econlife - Searching For an Accurate Statistic by Elaine Schwartz

When you measure the height of Mount Everest, it’s tough knowing precisely where the top and bottom are.

At the top, you could include the snow base. But the next day, the wind and weather would shift it. You could drill down to the underlying rocks. And you might or might not include any manmade objects that affect the height.

Similarly, identifying a “bottom” creates dilemmas. For Everest it is sea level but it could have been the center of the earth or the ocean floor. And, even if you agree that sea level is it, again different groups do it differently.

So, when Nepal completes its calculations for Everest, it could agree with 29,029–the most typical number. But the U.S. has said the mountain is 29,035 feet and Italy, 29,022.

Our point here is that seemingly precise numbers aren’t necessarily accurate. Depending on a slew of decisions, they could even be wrong.

Country of Origin

Similar to Everest, some NAFTA numbers are a challenge.

One example (currently being renegotiated) is the “rules of origin.” Where a good was made matters because tariffs depend on the answer. To be duty free, a certain percent of an item needs to have been produced in the U.S., Mexico, or Canada.

Sounds easy?

It’s not.

A car for example has more than 300 pages devoted to the criteria for determining if it has 62.5% content from the three NAFTA countries. Take an electric motor. It could have come from Asia, gone to Mexico and been used in a Mexican-made car seat. Even boxer shorts have more than one entire page in NAFTA’s regulatory tomes. There, the focus is the types of fabric that qualify.

Like the height of a mountain, the origin of the trillion dollars of goods that move among the three nations can be debated:

Our Bottom Line: A Statistical Oxymoron

The numbers matter.

For Mount Everest, climbers are looking for the highest altitudes. When Everest got a lower height from China, they shifted from the Tibet side to other peaks.

With NAFTA, rules of origin create incentives. Increased, the rules can encourage manufacturers to avoid NAFTA entirely. On the other hand, if they result in compliance, efficiency can suffer because the parts might not be optimal and the paperwork multiplies.

All of this leaves us with an awkward conclusion. We have said that a precise statistic is really an oxymoron. And yet we need the numbers for Everest and NAFTA’s rules of origin.

My sources and more: Up-to-date and interesting, the best Mount Everest measuring story was in the NY Times.and also from Newsweek. Meanwhile, a rules of origin podcast actually made one of my walks more pleasant. And, if you want more, the related paper is here.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - Why Tomatoes are Controversial by Elaine Schwartz

Texas and Ohio call the tomato their state fruit. But in New Jersey, it’s the state vegetable.

Where are we going? To why people care about what we call a tomato.

A Supreme Court Decision

Because of the Tariff of 1883, an importer’s tomatoes had been slapped with a 10% tax on vegetables. Objecting, he said those tomatoes are a fruit and not subject to the levy.

The case went all the way to the Supreme Court. In 1893, the Court did agree that scientifically the tomato was a fruit. However, all that mattered was common usage. Because the tomato was commonly perceived as a vegetable, it was a vegetable.

In the words of the Court, “Botanically speaking, tomatoes are the fruit of the vine, just as are cucumbers, squashes, beans and peas. But in the common language of the people…all these vegetables [like tomatoes]…are usually served at dinner…and not, like fruits, generally as dessert.”

  

School Lunches

The tomato debate continued into the 20th century when the USDA proclaimed ketchup a vegetable in 1981. Even Senator John Heinz (yes that Heinz… from the Heinz ketchup company) disagreed. Saying ketchup was a condiment, he continued, “This is one of the most ridiculous regulations I ever heard of, and I suppose I need not add that I know something about ketchup and relish — or did at one time.”

Although the USDA reversed its position, the debate continued. In 2011, a Senate bill said that the tomato paste on pizza could be counted as a school lunch vegetable.

NAFTA

Now tomatoes are making international trade news again. But this time, a group of Florida growers wants tariffs. Because Mexican tomatoes can be cheap and because Mexico has a better climate for growing tomatoes, U.S. farmers are asking for protection. Otherwise they say that their industry cannot survive.

Our Bottom Line: Comparative Advantage

Hearing about growing and eating tomatoes, 19th century economist David Ricardo would ask us to remember comparative advantage. He would say that because Mexico produces tomatoes with the lower opportunity cost, it should export them to the U.S. Through free trade world productivity will increase, every nation will benefit,…

And school lunches will cost less.

My sources and more: Isn’t it surprising that the tomato is rather controversial? This Washington Post Wonkblog and the Atlantic have great stories of past conflicts. Then National Geographic  has the scientific details and another Washington Post article looks at NAFTA. And finally, if you want to read more, here is the summary of the Supreme Court tomato case.

Ideal for the classroom, econlife.com reflects Elaine Schwartz's work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.