Friday, 28 October 2016

Transaction costs and farming

Many people stress about the ‘cost of living’ but the ‘cost’ of living is not the only thing that makes demands on one.  Institutional economics has developed the concept of ‘transaction costs’. These are the costs, financial but also in terms of time and stress, that occur when trying to find a new ‘supplier’.  When I go to the ‘market’ to buy tomatoes I have relatively straightforward choices between variety, quality, origin and price.  But, when I want to find a dentist, mechanic or accountant, things become more complicated.  The same is true if I want to buy, say, bottling machinery that will preserve those tomatoes.  

This has huge implications whenever people talk about, or conceive of, ‘the market’.  It means ‘trusted trading partner’ becomes a criterion that is much more important than ‘best deal on the street.’      I have been working with some clients of my business for almost fifteen years, since I first started it.  I have been using the services of some key suppliers for almost as long.  These are smooth relationships, far removed from the cut and thrust of spot markets.   I have good relations with these people, all tried and trusted business partners. 

When moving home (and especially country) developing these relationships anew can be one of the hardest things.  This was especially noticeable when I moved from Wageningen to Brussels five years ago.  Most of the contacts I made for things like a computer support, flat sharers etc., were achieved via the local Couchsurfing  group. Trying to find a mechanic was hell (no-one in the Brussels Couchsurfing group had a car).  The dentist, doctor and notary were found through lists of British-speaking professionals on the UK Consulate’s web-site.  But that was pretty much a stab in the dark. I mostly went for those that were easily accessible by public transport.   

Now I am going through the same process in Hendaye.  The mechanic, handyman and translator are already in place (though in some cases with reservations).   The search is on for a doctor and wood-supplier.  It’s much easier in a small town. You ask your acquaintances if they can recommend a (fill in gap here).  Sometimes it will just be a friend of theirs, others someone who does give good service.

But I am trying to take my search a bit deeper here.  I have recently joined a Jardin Collectif, which I blogged about a few weeks ago.  Jardins Collectifs are a form of community supported agriculture (CSA) help move farmers, growers and consumers move away from the brutality of spot markets and into a mode of exchange that is more trust-based, offers them more continuity and helps to balance the grower’s cash flow across the year.  

If you don’t already belong to one try researching what is available in your neighbourhood: a box scheme for fruit and veg (preferably from a local grower) or a meat-bag scheme.  When living In Wageningen I even belonged to a group that had keys that gave us access to a trailer full of dairy and meat products and an honesty box.  (I don’t think that model would work in a larger city such as Brussels!!).  Let’s help farmers and growers move away from the insecurity associated with reliance on spot markets and/or contracts with multi-national retailers.

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