Monday, May 31, 2010

My Town

I live in a small town in the district of Cutris, the county of San Carlos, the province of Alajuela, in Costa Rica.

I live in a wooden house.

We have three churches.

We have a soccer field.

We have a river.

We have a bull ring.

We have a computer center.

We have dirt roads.

We have chickens.

We have pineapple fields.

We have young pineapples.

We have peeled pineapples.

We have delicious pineapples.

We have happiness.

Farmer's Market

I met my new host family in San Jose at a farmer's market and helped them sell pineapple. Not only did I get to know the little yellow fellow quite well, I also had a chance to ponder the economics of farmer's markets.

Why do farmer's markets exist? If farmers specialize in farming, and stores specialize in selling, why would farmers try to do what stores do best? By selling retail instead of wholesale, farmers trade the certainty of contracts for risk, and loose the efficiency of transporting produce in large, refrigerated trucks.

Transporting produce in small trucks and selling it in a small stand requires more man-hours than using large trucks and large stores. Is the farmer's time just worth less than the professional driver's or clerk's? Do the farmer's markets exist only because farmers don't have access to jobs in the more productive full-time retail sector?

Or is it a transaction costs story? Farmer's markets are an example of vertical integration; by selling their produce directly, no resources are wasted in negotiations between farmers and retailers.

Farmer's markets also have a few advantages over traditional stores. Because the owner and the clerk are the same, prices can change quickly (not all markets are this efficient). If a farmer isn't selling enough, he can instantly lower the price. He has the freedom to bargain and price discriminate. Farmer's markets also offer a novel experience to consumers--from the colors and smells of the market to the chance to meet farmers and learn more about the products. And farmers have side benefits, too--instead of a professional truck driver hauling everything to the market, farmers can take advantage of travelling to buy products available only in the capital and visit relatives who live on the route.

Here in pineapple territory, a large pineapple is worth about 40 cents. In a grocery store in the capital it might cost $1.40, and in the farmer's market $1.00 (or, by the end of the day, $.80, $.60...)

Swearing In

On May 21, 2010, the US Ambassador to Costa Rica Anne Andrews swore me and 51 trainees in as Peace Corps Volunteers. I was privileged to speak on behalf of the Community Economic Development volunteers.

Wednesday, May 19, 2010

ISI or Export-Led Growth?

Historians of economic development examine two strategies for economic growth: Import Substitution Industrialization (ISI), or manufacturing at home what you used to buy from others, and Export-Led Growth, or making more products to sell abroad. Historians typically favor export-driven growth. It has a better track record. It worked for the Asian Tigers, whereas ISI failed in Latin America in the 1970s. And Export-Led Growth allows each country to specialize more and make better use of their Comparative Advantage, which economists argue leads to greater global efficiency.

I'd like to apply these theories to my new community. We export pineapples and cheese. We import ice cream, vegetables, meat, and trucks. If we want to increase our standard of living and have more ice cream, economists would probably recommend that we grow even more pineapples and sell them to buy more ice cream.

Can we apply this at the village level? One company's pineapple plantation alone is seven thousand hectares--70 square kilometers. While we're grateful to have these jobs in the community, large scale monoculture has environmental disadvantages.

Maybe we can use our milk to make more ice cream. That's inefficient, economists say--better to increase the industrial pineapple farming and leave ice cream production to the ice cream factories elsewhere. But there's also the issue of transaction costs and transportation costs. I'm sure it's less efficient to make ice cream at home, but you don't have to ship it or market it. You can sell it directly to your neighbors. And maybe our lives will be better, because now we're ice cream artisans in addition to employees. And it's nice to to feel ownership for your ice cream.

So--ice cream or pineapples? What do you think?