The ‘miracle of the marketplace’ brings bananas to your local grocery store from thousands of miles away for pennies

From Mark Perry.

"Shopping at a Harris Teeter grocery store in DC on Saturday, I bought four bananas for only 61 cents (see photo below). As I left the store marveling at what a bargain those exotic fruits are at those prices, I was reminded of this CD post from several years ago that was inspired when I had a similar experience purchasing bananas at a local Safeway.

 

 

As I commented in 2013, What a bargain! Based on the fruit’s label, those four bananas had traveled from somewhere in Guatemala to the nearby Harris Teeter store in DC, and even after traveling nearly 2,000 miles from Central America, were available to me for only 15 cents apiece!

The realization that I can walk to a local grocery store and pay 15 cents for an exotic, tropical fruit that was delivered to me from Central America seems like such a miracle that I started to wonder: How do today’s banana prices compare to prices in the past? Well, here’s a little banana history: Bananas were first available commercially to American consumers in 1876, when they were introduced at the Philadelphia Centennial Exposition to celebrate the hundredth anniversary of the signing of the Declaration of Independence, and sold for ten cents. In today’s dollars, that would be the equivalent of about $3.00 per banana, or 20 times more expensive in real cost compared to the 15 cents I paid at my local grocery store! Stated differently, the price consumers pay today for bananas is 95% lower (adjusted for inflation) than the original price paid by Americans in 1876 when that tropical fruit was first introduced here.

Over a more recent time period, the chart above displays inflation-adjusted retail banana prices (in 2015 dollars) from 1980 to 2015, based on BLS data, and shows that banana prices have been declining steadily over the last thirty years. Banana prices today ($0.58 per pound), after adjusting for inflation, are more than 41% cheaper than in 1980 ($0.985 per pound in 2015 dollars). It’s likely that nothing has changed as far as the physical product is concerned, but greater efficiencies in production, distribution, and transportation of bananas have resulted in a price reduction of more than 41% over the last 35 years.

I’ve also calculated the “time cost” of bananas measured in the number of minutes it would take a worker earning the average hourly wage to earn enough income to purchase a pound of bananas at the retail price in each year (see bottom chart). By that measure, the “time cost” of a pound of bananas has fallen from 3 minutes in 1980 to only 1.64 minutes this year, which is a reduction in “time cost” of 45%. At the current average hourly wage today of $21.18 the “time cost” of one 15-cent banana would be about 25 seconds of work – or almost free!

To express my appreciation of the “miracle of the marketplace” that allows me to walk to my local grocery store and buy exotic tropical fruit grown 2,000 miles away in Guatemala for only 15 cents, I’ve modified part of Leonard Read’s famous “I, Pencil” essay below (with a little help from Jeff Jacoby):

I, Banana, am a complex combination of miracles: First, I’m a plant that is a miracle of nature — I’m botanically a berry but am also the world’s largest herbaceous flowering plant. And then I’m part of a human miracle – the kaleidoscopic energy and productivity of the free market. That human miracle is the complex, coordinated efforts of thousands of people involved who cooperate to bring millions of bananas from places like Ecuador, Colombia and Guatemala to local grocery stores all over America and Europe – areas with climates that are completely hostile to growing the world’s most popular fruit. That human miracle is the configuration of the creative energies of thousands of people who speak different languages and have diverse ancestries — but collaborate spontaneously on our behalf to deliver fresh, tropical fruits like bananas (and also mangoes, avocados and pineapples) to our local grocery stores, which happens miraculously in the absence of any human master-minding or any banana or fruit czar! Man can no more direct these millions of know-hows to bring bananas to the local grocery stores in America and Europe than he can put molecules together to create a banana plant.

Bottom Line: Let me express my appreciation to the “invisible hand” and the “miracle of the marketplace” that allows me to purchase tropical fruit from a faraway place at my local grocery for a price (15 cents) that is almost free. At the average hourly wage today of $21.18, the average American earns enough income in only about 25 seconds to purchase a banana that has traveled 2,000 miles to his or her local grocery store! That’s a miracle!"