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Spring 1998
City Journal Spring 1998.
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  S oundings

Smelling a Plot
Wendy Shalit
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Now that Valentine's Day has come and gone, it's time for a lesson, not in love, but in economics. You would think that at least one official of the New York City Department of Consumer Affairs would have passed Economics 101, but that agency, like almost every public agency in the city, seems without an understanding of how markets work.

Convinced that some dastardly conspiracy jacks up the price of flowers every February 14, the department launched an investigation that confirmed its worst suspicions: rose prices were 42 percent higher on February 14 than on any other day of the year, with the cost of a dozen long-stemmed blooms soaring to a prickly $65. Were the florists price gouging? "Subsequently," reported the New York Times, also apparently without a grasp of Econ 101, "seemingly everyone involved in the flower trade played a game of ring around the rosy, as florists blamed wholesalers, wholesalers blamed growers, and growers blamed the weather."

As any economist would tell you, the economics of roses are no different from the economics of tomatoes: price reflects supply and demand. Since demand spikes up on Valentine's Day, the price rises to allocate the available supply. If we could store roses the way we store diamonds, then the price wouldn't change very much, because wholesalers would just draw on accumulated inventory. But roses are perishable, so wholesalers can't store them. And sure enough, the price of candy didn't go up at all on Valentine's Day, though seasonal demand for it increases far more than the demand for roses. Why? Candy isn't highly perishable.

If the Department of Consumer Affairs needed an investigation to learn this, maybe taxpayers should ask for their money back.

 

 


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