Tuesday, 15 January 2013

What is a 'fair price'?

Last night I observed our lads at BB doing a very simple Banana Role Play Game. I don't know where it came from - possibly BB HQ? But it presented itself as an exercise in economics (the 'banana trade') and in justice. By the end it seemed more like an exercise in propaganda for FAIRTRADE™ - even if that wasn't the intent.

So five minutes digging yielded some interesting fruit. There is another side to this! 
  • an Adam Smith 2008 report about Fairtrade: unfair trade
  • a short documentary film The Bitter Aftertaste: 

The terms 'fairness', 'that's not fair', 'fair trade' were all used a lot both by the material last night and by the lads in response to the 'scenario'. But, I think it is fair to say this 'fairness' business is not as simple as an emotive call to side with (poor) workers of the world against the (evil) 'rich guys' [in this case 'LESCO' ... mmm, some more propaganda going on!].  This is  especially so when the role play game consisted of only one worker, one producer, one exporter, one importer and one supermarket - thus eliminating a very important aspect of trade. Choice. 

So it reminded me. 
Watch out for banana skins! 
It is possible to slip on one. Even if it is fairly traded. 
Maybe especially if it is fairly traded. 

So, back to the question of a fair price. What is a 'fair price' ... whether it is a 'fair' labourer's wage (in this case he or she is selling their labour to someone who wants to buy it) or the amount we pay for the bunch at the supermarket?
'any price agreed upon between a willing buyer and a willing seller the just price, that alone is what makes it the just price.'
'People exchange goods in a market economy to their mutual advantage. Each party to an exchange values what he receives more than what he exchanges for it. Both parties are better off after an exchange than they were before the exchange. In a free market, suppliers compete with suppliers and buyers compete with buyers. Suppliers do not compete with buyers. The only exchanges that result in winners and losers are Christmas gift exchanges between parents and children. But even that is a voluntary loss. Competition for business between suppliers reduces prices, which is to the advantage of the consumer, while the bidding of consumers against each other for goods raises prices, which is to the advantage of the supplier. The free market allows suppliers (who naturally want the highest price they can get for their goods) and consumers (who wish to acquire those goods at the lowest price possible) to come together in harmony.' 
[from The Myth of the Just Price]

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