The .Plan

Why is it difficult to find high-quality apples in Seattle?

Back in the days when my father was still in medical school, economists Armen Alchian and William Allen correctly noted in their University Economics textbook that patterns of consumption are determined by relative, not absolute, prices. They therefore reasoned that high transportation costs should lead consumers to shift their consumption towards higher-valued goods. Fourteen years later, Thomas Borcherding and Eugene Silberberg illustrated what is now known as the ‘Alchian-Allen Theorem’ in a paper, published in the Journal of Political Economy, motivating their analysis with an example based on apples — after a local irate apple-eater wrote to the Seattle Times complaining that high quality apples were nowhere to be found:

Suppose, for example, a ‘good’ apple costs 10 cents and a ‘poor’ apple 5 cents locally. Then, since the decision to eat on good apple costs the same as eating two poor apples, we can say that a good apple in essence costs two poor apples. Two good apples cost four poor apples.

Suppose now that it costs 5 cents per apple (any apple) to ship apples East. Then, in the East, good apples will cost 15 cents and poor ones 10 cents each. But now eating two good apples will cost three-not four poor apples.

Though both prices are higher, good apples have become relatively cheaper, and a higher percentage of good apples will consumed in the East than here.

More recently, in the Financial Times, ‘Natasha’ writes in to the ‘Dear Economist’ section to inquire about optimal strategies to keep her long-distance relationship afloat. Tim Harford replies:

Dear Natasha,

I understand your concern, but your future looks bright. A long-distance relationship will always put pressure on both of you, but it’s a question of how you use that to your advantage.

Economist Tyler Cowen, a professor at George Mason University, has pointed out that the Alchian-Allen theorem applies to any long-distance relationship.

The theorem, briefly, implies that Australians drink higher-quality Californian wine than Californians, and vice-versa, because it is only worth the transportation costs for the most expensive wine. Similarly, there is no point in travelling to see your boyfriend for a take-away Indian meal and an evening in front of the telly. To justify the trip’s fixed costs, you will require champagne, sparkling conversation and energetic sex. Insist on it.

Meanwhile, optimal- experimentation theory suggests that at this tender stage of life you are highly likely to meet someone even better. Socialise a lot while your boyfriend is not around.

Finally, consider your bargaining strength with potential new boyfriends with regard to, for instance, who pays for dinner. Your best alternative to a negotiated agreement with the new boyfriend is. your old boyfriend, who by your admission is an excellent catch.

This puts you in a sound negotiating position - unless, of course, the boy is maintaining a long-distance relationship of his own.

Yet another career possibility…

For Debbie Frazier, every day is a dog day. She scoops poop for a living — and makes a killing doing it.

Frazier’s business, called Poop Busters, specializes in low-tech removal of dog waste. She’s been cleaning yards in and around Albuquerque for the better part of 22 years. “It’s hard to beat. You’re outside petting dogs all day,” she told the Albuquerque Tribune. Frazier estimates that she makes more than $100,000 a year, but she said it’s working with the animals that makes her happy. “Dogs are a gift from God,” she said.

Looks like I chose the wrong line of work…

A decade into the practice of medicine, still striving to become “a well regarded physician-scientist,” Robert H. Glassman concluded that he was not making enough money. So he answered an ad in the New England Journal of Medicine from a business consulting firm hiring doctors. And today, after moving on to Wall Street as an adviser on medical investments, he is a multimillionaire…

Just how far he had come from a doctor’s traditional upper-middle-class expectations struck home at the 20th reunion of his college class. By then he was working for Merrill Lynch and soon would become a managing director of health care investment banking.

“There were doctors at the reunion — very, very smart people,” Dr. Glassman recalled in a recent interview. “They went to the top programs, they remained true to their ethics and really had very pure goals. And then they went to the 20th-year reunion and saw that somebody else who was 10 times less smart was making much more money.”