Thursday, January 05, 2017

The Professor on Lemons, Peaches and Cask.

"So,", chuckled the Professor, "I gather it's all over for craft cask".

"Over-supply, is it?  Or perhaps something...", he paused, portentously, "Else?".

He threw open the doors to his workroom, from which, for some days, had been issuing a rattling and clinking cacophony.  We followed, and stood open-mouthed at the sight and sound that greeted us.  A huge assemblage of pipe and little paddle wheels was channelling thousands of marbles around tortuous and intersecting paths, almost filling the room.  The clinking marbles hurtled into cunningly gimballed cups, which flipped their contents onto new paths according to no obvious rule.  He handed us ear-defenders and then held up a sign:

"ANALOG COMPUTATION" He dropped it, to reveal another:

We noticed that the flow of marbles into two large buckets, which had been rapid, had begun to slow down.  Which a final convulsive flipping of cups and clattering down pipes. the monster spat out its , last marbles into the buckets.

"Take them off!" He removed his own ear-defenders, dislodging a couple of pairs of spectacles in the process, "See?"  He gestured at the fuller of the two buckets, a yellow one, "Every time!"

We didn't see,  and said so.

"The Lemons!  The lemons win out every time!" He pointed at a neighbouring pink bucket. "So few peaches.  Indeed, if I set the parameters only slightly differently - No Peaches AT ALL!  But I seem to have mislaid the stepladder, and that adjustment is now " He chuckled, and pointed towards the very top of his machine "beyond my reach."

"What we have here is a model of a market in which purchasers, represented by these little cups, can make their choices - lemons or peaches. Now the peach is high-quality, and would, you'd think do well in the market, assuming the price is right, Whereas the Lemon , er. Isn't or Doesn't. They're sour.  No-one likes them as much as peaches. For the sake of argument. Clear?"

We nodded.

"But, you see,  the buyers - the cups - aren't 100% sure of the difference between a lemon and a peach.  So the price they'll pay will be some sort of average.  More than they'd otherwise consider a fair price for something they're sure is a lemon, but less than you might think a peach would be worth.

"What this means, is that peach producers " He indicated a large pink hopper near the ceiling, "will be disinclined to put their fruit in this market at all"

We asked the professor if this was like a craft cask producer giving up on the format.
He nodded, "Yes, quite so, but there's more to it than that"

"Now we have less peach in the market, the average price must fall, since, while the buyers aren't sure they're getting a lemon, they know there's a reduced chance that they're getting a peach.

"And now more peach producers will pull out, the lemon proportion goes up, the average price falls, until there's no incentive to drop peaches into the top of my machine.  And everyone has to have lemons no matter how much they would like a peach."

He grinned, "Of course, I don't eat fruit." He proffered a tin, "Biscuit?"

Becky has suggested I should credit George Akerlof whose "The Market for Lemons"  foreshadows the Professor's machine.   I thought you'd get (or at least, google) the reference. I mean, I'm not that smart.  Anyhoo. There you go.