Building a wall of avocado and other economic and engineering idiocies

Okay, it’s not that simple but when it comes to idiocy it helps to keep it simple.

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As a general principle it’s best that governments don’t interfere in the marketplace. Markets tend to find their own balance when left to their own devices. More or less. So the avocado market in the US is probably in some kind of balance between the locally produced  fruit and imported fruit from Mexico. Say around $1 for argument’s sake.

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The Donald puts a 30% tax on the Mexican fruit.

Two things can happen.

Next day, American avocados are $1 on the supermarket shelves and the Mexican ones are $1.30. All the American ones sell out and the American consumers buy some of the Mexican ones, albeit pretty unhappily, at a $1.30.

Pretty soon most of the Mexican producers stop sending their avocados to the US supermarkets and they go out of business. The price of American avocados rises to a $1.20. The American producers are very happy.

The Mexican producers, who can afford the $0.30 of the Donald’s tax, are paying $0.10  and American consumers are paying the other $0.20.

The American consumers are not happy with the Donald.

The other thing that can happen is that the very efficient Mexican producers can absorb the 30% tax and keep selling their avocados at $1. This will produce a shortage of avocados and force the price up. Probably to $1.20 and the effect be the same as scenario one.

There is an interesting counterintuitive effect.

With the rising price of avocados and the exit from the market of Mexican producers, some American producers may be tempted to expand their production.This will require a supply of cheap Mexican labour. However, they will not have access to cheap Mexican labour because the Donald will have built a wall that will have stopped the flow of cheap Mexican labour.

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This is what happens when an economic illiterate is elected to the presidency of America.

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