Tag Archives: Georgia

10.20.2012 | Peanut Butter Economics

Last year, we had a peanut shortage. As a result, Skippy raised its prices and Smucker’s removed its reduced-fat creamy peanut butter spread from supermarket shelves.

But now, supply has responded. Predicting a record year, the USDA says the peanut crop will exceed its recent 2008 high of 5.2 billion pounds. The reason? Farmers who had switched to more profitable commodities like cotton returned to peanuts when their prices went up.

As one LA Times blogger said, “Our national nightmare is over.”

And economists will be smiling because the peanut butter story is a perfect example of how incentives affect supply curves.

Sources and Resources: For lots of detail, I recommend this WSJ article and this one from the Chattanooga Free Press while for a smile, here is the LA Times blog. Also, you might enjoy this 1884 patent application for “peanut paste.” Finally, at econlife, here is some background from a past post on the peanut crop.

Posted by: adminEcon
Tags: cotton, drought, Georgia, law of demand, law of supply, peanut butter, peanuts, Skippy, Smucker
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12.14.2010 | Supership Problems

When is a supership a problem? When the water is not deep enough or the Bayonne Bridge is not high enough.

To understand the Bayonne Bridge problem (and care about the answer), we have to look back to August 1914 and then ahead to August 2014. The Panama Canal officially opened on August 14, 1914. Connecting the Pacific and Atlantic Oceans, the canal diminished transport time and cost for worldwide shippers. Now, the canal will again enhance efficiency through a widening project that should be completed during August, 2014. For a new generation of larger container ships to use the canal, it had to become wider.

But that was only the beginning. From the Panama Canal, huge ships will travel to U.S. ports. Now, according to the NY Times, many of these ports need to have their capacity extended. Georgia, for example, with national and local funding, is spending $625 million to deepen the Savannah River by 6 feet. For the Port Newark-Elizabeth Marine Terminal, the problem is not the water. It is the Bayonne Bridge. To accommodate the superships, the bridge needs to be 64 feet higher or replaced.

Will New Jersey spend the money? The Bayonne Bridge blog says, “Yes.”

The Economic Lesson

19th century economic thinker David Ricardo stated the classic defense of free trade when he expressed the principle of comparative advantage. “Trade, trade” he said because each nation then can do what it does best (where it has the comparative advantage) and the whole world benefits through greater efficiency.

By facilitating the worldwide movement of goods, the Panama Canal enables nations to specialize and to benefit from comparative advantage.

Posted by: adminEcon
Tags: Bayonne Bridge, comparative advantage, David Ricardo, Georgia, international trade, Panama Canal, Savannah, Superships
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