May 11, 2015

FREE FOOD:

The 'miracle of the marketplace' brings tropical fruit from 2,300 miles away in Colombia to your local grocery store (Mark J. Perry, 5/10/15, AEI)


Based on the fruit's label, those four bananas had traveled from somewhere near the equator in Colombia to the nearby Harris Teeter store in DC, and even after traveling more than 2,300 miles from another continent, were available to me for only 20 cents a piece!

The realization that I can walk to a local grocery store and pay 20 cents for an exotic, tropical fruit that was delivered to me from South America seems like such a miracle that I started to wonder: How do today's banana prices compare to prices in the past? Well, here's a little banana history: Bananas were first available commercially to American consumers in 1876, when they were introduced at the Philadelphia Centennial Exposition to celebrate the hundredth anniversary of the signing of the Declaration of Independence, and sold for ten cents. In today's dollars, that would be the equivalent of about $3.00 per banana, or 15 times more expensive in real cost than the 20 cents I paid at my local grocery store! Stated differently, the price consumers pay today for bananas is 93% lower (adjusted for inflation) than the original price paid by Americans in 1876 when they were first introduced.

Over a more recent time period, the chart above displays inflation-adjusted retail banana prices from 1980 to 2015, based on BLS data, and shows that banana prices have been declining steadily over the last thirty years. Banana prices today ($0.59 per pound), after adjusting for inflation, are almost 40% lower than in 1980 ($0.98 per pound), see blue line in chart. It's likely that nothing has changed as far as the physical product is concerned, but greater efficiencies in production, distribution, and transportation of bananas have resulted in a price reduction of 39.4% over the last 35 years.

I've also calculated he "time cost" of bananas measured in the number of minutes it would take a worker earning the average hourly wage to earn enough income to purchase a pound of bananas at the retail price in each year (see red line in chart). By that measure, the "time cost" of bananas has fallen from 3 minutes in 1980 to only 1.7 minutes this year, which is a reduction in cost of 43.3%. At the current average hourly wage today of $20.90 the "time cost" of one 20-cent banana would be less than 35 seconds of work - almost free!

Posted by at May 11, 2015 4:31 PM
  

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