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Thursday, November 17, 2005

What's Wrong with Fair-Trade Coffee?

Professor John Larrivee:

I heard the story again just a few days ago. You know the basic plotline: Poor coffee growers in third world countries get paid $1 per bag of coffee, which Starbucks then turns around and sells for $10 a pound. The story always concludes with a discussion about the evil firms involved and how markets result in people at the top getting rich and people at the bottom getting ripped off. But, in the end, this story can only survive due to ignorance of how markets work.

Difference between input price and output price doesn’t inherently imply injustice... the question is not the difference between what different parties to the production get paid, but rather who adds value, how much, and where.

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