Economists tend to study ”the market” in the abstract, but some markets are anything but abstract. The Aalsmeer auctions in the Netherlands burst with the colour of more than 20m flowers a day, while Tokyo’s early-morning Tsukiji fish market is enthralling enough to compete for tourist attention with the nightclubs of Roppongi. (The stink of alcohol in the tourist pens of Tsukiji suggests that many visitors have combined both experiences to make a night of it.)
These celebrated markets deserve attention from economists as well as tourists. A lot of economics assumes away the details of how market transactions actually work. That is a shame; the late John McMillan, an economist at Stanford, argued that markets will only work well if they are well designed. The whole idea of a market is to allow gains from trade to take place; a badly thought-out market will often fail.
There is more than meets the eye even to a simple transaction such as buying fish.
The economist Kathryn Graddy once spent a month shadowing a trader at the Fulton Fish Market in New York, rousing herself in the early hours and paying protection money to park her car in a safe spot near the market. She discovered that market traders appeared to charge different prices to different ethnic groups – in particular, Asian buyers tended to win keener prices than white buyers. The likely explanation was that the Asian buyers had more price-sensitive customers in Chinatown.
Still, this was a surprising result.
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