Big Boxes

by Elaine Schwartz    •    Dec 15, 2010    •    731 Views

What we ship things in makes a difference.

Take the banana, for example. In 1876, at the Philadelphia Centennial Exposition, the banana was a delicacy (and very black). Millions of bunches could only be sent to U.S. shores if they were refrigerated. By 1901, as I describe in Econ 101 1/2, United Fruit was distributing 14 million bunches of bananas in the U.S. One reason, in addition to the railroad and the steamboat, was a banana vessel that could maintain a 53 degree temperature for its cargo.

Just like refrigerated banana vessels transformed world trade, so too has the cargo container. Introduced in 1956, now one ship can carry 3,000 forty foot containers with 100,000 tons of shoes, electronics and clothing. Imagine the potential efficiency. Put everything in the container, arrive at a port, and just slip it onto a truck or a railroad car for it to move to its next stop. Journalist Marc Levinson says the result is more variety for consumers, lower freight bills, less shipping time, lower inventory costs and longer supply chains.

This takes us back to yesterday’s supership post and the expansion of the Panama Canal. Larger ships mean more containers on board. The NY Times said that the newest generation of superships could hold 15,000 containers that are 20 feet long.

The Economic Lesson

Adam Smith would have been delighted to see his ideas about mass production and regional specialization extend around the world. Describing the productivity of factory pin production in The Wealth of Nations, he told us that one worker, functioning alone, could produce 1 pin per day. However, when that worker specialized through a division of labor in a factory, 4,800 pins per worker per day were made.

Adam Smith used the term “distant sale” to explain the transport of goods from a factory to a distant market. He could have been describing a container ship moving from China to the U.S.

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