The Effects of Reciprocal Externalities on Bee Production

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James Mead is a Nobel Prize winner who speculated that there would be some problems in the pollination market because of what he called, or I think has come to be called, reciprocal externalities. So it's not obvious to some economists that this market would work very well. And here's a nice story: You've got apple growers next to beekeepers. The bees themselves fly over and they collect nectar from the apples. That's helpful for the beekeeper because he produces honey. While the bees are doing this, they help pollinate apples so that produces more apples.

Wally Thurman of North Carolina State University and PERC talks with EconTalk host Russ Roberts about the world of bees, beekeepers, and the market for pollination. Thurman describes how farmers hire beekeepers to pollinate their crops and how that market keeps improving crop yields and producing honey. Thurman then discusses how beekeepers have responded to Colony Collapse Disorder--a not fully understood phenomenon where colonies disband, dramatically reducing the number of bees. The discussion closes with the history of bee pollination as an example of a reciprocal externality and how Coase's insight helps understand how the pollination market works.