YouTube of Tyler Cowen speaking at Google, about Google

Great talk.

That thing about “exploitation coffee” I don’t fully understand. It seems pretty thorny..

- Companies only offer fair trade coffee if they make a profit: i.e., the benefit (premium extracted from consumers) is larger than the cost (the extra cost of treating workers better). But consumers don’t care if the coffee company makes a profit, so shouldn’t consumers shun this choice, buy cheaper coffee and give money to the workers directly through charity? Then you’re not giving extra money to the coffee company.

- I understand that creating a tiered system (“good treatment” coffee vs. “exploitation” coffee) may at equilibrium be worse for the lower tier workers. So as a consumer you may want to “discourage” the tiered system. But how do you do this? You have to buy coffee from somewhere. Is buying fair trade coffee in the context of the tiered market really a bad option? Or are you proposing that at least buying the cheaper coffee bids up its price and undermines the tiered system?

Should I feel bad for exploiting the workers or should I feel good for bidding up the price? Should I register my protest that the worker treatment is too shoddy by buying the product so as to bid up the price? Or should I only buy “fairer” coffee to increase the profitability of treating people well?

Perhaps in the end, it’s best to ignore these issues and use direct philanthropy?

aaron

I think that is a bit unfair on nik. I have very mixed feelings about “fair coffee” and nik has a point. Price discrimination plays a role for sure. Yes, the fair coffee organisations are credible and clearly have sincere motivations. But at the same time a lot of the premium on a cup of fair coffee goes directly from the cash register to the retailers bank account – they take a premium on the premium. There is really no way around this for the fair coffee suppliers I suppose. The argument is, the way I see it, that the buying of fair coffee gives incentives to the “explotation coffee” producers to move to fair coffee pratices. My view is that price is too big a motivating factor for consumers for it to work (though i hope i’m wrong).

In the same way that i don’t avoid explotation food, shoes, (insert any number of consumer items)I still buy based on value for money regardless of where it comes from. Am I evil?

aaron

You’re right. It was unfair of me to call your comments unfair. Clearly there is more to it than price discrimination alone. In this case I don’t think I am being morally lazy (I think I mentioned that I had mixed feelings about it). I just don’t think buying fair trade coffee necassarily helps (there are other reasons to buy it apart from a sincere beleif of helping the exploited). What would they be doing if they weren’t being “exploited” growing coffee? Something even less attractive in the short term i’ll bet. And shouldn’t what money I do spend on coffee go towards the exploited? This is one case where regulation can (at least in the short to medium) and has helped in the past by orchestrating supply. I’m not firm in my thinking either way and it is a more difficult question than most people like to admit.

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