I, Rose

Valentine’s Day is this week and what better way to celebrate than to appreciate the economics of roses!

A rose isn’t just a symbol of love it’s a symbol of global cooperation coordinated by the invisible hand. In The Price System, the just released section of our principles of microeconomics course, we feature two rose videos (along with videos on the great economic problem, speculation, prediction markets and more). Here’s the first; I, Rose. Tomorrow, A Price is a Signal Wrapped up in an Incentive. Enjoy.

Comments

At the risk of the wrath of the readers of MR....

The video is nicely produced and I do like the "message" and it matches the way I like to have students think about markets. However, it also reflects a fundamental viewpoint (that, dare I say) sociologists might point out. Along with the miracle of self-organization that takes place through the rose market, there is a distribution of income from the roses. It would be nice to add alongside who is getting what from the production and sale of roses. I'm sure this is covered in some way in future videos, but I want to point out that economists make a choice to focus on the efficiency aspect of trading, and relegate distribution to a lesser consideration. I believe it is this prioritization that permits the Piketty's of the world to gain so much attention. Is there a reason to place more importance on efficiency over distribution? Is this really appropriate for introductory students of economics?

Wasn't it Shakespeare who said "a rose by any other name is just a perishable agricultural commodity produced by a lean global supply chain whose income from sale will mainly be distributed to the owners of land and capital"?

So someone who isn't involved in the production, distribution and sale of the roses should get some benefit?

How about if you want a piece of the pie you learn some skill that enables the process to be better in some way? I personally benefit when I sell, install, repair the equipment that keeps them cold. That is what I call redistribution.

I think you missed my point entirely. First, I have no preconceived notion as to who "should" reap the gains from production and sale of roses. Second, I was not suggesting a focus on those that are uninvolved in the trading. There is a distribution of the total gains among the growers, distributors, transporters, ... and consumers. That distribution is worth talking about.

Dale, this is a good question and point. I will answer in brief.

First, it's my belief that economists have a unique perspective on the marvel (not miracle!) of self-organization that other professions do not. Only economists can see the invisible hand! Issues of distribution are discussed in political science, philosophy, sociology etc. so I think there is some justification for economists focusing on where we have a comparative advantage.

Second, the second fundamental theorem of welfare economics says that efficiency and welfare can be separated so that distribution can be handled entirely by lump-sum taxation. Now this only holds under certain conditions etc. etc. but I think the basic message is an important one. Namely, that it's not a good idea to interfere with markets for distributional reasons. Instead, it's usually going to be better to let markets do their job and to handle distributional issues via the tax system. Given this perspective, it is important to deal with these issues separately otherwise every single policy discussion is going to become hopelessly tied in with distributional issues and the result will be worse outcomes for everyone. In other words, first make the pie as big as possible and then worry about dividing. If you worry about dividing the pie first then everyone will end with a smaller slice.

"Now this only holds under certain conditions etc. etc. but I think the basic message is an important one.nstead, it’s usually going to be better to let markets do their job and to handle distributional issues via the tax system. ."

That leap from "certain conditions" to "usually" via "etc.etc." - that's why people hate economists.

I don't agree with this. Samuelson's Principles text contained (early on) the clause "and when democratic societies do not like the distribution of votes under laissez-faire, they use redistributive taxation to rectify the situation." (paraphrased slightly since I no longer have the book)

The problem is that redistribution has its own inefficiencies - as a result, some hard choices need to be made between distribution and efficiency. To assume away the problem is poor practice. I am not saying that distribution should trump efficiency - far from it. But if you think it is someone else's job to worry about distribution (like sociologists or political scientists) then I think you are mistaken. I also think you fool yourself into thinking that no moral choices are made when you recommend policies based on economic efficiency. I believe this is the essence of many valid critiques of economics.

TRANSLATION: Watch the birdie.

I think he reserved the word "perishable" for lawyers.

Nice. I've been to one of the rose-growing regions in Ecuador. Buying the roses is not just a nice thing to do for your sweetie, but also a good thing for the indigenous people there who clearly need the jobs. And this is cooperation that's happening despite the fact that the US and Ecuadorian governments are not exactly the best of friends (and is probably helping to keep relations from deteriorating further).

And this is cooperation that’s happening despite the fact that the US and Ecuadorian governments are not exactly the best of friends (and is probably helping to keep relations from deteriorating further).

But for how long? Sure after a few fights giving a gift of roses can help smooth things over but sooner or there's going to be another argument and then Ecuador will have to get Ghana and Switzerland to help out with putting together a box of chocolates for Uncle Sam, and from there believe me the price of these make-up gifts really escalates.

Or, as they say in Spanish, "arroz by any other name is still... rice".
Dig dis plant people:

DID PLANT PATENTS CREATE THE AMERICAN ROSE?
Petra Moser, Paul W. Rhode
http://www.nber.org/papers/w16983
The Plant Patent Act of 1930 was the first step towards creating property rights for biological innovation: it introduced patent rights for asexually-propagated plants. This paper uses data on plant patents and registrations of new varieties to examine whether the Act encouraged innovation. Nearly half of all plant patents between 1931 and 1970 were for roses. Large commercial nurseries, which began to build mass hybridization programs in the 1940s, accounted for most of these patents, suggesting that the new intellectual property rights may have helped to encourage the development of a commercial rose breeding industry. Data on registrations of newly-created roses, however, yield no evidence of an increase in innovation: less than 20 percent of new roses were patented, European breeders continued to create most new roses, and there was no increase in the number of new varieties per year after 1931.

The last two sentences could be due to a "Great Stagnation" in roses (Peak Roses) and the fact Europeans are less likely to patent plants.

While I'd agree that the price system solves the allocation problem (given the market objective function), I am not sure it solves the information problem except in cases where markets are ideal:

http://informationtransfereconomics.blogspot.com/2015/01/is-market-intelligent.html

Anecdote for perspective:

In the early 1900s a man died and left a local church $200 a year for fresh flowers on the altar. Assuming that is 10 $20 gold coins, thats roughly $12-13K a year for flowers at today's prices. My how things have changed!

If they only asked heterosexuals in a committed relationship, the numbers don't add up:

http://publicreligion.org/2015/02/valentines-day-battle-of-the-sexes/

Although there's this about Gale and the Prom Theorm:

http://www.nytimes.com/2007/08/19/weekinreview/19kolata.html?_r=0

prompted by this,

http://www.nytimes.com/2007/08/12/weekinreview/12kolata.html

Which makes me wonder about whether economics majors are more prone to lie, and if so is that because they are econ majors or they are mostly males -- see this link from Tyler last week,

http://www.huffingtonpost.com/2012/09/27/economics-majors-have-the_n_1920250.html

Given the date, I was expecting it to go into why the price of roses in the grocery store triples around Valentine's Day. That's an excellent supply and demand story.

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