August 22, 2023
Grocery shopping is an ideal context for “economic naturalists.” It’s a great way of looking out your window instead of getting sucked into endless blackboard exercises.
In grocery shopping the other day, I noticed, once again, that “not all exchanges look the same.” You’d think that the exchange of fresh green beans and spinach would be governed identically. Not so. They’re both vegetables and they sit in adjacent boxes, so what gives?
It’s always instructive to ask: “What problem are they solving?”
While both fresh green beans and fresh spinach are sold by the pound (as opposed to the unit), the produce aisle permits different degrees of sorting between the two vegetables. The green beans were sitting in a large carton and a consumer could—if he chose—sort down to the individual bean. By combing through with his hands, a buyer could select the fifty choicest, largest, cleanest, or whatever beans in the box. In contrast, the spinach—also sold by the pound—came in pre-packaged bundles that looked roughly like this:
When shopping for spinach, consumers must select the bundle that appears to have the best “average” set of attributes. It’s pretty hard, if not impossible, to inspect the freshness of spinach leaves toward the center of the bundle. Appearances might be deceiving.
Why the difference between green beans and spinach?
One vegetable, the green bean, is far hardier—and thus less susceptible to damage—than the other. There’s a throwaway line in Yoram Barzel’s classic 1982 paper on measurement costs. Here’s that line:
“In some cases inspection might damage the commodity.”
This observation comes in the midst of discussing why sellers might offer and why buyers might agree to a “pig in a poke.” Briefly, a “pig in the poke” offer doesn’t allow buyers to inspect the contents of the offer before agreeing to a purchase. Barzel thinks the primary reason for such arrangements is to reduce measurement costs. In passing, he notes that perhaps another reason for a “pig in a poke” is to prevent the damage that inspection may inflict.
The potential for damage is the reason for the “halfway pig in a poke” spinach offer. It’s a “pig in the poke” because buyers can’t inspect or sort down to the individual spinach leaf. Having consumer after consumer handle the delicate spinach leaves would quickly wilt and eventually disintegrate the spinach. Thus, you take or leave (leaf? 😉) the spinach bundle. It’s “halfway” because you can still sort between bundles as the outer leaves are amenable to inspection. Plus, not all the bundles are the same size. You can pick and choose between bundle sizes if you’d like (I did).
Sorting down to the individual bean for green beans presents no comparable problem as their tough outer skin protects them from the ordinary “rigors” of sorting. It might be fruitful (😉) to pull on this thread a bit more in the case of goods which are easily damaged through inspection.