating along glibly in hopes that the gap will close anytime soon will work as a defensive strategy, either.

Hilzoy, I think even preferences against leather seats would be viewed as illegitimate and weird.

It pays to be wary of anything quoting Harford or the Undercover Economist. I don't have the reference here (at home), but the most recent Journal of Economic Literature had a review. The bottom line: he bungles even Econ 101.

Just to chime in, I have no problem whatsoever with people trying to tailor their buying habits to whatever they perceive as being moral considerations. I think there is a huge difference between people using prices to signal preferences and having the government dictate prices. The first is EXACTLY how the market is supposed to work, while the second is not.

But I think the Economist's point is a bit more subtle than that. It depends on why you are buying FairTrade's argument. Is the argument only that coffee workers don't get paid enough for making the coffee we like, or is it that we are exploiting poor countries by putting them to work making our coffee? If your concern is the former, FairTrade makes a lot of sense. If your concern is anything at all like the latter, your price signal isn't necessarily helping. You are propping up the coffee industry which will provide incentives NOT to go into other industries which might lead toward an even better economy for that country. It depends on how targeted your concern is.

Seb: I don't know about others, but I'm closer to #1 than to #2. (In fact, since afaik coffee can't be grown in most places, the fact that it's being grown where it is seems an odd thing to object to -- sort of like objecting to the fact that we don't mine all our own diamonds here in the US.)

Only 'closer to #1' since my actual preferences aren't primarily for higher prices but for no child or slave labor, decent labor practices (voluntarily adopted in response to market incentives!), and environmental sustainability. Which just makes the Economist's argument look odder.

I mean, they have a point about the effects on prices, but no point at all if the main motivation for buying FT is something like my set of concerns.

or is it that we are exploiting poor countries by putting them to work making our coffee?

That can't be right, though, can it? The point isn't that we are putting them [whatever that means in context] to work making our coffee which is ipso facto exploitation, it's that the particular way in which coffee is currently produced is exploitative. In other words, unless one has an inherent opposition to coffee the issue is one of exploitation rather than the coffee industry per se.

There might, I hasten to add, be other ways in which one might oppose the coffee industry -- for example, the actual act of farming coffee beans might be environmentally destructive, or one might be religiously opposed to it* -- but I don't think that's what you're talking about here.

* Far-fetched in the particular instance of coffee, of course, but not at all in other industries like the meat or alcohol industries.

Sebastian, if a consumer is concerned that we are "exploiting poor countries by putting them to work making our coffee," then the only moral choice is to buy domestically-grown coffee. Since coffee-buyers, by and large, are already at peace with buying coffee from foreign countries, the buyer making a moral judgment about the issue is going to send his money to a place where he or she can be assured that the individual grower is not getting exploited on the deal, making a case for buying fair-trade coffee.

I still have no idea what that reference to "kids...hacked with machetes" means in the last paragraph. Are there allegations that the children are being attacked by machete-wielding assailants? And if so, isn't that an entirely different issue from the child-labor issue? Am I just missing something obvious?

Hey, there's always Kona.

I think Seb has hit the nail on the head. Just as farm subsidies cause some ecological damage by incentivizing people to use marginal land for farming, fair trade coffee may have similar effects. And the article seems to have a valid point, which is that if everyone is making product X, profit margins will necessarily be low and producers would be better off if they shifted production to a more profitable crop.

I'm curious why the article draws such opprobrium, actually. The conclusion seems quite moderate: choices come with a price tag. This is not a simple issue; buying Fairtrade products may make people somewhat better off in the short run, but harm them in the long run by removing the incentive to shift to something that would bring in more money.

On a related note, I do wish we would do away with the asinine appellation 'organic.' Unless some miraculous transformation is occurring when foods aren't grown using 'organic' methods, they're not transforming into rocks, metals, and other inorganic substances.

Also, Reason Magazine had a good piece on fair trade coffee earlier this year.

"Sebastian, if a consumer is concerned that we are "exploiting poor countries by putting them to work making our coffee," then the only moral choice is to buy domestically-grown coffee. Since coffee-buyers, by and large, are already at peace with buying coffee from foreign countries, the buyer making a moral judgment about the issue is going to send his money to a place where he or she can be assured that the individual grower is not getting exploited on the deal, making a case for buying fair-trade coffee."

This would be true in a perfectly considered buying choice. I'm not sure everyone really thinks about it that way. (Please understand I'm ok with the choice even if not carefully considered, I'm just exploring what is going on around the choice). Take the minimum wage for instance. Anyone who understands anything about economics understands that if we raised the minimum wage to say $30 per hour that it would have very noticeable and negative effects (most likely extreme inflation and some unemployment). The effect of small increases is disputed, but the effect of large increases is not. But there are lot of people who don't really understand anything about economics. I distinctly remember in college some people suggesting that we could easily multiply the minimum wage by 5 and that everyone would be better off. Hopefully they get good information somewhere at some point.

Sorry, I'm drifting. I think the problem in conservative perceptions of liberals comes from experiences like that. It isn't fair, it probably isn't even representative but there you are.

So, for those who want higher prices for coffee workers, fair trade is fine. For those with other notions of corporate exploitation of underdeveloped countries, it is awful. The first view is of course the well-considered view. The second isn't, but that doesn't make it a non-view.

I do wish we would do away with the asinine appellation 'organic.'

Yeah, I've always hated that myself.

Still, "organic" does have some dependable meaning in this context, even if it has to be further explained on the product label. For instance: we were concerned about our kids getting hormones through cow's milk, so we started buying organic. It's lots more expensive than mass-market dairy, but we don't drink all that much milk.

buying Fairtrade products may make people somewhat better off in the short run, but harm them in the long run by removing the incentive to shift to something that would bring in more money.

I feel compelled to note that the question of simply bringing more money in (for whom, and how) is a bit more complicated than that and I don't think this is being acknowledged in the discussion. Some crops or extraction, while presenting opportunities to bring in more money, may have adverse effects on the environment or on the sustainability of the industry. Fair Trade coffee can also be argued to support more sustainable, environmentally sound, methods of growing, something which the Reason piece only mentions to ridicule. There is no free lunch and moving to something that may bring in more money is not cost free, so I don't think it is simply providing opportunities for social justice, but taking a more conservative approach to change (which doesn't seem to easily obtain when you have a large international conglomerates trying to maximize profits)

I wonder if the contrarian opposition to, say, Fairtrade works like this: those lefties are saying I'm [morally] obligated to buy fairtrade goods, but by god as a libertarian I assert my freedom, so I'll stick it to those who would illegitimately constrain me by buying Machete-brand coffee. So it's a confusion about the nature of the obligation, or a conflation of moral and legal requirement, or something along these lines. If so, Kant spins in the grave.

I wonder if the contrarian opposition to, say, Fairtrade

Wait...there are actually people who are actively opposed to FairTrade? There are people boycotting FairTrade? Or are there people simply poking fun at it?

Well, Sebastian, first of all, you do kind of concede hilzoy's point that libertarians and right-wingers seem inherently opposed to making moral choices through choices in the market based on their stereotypes of liberals leading them to think, "liberals like it, so it must be bad, and I will do the opposite." Next, one can find that certain corporate farming practices and commercial exploitation in foreign countries are dispicable and choose to send one's money towards companies whose practices are less dispicable which is, of course, the point of many of these commercial endeavors.

Sebastian-

I don't understand the contrast between your two positions on why people might buy fairtrade. Your second position: is it that we are exploiting poor countries by putting them to work making our coffee? seems to be identical to the first, in that instead of exploiting them we could pay them better. Who would say that we shouldn't increase the producer's wages because they're still exploited afterward? What kind of exploitation do you mean?

I think Seb has hit the nail on the head. Just as farm subsidies cause some ecological damage by incentivizing people to use marginal land for farming, fair trade coffee may have similar effects. And the article seems to have a valid point, which is that if everyone is making product X, profit margins will necessarily be low and producers would be better off if they shifted production to a more profitable crop. - Andrew

First of all, may have similar effects and has similar effects is a big difference in the same sense as Hilzoy's original 'if I find out it's not actually better then I won't do it' sense. There's no reason to assume that is happening.

Second, none of this is attentive to who owns the land and who makes decisions. Standard coffee may have perverse incentives because capital is held by people distant from the site of production. Increasing the amount farmers get from the same production might also deter use of marginal lands because they don't need those areas to be productive to make the same amount they were making before. Financial constraints can cause degradation too.

Last, I think that fairtrade might "harm them in the long run by removing the incentive to shift to something that would bring in more money." is pretty perverse logic. It assumes there's some industry waiting to pay great wages to peasants and that farmers would be interested in such a shift out of coffee growing even if it existed.

"I don't understand the contrast between your two positions on why people might buy fairtrade. Your second position: is it that we are exploiting poor countries by putting them to work making our coffee? seems to be identical to the first, in that instead of exploiting them we could pay them better."

I'm trying to explain an argument that I don't at all believe, so I'm sorry if I'm not super-clear but they aren't the same thing. From that point of view the exploitation is not just paying them too little. The exploitation is in convincing them to do the menial work of growing the coffee for the benefit of our morning enjoyment. It is similar to the Ehrenreich argument that hiring a maid is exploitive not only if you don't pay enough, but also because paying someone else to clean up your messes is an inherently exploitive situation. Now in my view, this profoundly misunderstands what economies are and what they do, but this kind of thinking really is lurking in the background of some people's (I'll make no guess as to how many but I'll say that it is common enough that I've seen it in person) pseudo-formed thoughts about economics. If Ehrenreich can misunderstand things so profoundly in that area, I suspect she isn't the only one. If that is the kind of thing that you are thinking about, FairTrade is almost certainly counterproductive.

Well, sure, but thinking that FairTrade would be an effective solution to that sort of concern (that encouraging developing countries to produce coffee at all is bad) is so incoherent that I wouldn't worry that anyone thinks it. What could such a person's thought process possibly be? "It is bad to exploit poor people by buying coffee from them under any circumstances. Therefore I will buy FT coffee because..."

So I wouldn't worry about people deluded in that regard -- if they exist, they're too confused to be helped.

There is no free lunch

Goodness, are you sure you're a liberal with such statements? *ducks*

moving to something that may bring in more money is not cost free

Which was the underlying point I was making about the subsidy effect of fair trade coffee. There is a cost involved in moving from crop A to crop B. Some farmers may well choose not to take on those costs due to the fair trade price being offered, even though they might make more money in the long term if they did so. This is hypothetical, however, and I certainly don't blame a farmer for taking the bird in the hand, nor do I have any objection to people choosing to spend their money to encourage favored causes.

There's no reason to assume that is happening.

True enough. Then again, I'm not assuming it's happening, I'm merely pointing out that there are concerns that should be addressed beyond how much we're paying per pound of coffee.

It assumes there's some industry waiting to pay great wages to peasants and that farmers would be interested in such a shift out of coffee growing even if it existed.

Er...no, it doesn't. It assumes that there are crops out there that pay higher profit margins than coffee, which I don't believe is a particularly controversial notion. For some farmers, of course, coffee may be the best crop available to them, but as I noted above, by paying a higher price it is possible we will encourage people to grow coffee when there are better alternatives available to them.

I am not, I suppose I need to point out, at all opposed to people buying fair trade coffee or organic food or whatever else. I consider consumer-choice techniques like this far preferable to government intervention, certainly. My intent was merely to note some conceivable objections to fair trade coffee. I make no pretense about my knowledge as to whether those objections obtain in any particular case.

Er...no, it doesn't. It assumes that there are crops out there that pay higher profit margins than coffee, which I don't believe is a particularly controversial notion. For some farmers, of course, coffee may be the best crop available to them, but as I noted above, by paying a higher price it is possible we will encourage people to grow coffee when there are better alternatives available to them.

I don't understand this argument. Why would the existence of FT coffee make farmers grow FT coffee rather than a more profitable alternative? I could see that if the farmer has three options, with increasing profit margins in order: standard coffee, OTHER CROP, and FT coffee, the farmer will probably grow FT coffee. But that's not a problem -- the farmer is better off growing FT coffee than OTHER CROP.

If OTHER CROP is more lucrative than FT coffee, it shouldn't affect the farmer's decision at all. What am I missing?

Hilzoy's analysis is spot on.

Many libertarians seem personally uncomfortable when reminded that peoples' purchasing decisions are subject to moral considerations.

I suspect this is because they've internalized the value that growth and economic efficiency trumps all, and they don't want to be reminded that other (e.g. distributional) considerations exist.

One of the most prevalent forms of libertarian/economics 101/contrarian argument goes as follows: "You're trying to help X...but if you knew more economics, you'd realize you're actually hurting X!" Sometimes the argument's justified, often not, but it's always morally assuaging, because it rebuffs any attempt to challenge the status quo.

Liz,

Because switching crops has other costs. Let's say, for the sake of argument, that to switch from coffee to soybeans would cost the farmer $100 in transaction costs. Once he does so, he will make an extra $0.50 per acre on his 100 acres, so he'll recoup his costs in a little over two years (depending on the discount rate). That's a great deal for the average business, but it's not as easy for a farmer who's close to subsistence. If the fair trade deal gives him an extra $0.25 per acre, he may decide he'd rather have the extra money now.

Again, let me note that I have no objections to fair trade coffee. I'm just trying to help explain the objections.

by paying a higher price it is possible we will encourage people to grow coffee when there are better alternatives available to them.

I don't understand this. What do you mean by "better?" More profitable? But no one is making them grow coffee instead of the more profitable crop. They do it precisely because the price is high, because FT coffee is more profitable than the alternatives. Free-market arguments rest on this assumption.

But that's the case whenever the difference in profitability between two options is within a certain margin. There's no reason at all to think that farmers have other options more profitable than FT coffee, but only barely so, so they won't be motivated to switch, but that they aren't in that state right now with respect to standard coffee. It could be true, anything's possible, but there's no reason to think that it is true. And of course there's every reason to think that usually, allowing people to earn more money makes them better off rather than worse off.

And even taking your example at face value - that's a reason to worry that insufficient credit is available to subsistence farmers, sure. But assuming that the farmers would be able to switch to soybeans (that is, they'd scrape up the money for the initial costs somehow) if they were earning a pittance for standard coffee, but that if they were earning more for FT coffee, despite the fact that they would be able to switch to soybeans (it couldn't be financially harder, could it?), they wouldn't make the switch despite the fact that it would clearly be in their economic self interest... doesn't that require assuming that they don't understand their own best interests? A tad paternalistic for someone of what I understand to be your political views, if I'm understanding the situation correctly.

Fair trade is now up to 2-3% of the US market! I'm sure that's sending an ENORMOUS price signal to the developing world. I hear they've declared peace in the Congo and are ripping up the rainforest right now for coffee plantations.

The coffee market, like the wine industry, does not respond well to price signals because the production lag is so long. Coffee plants take a while to start bearing fruit (see: Out of Africa).

Fair trade exists primarily as a response to the catastropic price collapse of a few years ago. Hopefully it will become significantly less necessary in the future, and the Economist can get back to worrying about the market destroying effects of everything else that compensates for externalities, like carbon credits or whatever.

PS. If you're worried about holding people back, you'd do better to stop buying all American agricultural products and tell all the farmworkers to go sit in call centers, because farming is relatively unproductive per hour of labor.

doesn't that require assuming that they don't understand their own best interests? A tad paternalistic for someone of what I understand to be your political views, if I'm understanding the situation correctly.

I would argue that it would paternalistic if I were to advocate taking some action to force them to do what I consider to be in their best interests. I don't think that I'm not permitted to note that people do stupid things just because I believe people should be free to do stupid things.

Okay, but to interpret this as a valid argument against FT coffee, you have to assume it's likely to make farmers act against their own economic self-interest. That seems like a form of reasoning that you and SH should be pretty firmly averse to.

(And of course, to even make the paternalistic argument work, you do have to make some strong and unfounded fact assumptions -- the existence of 'soybeans' as another option, at a return that will be attractive compared to standard coffee, and superior but not superior enough to be attractive, given the limited good sense of the farmers involved, to FT coffee. Without any facts indicating that there are precisely such alternatives, I'm not going to worry about them.)

Liz,

I'm not suggesting you should worry about them. I noted above that I have no idea what the facts are on the ground. Since I don't drink coffee, I'd be lying if I said I was all that interested. But I do understand the logic of the cited article, and since there appears to be some dispute about it, I was trying to help others understand where it is coming from.

As for people acting against their economic interests, people do that all the time. My grandfather was in a union where the rank and file was given the option every year: pay raise, or lump sum bonus. They always took the bonus, even though it was less than half of what they would earn with a year's wages at the higher rate. Or, to use a more immediate example, people who purchase fair trade coffee are acting against their economic interests in paying more for their coffee. In both cases, however, people can have interests other than economic, such as the desire to aid those who harvest the foods we consume to make a decent living.

I am not particularly prone to the belief than mankind is homo economus.

Sorry, I shouldn't be nagging you as if you were making, rather than alluding to, the argument. But The Economist purports to be making an economic argument -- presumably one assuming that mankind is, on average, homo economus. And on those terms, the argument doesn't work -- to make it work, you need to prop it up with assumptions that the farmers will be irrational in a specific way, without any basis at all for that assumption.

The argument is nonsense.

The argument is nonsense.

Well, that I've got to disagree with. The argument's soundness depends on the ancillary data. The argument itself is valid, as long as the underlying data supports it. Now, if you'd like to complain that the Economist failed to include that necessary data, and that you are therefore free to disregard the argument, you'll get no argument from me. But the article is insufficient to demonstrate the validity of the argument in the positive or negative.

Sure, if by valid you mean valid on the same terms as the following argument: "Fair Trade coffee may be harmful to farmers because of crop losses due to the damaging methods the Fair Trade program requires, which the increased prices might not make up for." There's nothing wrong with the form of the argument, but it depends on claims of fact that the writer isn't purporting to have any support for, which makes it valueless. The Economist article is doing the same thing.

"As for people acting against their economic interests, people do that all the time"

Isn't time the point of the proposed scenario? That is, the idea is that farmers are in a local minimum of the optimization function at some distance from a global minimum, so anything they do differently is bad in the short term. The likelihood they'll get to the global minimum depends on how deep the local one is.

Another question I have for the scenario is how stable the price supports are - can anyone guarantee that someone evil won't take over Starbucks tomorrow and decide to stop buying only Free Trade? The obvious counter is that no one can guarantee the coffee market generally, though I guess it has addiction undergirding it.

Finally, I wonder about the strong market thesis - is it the case that no sufficiently powerful computer modelling can make a command economy more efficient than a capitalist one?

And just in case it wasn't clear, I don't think people are economically rational all (or even much of the time). But on the other hand I believe that paternalism screws things up just as much by not getting enough information to make rational choices for everyone, so on balance I'm rarely interested in paternalistic solutions to the fact people aren't always economically rational.

Liz,

It's a short article. Yes, the argument isn't substantiated in the text of the article, but isn't that the format of most modern reporting? I don't see anything in the article that addresses the question of whether or not fair trade coffee actually has positive impacts on growers, either. The article lays out arguments on both sides but is woefully short on the underlying data.

is it the case that no sufficiently powerful computer modelling can make a command economy more efficient than a capitalist one?

I'm no economist (indeed, I've been rebuked for not practicing real economics), but I think the answer to that question is a clear yes. Although I suppose the answer really depends on how you define command economy and more efficient.

Seb,

Well said.

"you need to prop it up with assumptions that the farmers will be irrational in a specific way"

I don't understand - isn't there a sensible difficulty about acting in one's short- vs long-term interest in systems without full information?

I'm worrying this like a dog with a bone, but it's still a bad argument, because it doesn't acknowledge the missing assumptions it depends on, and because those missing assumptions (that coffee growers are irrational in a very particular way) have no basis in likelihood. If you included the assumption explicitly ("If it is the case that it's financially possible for farmers to switch from coffee to more lucrative crops whether or not they're getting Free Trade prices, and that there are possible alternative crops more lucrative than either standard or Free Trade coffee, then buying coffee at Free Trade prices might hurt farmers if they are capable of perceiving that switching crops is in their economic best interest when they are being paid at standard coffee rates, but are incapable of perceiving that switching crops is still in their economic best interests even when they are paid at the higher Free Trade rates.")

The bolded assumption is possible, but really awfully silly sounding -- no one would make an argument based on it, without backup data indicating that it is in fact the case, if they had to say it explicitly.

Rilke-

To assume that paying FT rates is harmful, you have to assume that coffee growers can accurately weigh their short-term against their long-term interest when they're getting paid standard rates, but lose that ability when they're getting paid FT rates. That's a hell of an assumption.

LB: "you have to assume that coffee growers can accurately weigh their short-term against their long-term interest when they're getting paid standard rates, but lose that ability when they're getting paid FT rates"

I don't think that's correct, or even quite an accurate statement of the claim - I think one should compare the likelihood of making the "right" decision vs the "wrong" decision as a function of relative prices. Consider the question of distinguishing two peaks in a function given imperfect resolution. It's easier to pick the higher peak if there's a large ratio in size. And there are surely nonlinear effects in switching crops that I can't guess at.

I believe I have attacked this from the wrong angle. Let me try again.

One of the primary economic arguments against fair trade pricing is market distortion. By artificially increasing the price of a good, more people produce the good, which creates additional downward pressure on the price, which requires more intervention to keep the price at the higher level, which draws more producers, and so on. This will put some pressure on producers to shift to fair trade techniques, but there is presumably some ceiling for demand for fair trade coffee. So at some point, growers will adhere to fair trade requirements, but will not be able to find a buyer, at which point he will be forced to sell at market prices, which will drop because supply has increased.

I think that explains it more clearly. I hope so, in any case.

I think my phrasing is a fair shorthand. Again, look at all the fact assumptions that have to be made to make the argument work. (1) There is a more lucrative crop out there, and the coffee growers haven't switched already. (Why haven't they?) (2) It's possible for growers to switch (that is, transaction costs aren't prohibitive) whether they are now getting standard prices or FT prices for their coffee. (3) The difference in return between coffee and the more lucrative crop is such that (a) coffee growers will be easily able to tell that it is in their best interests to switch if they are now receiving standard prices, but (b) they won't be able to tell that it is in their best interest to switch (despite the fact that it really really is in their best interests to switch) if they are now receiving Fair Trade prices. Now, none of that is impossible, but it's a set of very specific claims about the nature of the world and the minds of coffee growers for which the writer claims no empirical support, and which do not appear intuitively likely to me. (Particularly (1), although (3) runs it a close second.)

Pulling strong empirical claims like this out of the air, not acknowledging that that's what you're doing, and then spinning arguments based on them is a silly way to argue.

This will put some pressure on producers to shift to fair trade techniques, but there is presumably some ceiling for demand for fair trade coffee.

I once attended a Q&A with (IIRC) one of the founders of the fair trade coffee project, I think their assumption was that this would never be reached (again IIRC), or that it was so far off so as not to be a factor.

They also stated that one of the reasons that coffee prices were so low was due to gov't incentives for production in places like (once again, IIRC) vietnam.

One of the primary economic arguments against fair trade pricing is market distortion. By artificially increasing the price of a good, more people produce the good, which creates additional downward pressure on the price, which requires more intervention to keep the price at the higher level, which draws more producers, and so on. This will put some pressure on producers to shift to fair trade techniques, but there is presumably some ceiling for demand for fair trade coffee. So at some point, growers will adhere to fair trade requirements, but will not be able to find a buyer, at which point he will be forced to sell at market prices, which will drop because supply has increased.

This also seems confused to me, in that standard and FT coffee are different products, just like diet Coke in cans, and diet Coke in 100 gallon drums. What happens is that demand for FT coffee will, to the extent that people prefer it, lower demand for standard coffee, because FT coffee is a substitute for standard coffee. And then standard coffee producers have the choice of taking the lower price, or producing something different -- either FT coffee, or an entirely different product such as 'soybeans'.

When enough FT coffee is produced to satisfy the demand for FT coffee, then standard coffee producers can take the market price for regular coffee, or can switch products. Either way, the producers as a whole are not worse off -- assuming the total demand for standard and FT coffee remains the same, than more money is still going to go, overall, to the growers as a class.

Andrew: I think that your last summary is exactly the form of the argument the Econ. is making. Which is why I responded as I did: namely, by saying: when consumers have a preference and buy stuff accordingly, how exactly is that a "market distortion", rather than bog-standard market operation? Why do I distort the market if I act on my preferences about child labor, but not if I act on my preferences about Diet Coke in cans vs. 2 liter bottles?

(This directed not to you, but to the Economist.)

Kid B: I think the machete reference comes from this story, which I had linked in my earlier post.

Hrm -- that last bit is cryptic. Because the ones serving the FT market are better paid, given the existence of FT, and the ratio of growers closed out of the FT market due to lack of demand for more FT coffee, to the amount of demand for standard coffee, should be about level, all other things being equal, the FT growers should be better off and the standard growers no worse off, once everything settles out.

"is it the case that no sufficiently powerful computer modelling can make a command economy more efficient than a capitalist one?"

I think this isn't a well formulated question. The problem is not only calculation of inputs once found. The question is of how to get the information inputs for the calculator to do the calculation.

I believe that we are no where near the computing capacity needed, and that we are many orders of magnitude further from being able to give such a computer the inputs it would need.

"coffee growers will be easily able to tell that it is in their best interests to switch"

You're inserting this hurdle, I think, and ignoring the point that there's a maximum between a local minimum and a global minimum.


"Pulling strong empirical claims like this out of the air, not acknowledging that that's what you're doing"

Question-begging, I think.

How so? Doesn't the argument as made require all of those assumptions? And aren't those assumptions not necessarily the case? And doesn't the writer fail to acknowledge that the assumptions are necessary?

I don't see what I'm assuming that makes my conclusion (that the argument is a silly one) inevitable. What do you mean by 'question begging'?

Liz,

Economics is not quite so precise. With the premium offered for FT coffee, more people will look into growing it, including some people who are currently doing something else. Remember that by raising the price, you've signalled increased demand, so supply will increase to meet that demand. But, while it's debatable when the ceiling will be reached, at some point you will have more FT coffee being produced than there is demand for, which means that coffee will get dumped on the market for non-FT coffee. Over the long term, I suspect (and again, I'm not an economist) that an equilibrium will be reached. In the short term, however, there will be disruptions as some suppliers end up going out of business because they were enticed into going into coffee because the price was higher. That's the way the economy works, of course, but I think the concern of the economists is that FT coffee is exacerbating the natural problem. FT aficionados may consider that price one they're willing to pay (particularly as they won't be the ones paying it), and in the aggregate FT coffee may well make more people better off. But while the producers as a whole will probably be better off, FT coffee will make some producers worse off.

"I think this isn't a well formulated question"

Yep, I know 0. economics.

I'm maybe thinking about how to allocate resources to say steel production more than say how to set art prices.


"many orders of magnitude further"

We're getting something like an order of magnitude per decade, so that may not be a great distance on the scale of our lifetimes.

In the short term, however, there will be disruptions as some suppliers end up going out of business because they were enticed into going into coffee because the price was higher. etc.

Okay, but that (and I recognize that you are alluding to, rather than actually making, the argument in question) is blitheringly ridiculous. That's an argument against any change in consumer preferences at all, because disruptions are going to hurt some producers. If The Economist would laugh at at an argument like that if applied to non-dogoodery consumer preferences ("Polling shows some danger that consumers will eat more bananas over the next year. This may cause terrible hardships as tropical fruit growers try to switch acreage to banana production."), which it most certainly would, I don't see any reason to take it seriously with respect to FT coffee.

Hilzoy has this one entirely right. A preference for coffee grown by people earning a living wage is a consumer preference, and a market to satisfy it has sprung up. Arguments of the general form:
"But the operation of the market is cruel!" are ridiculous other than from people who object to the cruelty of markets generally and have specific ideas about how to mitigate it.

hil,

I'd argue that both are market distortions. However, I do think there are some not-insignificant differences between preferring Diet Coke in 12 oz cans vs. 100-gallon vats and paying a premium for FT coffee vs. regular coffee. Coke is a commodity produced by a single manufacturer, therefore it is relatively easy for them to make adjustments based on consumer preferences. Coffee is a commodity produced by thousands of growers around the world, and as was noted above, there are not insignficant transaction costs involved with switching crops. By offering a premium, you encourage people to get into the business, but at some point a nontrivial number of those people will not see the expected return on their investment because demand has been met. So the nominally good thing, trying to get people paid more for their labor, will actually result in some people ending up with people getting less for their labor.

I'd argue that both are market distortions.

That hilzoy's preference for soda in cans is a market distortion? I do not think that word means what you think it means.

I'm getting heated here, which is leading me to overstate things. Sure, in the face of empirical evidence that FT coffee caused disruptions to growers so that it ended up not being a net benefit to coffee growers, I'd agree that FT coffee is a bad idea. But arguing that something is possible doesn't make it so, and The Economist hasn't done more than argue that it's possible, and claim that FT coffee is a bad idea because bad effects are conceivable. That's a ridiculous way to argue.

I suppose that depends on how one wants to use the term. If the market is currently in a particular shape (so to speak) and preferences change, does that not distort it, i.e., change its shape?

I've never even been a farmer and even I know that some of the economic arguments here are pretty damnably ignorant of the actual econimic processes involved in farming.

1) Switching crops is expensive, if it really is your aim to allow farmers to switch crops in relation to market trends/enviromental conditions then one way to do it is to allow them a cushion of income otherwise the farmer goes bankrupt.

2) Fair trade short term production costs are higher because more is paid to workers and more attention is paid to the enviromentatal impact of coffee growing.

3)Prices are also higher in that the sources for fair trade coffee/chocolate tend to be smaller farms feeding upwards rather than larger company owned farms meaning that economies of scale are lost. Smaller farms mean that an area can be dependent on more than one crop meaning that the area is not quite as vulnerable to enviromental shocks such as droughts (for an example of what happens when huge swathes of land are employed in only one type of agriculture see Australia and the drought problem they're currently having). Global warming means that more and more extreme patterns are emerging and areas that are monocultural in terms of crops are in deep trouble.

4) Prices on fair trade coffee are meant to compensate for 3 and 2 above, ultimately they incentivise sensible long term behaviour which coffee growers are unable to engage in otherwise (healthier better fed workers are more productive and last longer as employees and soil which is cared for does not lose its minerals or get worn out as quickly).

"Doesn't the argument as made require all of those assumptions?"

See above for disputing of some of your assertions and reading of the argument.


"And doesn't the writer fail to acknowledge that the assumptions are necessary?"

The writer seems to be relying on a well-established world view familiar to readers of the Economist. I'm perfectly ready to learn the argument he makes is wrong, but "silly" seems presumptuous, esp. in a conversation where you're arguing with manifestly non-silly people like SH and Andrew.

"But arguing that something is possible doesn't make it so, and The Economist hasn't done more than argue that it's possible, and claim that FT coffee is a bad idea because bad effects are conceivable. That's a ridiculous way to argue."

The standard economic argument against Fairtrade goes like this: the low price of commodities such as coffee is due to overproduction, and ought to be a signal to producers to switch to growing other crops. Paying a guaranteed Fairtrade premium—in effect, a subsidy—both prevents this signal from getting through and, by raising the average price paid for coffee, encourages more producers to enter the market. This then drives down the price of non-Fairtrade coffee even further, making non-Fairtrade farmers poorer. Fairtrade does not address the basic problem, argues Tim Harford, author of “The Undercover Economist” (2005), which is that too much coffee is being produced in the first place. Instead, it could even encourage more production.

Mr Bretman of FLO International disagrees. In practice, he says, farmers cannot afford to diversify out of coffee when the price falls. Fairtrade producers can use the premiums they receive to make the necessary investments to diversify into other crops. But surely the price guarantee actually reduces the incentive to diversify?

...

But perhaps the most cogent objection to Fairtrade is that it is an inefficient way to get money to poor producers. Retailers add their own enormous mark-ups to Fairtrade products and mislead consumers into thinking that all of the premium they are paying is passed on. Mr Harford calculates that only 10% of the premium paid for Fairtrade coffee in a coffee bar trickles down to the producer. Fairtrade coffee, like the organic produce sold in supermarkets, is used by retailers as a means of identifying price-insensitive consumers who will pay more, he says.

Did we read the same article?

Andrew, I think you tip the hand of the people who are serious about the argument against FairTrade and the like when you describe the payment of a premium for a commodity manufactured according to particular standards as "artificially" raising the price. In fact, the payment of bonuses to producers is as natural as any other exchange. If it were otherwise, we'd expect to see sweeping denunciations of merit pay, for instance, because that would be "artificially" increasing the price of labor that met standards higher than the prevailing minimum acceptable for doing the job at all. We'd also expect to see denunciation of branding as a general practice, an "artificial" distortion of costumer selection when it comes time to choose between otherwise apparently identical goods, and so on.

What Hilzoy, I, and others are doing isn't any more artificial - or natural - than what the perfect profit minimaxer does. There's nothing actually natural about any of it. Exchange is natural, but the accumulated laws and customs favored by the Economist, or someone investing in that anti-liberal portfolio. Nature, after all, includes altruism, commensuralism, and parasitism along with predation. For that matter, theft and fraud are just as natural, and yet somehow we never see a market-praising argument that calls for the repeat of the protection of property from them.

At heart, it's a rationale for maintaining a status quo comfortable to some of the participants by shaming efforts that might change popular preferences.

By [making a profit], you encourage people to get into the business, but at some point a nontrivial number of those people will not see the expected return on their investment because demand has been met. So the nominally good thing, trying to [make a profit], will actually result in some people ending up with people getting less for their labor.

Thus have we proved that making a profit reduces wages.

That's not how it's generally used in economics -- a consumer buying the products they prefer isn't distorting the market.

Here's an econ glossary, defining 'Market Distortion': Market failure that is caused by deliberate policy intervention, such as imposition of a tax or a subsidy.

A preference for cans certainly doesn't fit that description, and I'd argue that a preference for FT coffee doesn't either.

Rilke-

I'm getting that you disagree with me, but not following your argument. I don't mean to ignore you, but I don't know what to say.

The bottom line, as I see it, is that the economists (if not necessarily The Economist) are arguing that intentionally disrupting markets will cause unnecessary damage to producers as they attempt to adjust to the changed market conditions. Yes, markets are inherently instable at the micro level and therefore already cause hardships; the argument as I see it is that adding to that turmoil is a net negative. That is a value judgement and it is therefore impossible to reconcile without matching preferences. (Are Americans better or worse off with the near-demise of the family farm? Food is cheaper, but many farmers suffered greatly when their products were undercut by agricultural conglomerates. You can't answer the question of whether or not we're better off without setting the parameters of better off first.)

I am personally of the opinion that, if carefully established and monitored, FT coffee can be a net boon to growers and a good way for consumers to improve the low of the growers. But I can sympathize with the concerns of economists who note that when working with an exceptionally complex system, seemingly simple changes can have significant unforeseen consequences. The argument is, I believe, ultimately one of conservatism. While we know a great deal more about economics than we used to, the market remains too complicated for predictions to regarding any one change to the system to be reliable.

That argument may not jive with one's personal sensibilities, but I believe that describing it as ridiculous or silly is inapt and adds little to the discussion. Ultimately this is a value dispute, and as such the 'correct' answer is wholly dependent on how each participant weights the criteria and therefore I'm not certain one can come up with an objectively correct answer.

LB, I'm probably in shorthand physicist mode, but I thought I was actually clear about the possible difficulty of resolving (distinguishing) two peaks, which disproved your obviousness claim, and it seems to me you're just wrong about what the article does and claims - I wasn't kidding about "did we read the same article" - see the above cites.

I think that some people here are misunderstanding the argument. Perhaps it would help to read the excerpt from The Undercover Economist that the article references, or this post in Marginal Revolution. Or see Mark Thoma's comment at the end here.

Essentially, this is an Econ 101 thing. There are various types of market structures, and monopolistic competition is marked by product differentiation, which gives producers some price power. This is true whether that product differentiation comes from the promise of ethical treatment to workers, or from a certain cachet, or something else. (Remember that one of the conditions for perfect competition is that the products be fungible, like natural gas.) The result of this is that there is some inefficiency; price exceeds marginal cost.

A related argument is that the supermarket (or whomever you buy fair trade coffee from) can price discriminate, which increases its producer surplus. So the argument here is that this is institutionalizing worse treatment for a class of workers—the ones who don't for whatever reason work for fair trade growers. That doesn't necessarily mean fair trade lowers average wages, since under price discrimination, average wages can rise or fall, though the variance rises. But it does mean that had it not been for price discrimination, the conditions of all workers might be better in ten years or whatever. I suspect I'm not explaining this very well.

I think Andrew's 5:48 comment is perfect, modulo "Ultimately this is a value dispute" since that seems moot.


Raghav, thanks, if nothing else you've given me some links and terms to look up.

That argument may not jive with one's personal sensibilities, but I believe that describing it as ridiculous or silly is inapt and adds little to the discussion. Ultimately this is a value dispute, and as such the 'correct' answer is wholly dependent on how each participant weights the criteria and therefore I'm not certain one can come up with an objectively correct answer.

What I am calling ridiculous and silly is making an argument about the hardship caused by expressing a consumer preference (1) without any data whatsoever about the extent of that hardship and (2) where the same people wouldn't make the same argument about a different consumer preference that wasn't related to contemptible dogooderism.

But, while it's debatable when the ceiling will be reached, at some point you will have more FT coffee being produced than there is demand for, which means that coffee will get dumped on the market for non-FT coffee.

It is possible that, due to the long lag in turning non-FT fields into FT fields, that late producers will cause an overshoot.

or, it is possible that the excess supply will allow for entry into new markets for the luxury good.

Bruce,

I am intrigued by your use of 'tip the hand.' If I understand you correctly, your argument is that those who make this argument have some ulterior motive for making the argument and are trying to conceal that motive with specious arguments. You're not the only one to have intimated that. I will note only that, if that is what you're doing, that seems unnecessarily inflammatory, as you're saying that they're not arguing in good faith, a rather serious charge.

On point, I concur that the premium for FT coffee is no more artificial than other consumer preferences.

Liz,

I'm pretty sure I warned you I'm not an economist. I'm just a CDAT. ;)

LB, I'm probably in shorthand physicist mode, but I thought I was actually clear about the possible difficulty of resolving (distinguishing) two peaks, which disproved your obviousness claim

Rilke-

I keep on saying this. Sure, it's possible. I have never said that it's impossible. But The Economist needs to know what that two-peaked function actually is to make claims like the ones I laid out, and they don't. They don't claim to. The fact that such a function is possible doesn't mean that it's not silly to make arguments about it unless you have some reason to believe what you know it's likely to actually be.

Again, I don't think the Economist is making the claim you say they are.

Ultimately this is a value dispute, and as such the 'correct' answer is wholly dependent on how each participant weights the criteria and therefore I'm not certain one can come up with an objectively correct answer.

Andrew:

Step back and think about the bolded words. Hilzoy is saying: "I like fair trade coffee because I want coffee producers to be better off." The Economist is saying: "Not so fast! Under our clever set of arguments, you can see that maybe they won't be better off!" How on earth is that a value dispute? Both are claiming to want coffee producers to be better off -- The Economist is making a counterintuitive empirical claim that Hilzoy is going about it wrong.

For the reasons that I gave above, that they're making empirical claims with no support, I'm calling them silly, but the last thing this is is a value dispute.

Rilke-

I don't mean to be obtuse, but I don't know what claim (presumably either not needing empirical support, or supported by actual evidence) you think The Economist is making, that differs from the one I think they're making. I am sorry to be so slow at following your argument.

Liz,

The values in dispute are as follows:

Both sides agree that it would be a good thing if coffee growers were better off. Hilzoy believes that paying a premium for FT coffee will achieve that goal. Economists believe that making this change to the market will have unintended consequences. Hilzoy and the economists place different weights on certainty and stability. Hilzoy says it's worth taking the chance. The economists aren't so sure. Different values, therefore different preferences.

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