Business Life: Mackerel economics
First published: Business Life Magazine, August 2008
You’ll all have heard the old proverb, “Give a man a fish and you feed him for a day. Teach him how to fish and you feed him for a lifetime.” But what happens if you give him a mobile phone?
The economist Robert Jensen has been trying to find out. For over a decade, development types have been debating the idea that new technologies such as mobile phones and email might prove to be important tools for helping poor countries grow richer. It all sounds plausible enough, but the challenge has been to prove it. After all, the sceptical case – that the priority for economic development has to be basics such as vaccines, schools, roads and electricity – is fairly persuasive.
Jensen studied Kerala, in India, whose 400 miles of coastal waters provides the livelihood for a million fishermen, and whose beaches host over 100 local fish markets. In the mid-1990s, this was an industry characterised by waste and shocking uncertainty for buyers and sellers alike.
A detailed data-set collected by Jensen tells the story. One Tuesday in January 1997, for example, fishermen were arriving at the Bagdara market to find that buyers had already purchased all the fish they could possibly want. The excess fish had to be dumped or given away for free, since they were perishable. But within 10 miles, at the markets both north and south of Bagdara, fish were scarce and prices were high; buyers were giving up and going home in disgust.
Buyers and sellers were not able to meet up because they had no way of finding each other. And the next week, exactly the same thing happened – except that the gluts and shortages were located at different markets, the result of the whimsy of the mackerel shoals.
Jensen – who collected his data each week for years – was able to see clearly what happened when the mobile phone masts came to Kerala, erected one at a time along the coast. Although they were not aimed at fishermen, the signals ranged many miles out to sea, allowing fishing boats to call the markets and find the best prices.
If I were to show you the graph of fish prices, you would instantly be able to point to the moment at which the masts were switched on in each region. The graph, which has been jumping around like the ECG of a patient with a heart-attack, sudden flatlines as the prices across different markets equalise. At that point, prices fall but fishing boat profits rise, and spoilage of fish becomes a thing of the past.
When Jensen’s research was published late last year, it was a minor triumph for economic analysis: the moment at which the stories about the magic of technology became something more than fishermen’s tall tales.