Chip Taylor

The value of variety

It doesn't seem that long ago (it's probably not that long ago) that the produce section at the grocery store had only three or four types of apple: Red Delicious, Golden Delicious, Granny Smith, and the occaisional Winesap or something. Now there are Fujis and Galas (two of my favorites), Pink Ladies, something with a Scottish name, and several others.

I really like the Fujis and Galas, so I must be better off now that they are available to me. Trade has increased the number of our choices in many areas. But how do you measure how much better off we are? Virginia Postrel has the story on economists who say they have done just that.

Being able to get exactly the coffee you're in the mood for makes you, in a sense, better off. But this improvement in consumer welfare has tended to go unmeasured. In most economic statistics, coffee is coffee, beer is beer and shoes are shoes.

In a recent working paper for the National Bureau of Economic Research, Professor Weinstein and Christian Broda, an economist with the Federal Reserve Bank of New York, estimate how much international trade has benefited consumers simply by increasing variety. (The paper is available at www.ny.frb.org/research/staff_reports/sr180.html.)

The results are striking. Consumers, they estimate, would be willing to pay $280 billion a year, or about 3 percent of gross domestic product, to have access to the variety of goods that were available in 2001, rather than what they could have bought in 1972.

That represents a huge, previously uncounted rise in the standard of living. It also suggests that measurements of real price increases, like the Consumer Price Index, are overstated.

Does this all sound a little too theoretic? Well think of the value of choices in this way:

The benefits of variety also help explain why many people are willing to pay more to live in big cities. Thanks to greater variety, urban dwellers get more for their money.

Professor Weinstein, who used to teach at the University of Michigan, explains it this way: "In Ann Arbor, you have maybe a dozen good restaurants to choose from, and in New York you probably have several thousand good restaurants to choose from. Yet when you compute the price of a meal, you don't take that at all into account."

Speaking of apple varieties. I like this quote:

“Why do we need so many kinds of apples? Because there are so many folks. A person has a right to gratify his legitimate tastes. If he wants twenty or forty kinds of apples for his personal use, running from Early Harvest to Roxbury Russet, he should be accorded the privilege. Some place should be provided where he may obtain trees or scions. There is merit in variety itself. It provides more points of contact with life, and leads away from uniformity and monotony”

-Liberty Hyde Bailey
from The Apple Tree (1922)