Econ-Atrocity: A Lesson Taught By Honeybees

By Hasan Tekguc

What are honeybees, the favorite economic textbook example of a positive externality, doing nowadays? The short answer is: they are vanishing in droves, in billions.

Let’s take a step back and see what economics textbooks tell us. In many economics textbooks and introductory classes honeybees are referred to as the perfect example of a positive externality. A positive externality is the benefit from economic activity that falls on a party ‘external’ to the activity. Economics textbooks and professors explain that when honeybees visit flower after flower to collect nectar, they help flowers to pollinate. However, honeybee keepers are not paid by orchard owners for honeybees’ services and hence the pollination service is underprovided. The market-based solution offered in textbooks is to expand the market to include the positive externalities; in plain language if the orchard owners start to pay the beekeepers for bees’ services, the beekeepers will keep more honeybees, more flowers will be pollinated, and the trees will bear more fruit.

The good news for the economic textbook authors is that the market has already enlarged to pay for the services of honeybees. Today in the U.S., beekeepers are earning many times more for pollination work than honey sales–especially since imports from China and Argentina have depressed honey prices. The two crops most dependent on bees for pollination are almonds and apples, but the list extends to oranges, cotton, kiwis, avocadoes, and more.

In the last two decades beekeeping has become increasingly commercialized and consolidated: beekeepers are trucking trailer-loads of bees from state to state in search of pollination contracts. Also, the bees have been bred in recent decades to pollinate rather than to make honey. In other words, the beekeepers are responding to the demands of market.

However this is not the end of externality story. Nowadays the ugly side of market extension is playing out. The New York Times reports that ‘colony collapse disorder,’ a mysterious disease, is causing bee population losses ranging from 30% to 60% on the West Coast and more than 70% in some areas of the East Cost and in Texas. Losses of 20% during the off-season is regarded as normal in the bee industry.

In February 2007, beekeepers and researchers convened in Florida to try to identify possible causes of this mysterious colony collapse disorder. They came up with following possible reasons:

  • Stress: “Bees are being raised to survive a shorter off-season, to be ready to pollinate once the almond bloom begins in February. That has most likely lowered their immunity to viruses.”
  • Insecticides: “Mites have also damaged bee colonies, and the insecticides used to try to kill mites are harming the ability of queen bees to spawn as many worker bees. The queens are living half as long as they did just a few years ago.”
  • Pesticides: “A group of pesticides that were banned in some European countries [may be] affecting bees’ innate ability to find their way back home.”

This is not the first time that mysterious diseases are hitting honeybees but this is the first national honeybee epidemic. The previous diseases were local. Probably, the forced migration of bees in trucks turned this crisis into a national one. The diagnosis of colony collapse disorder is not yet final but all the fingers are pointing in one direction: at the beekeepers’ efforts to take full advantage of the opportunities that markets are presenting them. The mere extension of markets to pay beekeepers more for their services, however, does not mean they were making loads of money before the mysterious disease. One beekeeper, interviewed by the New York Times, stated that he made on average $30,000 per year during the three years before the disease from the 4,200 colonies he owned (each colony/hive ranges from 15,000 to 30,000 bees).

If you are an avid consumer of almonds you may want to store some since California’s almond crop is threatened colony collapse disorder and almond prices may go up. Apart from this, the whole episode is an example of how economics textbooks fall short of capturing the complexities of real life, especially when humans and nature interact. In the textbook version, the only problem was that beekeepers were not rewarded for their bees’ services and once the market extends to cover their services, everybody was supposed to live happily forever. In the natural world with all the complex interrelations and unforeseen feedback mechanisms, the honeybees are apparently not happy.

Reference

Alexei Barrionuevo, “Honeybees Vanish, Leaving Keepers in Peril,” New York Times, February 27, 2007

© 2007 Center for Popular Economics

Econ-Atrocities and Econ-Utopias are the work of their authors and reflect their author’s opinions and analyses. CPE does not necessarily endorse any particular idea expressed in these articles.