November 26, 2018
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It feels good to buy a chocolate bar with the Fair Trade label, signifying decent wages for the farm workers in developing countries who harvest the cocoa beans. But are you willing to pay more for that chocolate than for a regular chocolate bar? And how much more?
What about corn chips? Would you pay more for chips in a package that said "Made in U.S.A."?
And, to get more serious than snack food, what about pollution? If you could see what it cost, to you personally, to reduce acid rain, how wide would you be willing to open your wallet?
Jay Corrigan looks into such questions with the eye of an economist--a micro-economist, to be exact, who studies the complex world of economic interaction from the standpoint of how and why individual people make choices.
Corrigan, an associate professor of economics who joined Kenyon's faculty in 2002, is particularly interested in the value of "non-market" goods, products--like the Fair Trade label or the Certified Organic label--that aren't tangible in the usual sense. "It's more complicated," he says, "than just seeing what people will pay for bananas."
Bananas, in fact--and Fair Trade bananas--have figured in one of Corrigan's research projects. In one research project, he and a colleague from Susquehanna University set up a table in a supermarket in Harrisburg, Pennsylvania, considered one of the most demographically representative cities in the nation. There, they offered people $10 to participate in a fifteen-minute "experimental auction" designed to measure individuals' willingness to pay for the Fair Trade designation in products such as bananas and chocolate.
"Our initial results show that shoppers are willing to pay as much as a 25-percent premium for Fair Trade products," says Corrigan. He adds, though, that the premium that shoppers will pay varies according to how much information they receive, both from product labels and third-party sources. "We're trying to understand how consumers respond to these different types of information."
Corrigan likes to use similar kinds of hands-on exercises in the classroom, in part because they can impart a richer understanding of concepts than the traditional "chalk and talk" approach. In "Environmental Economics," for example, he has asked the students to voluntarily (and anonymously) donate money to buy a pollution allowance from the Environmental Protection Agency. A recent class actually purchased a ton of sulfur dioxide emissions, through a nonprofit organization called the Acid Rain Retirement Fund, which buys the allowances so that they can't be used by power plants--the group reduces acid rain by buying the right to pollute with sulfur dioxide and then, in effect, choosing not to use that right.
Corrigan's aim was not only to demonstrate, in a very concrete way, that pollution control comes with costs. By asking the students to use their own money, he got them to reflect on the question of individual willingness to bear that cost. Why do some people prefer to pay and others opt out? What factors influence their choices? The questions aren't merely academic; they could influence legislation and public policy.
The exercise also addressed one of the problems inherent in teaching "Environmental Economics," which attracts a good many non-majors as well as economics majors. "It's an advanced course," notes Corrigan. "I want to make it appealing and useful to the non-majors who may lack some of the theoretical tools, while keeping it challenging for the majors."
Corrigan, an Iowa native who received his B.A. from Grinnell College and his Ph.D. at Iowa State University, knew early on that he wanted to teach at a small liberal-arts college with a tight-knit community. "I loved it at Grinnell, a place that's very similar to Kenyon," he says. "I liked the fact that classes were small and that professors cared about you personally, not just about your assignments and exams but about who you were and what you had going on."
As something of an expert on auctions (albeit experimental auctions for research purposes), he also enjoys the Knox County Fair, where the 4-H kids sell their hogs, cows, and lambs, with local companies paying higher than market prices for the "intangible" value of publicity and civic contribution. Perhaps he's wondering: what would a Kenyon class pay for a hog?