August 11, 2012

Mark Koyama cited in the Financial Times, "The Cost of a Cuppa"

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Mark Koyama cited in Financial Times article, "The Cost of a Cuppa: Rising Tea Prices Offer Lesson From History Worth Imbibing."

What effects would higher tea prices have on the world economy? Here history can teach us a lesson or two. According to Mark Koyama, an economic historian at George Mason University, the extraordinary fall in the price of tea, sugar and other commodities that occurred in Britain throughout the 18th century transformed them from exotic luxuries into goods of mass consumption. The result was history's first wave of consumerism. Workers became willing to work longer so that they could earn the money needed to buy these goods.

This tale will no doubt scare today's policy makers. If in the 18th century falling tea prices led people to work harder, this year's price hike may well risk encouraging widespread idleness.

Luckily, the answer is not that simple. When the price of tea rose again at the beginning of the 19th century, consumers did not stop drinking tea. The masses were now addicted and so people were willing to pay ever more for their precious cup of tea.

Find the full article at Financial Times.