The economics behind Trader Joe’s bags: An Introduction

I went grocery shopping today at a nearby Trader Joe’s store. As Joel (my cashier today) was ringing up the items I had picked, he asked me in typical Trader Joe’s fashion, “any exciting stuff happen today?” By the way for anyone who hasn’t been to a Trader Joe’s before, their cashiers tend to strike up conversations with you.

I mentioned to him that I learned some Spanish phrases on Duolingo this morning, and asked if he had tried the app too. It turns out that he uses it for learning Japanese, and he started talking to me in pretty good Japanese: “watashi wa nihongo wo hanashimasu. Trader Joe’s no baggu wa nihon de ninki desu.” (I speak Japanese. Trader Joe’s bags are popular in Japan.)

Clearly that second phrase is not something he learned directly from Duolingo, so he must have taken his learning a bit further, and I was very proud of him for that.

Then he proceeded to tell me about an interesting phenomenon: the $5 Trader Joe’s reusable bags are being sold in Japan for $25. “There is a black market for Trader Joe’s bags in Japan,” he claims.

Of course the “black market” part is a joke because there’s nothing illegal about me buying a few of these bags and selling them in my home country, but I got curious so I searched on some Japanese peer-to-peer shopping sites, and sure enough, these bags are indeed being sold in Japan for around $25.

This fascinated me, because as an educator at heart, I could not stop thinking about what a great lesson in economics this makes. Any curious student of mine, when told about this phenomenmon, would have asked me: “Well why does a $5 Trader Joe’s bag sell for $25 in Japan? Can I get rich by starting a Trader Joe bag business in Tokyo?”

It turns out that answering this seemingly simple question requires a solid understanding of some of the most important economic concepts, such as “supply and demand”, “scarcity”, “free market”, “division of labor”, “tradeable vs non-tradeable goods”, “exchange rate”, “purchasing power parity” and many more.

So let’s delve into those topics in future posts. But first, why should you care? For starters, economics is really interesting, but more importantly, I believe that a firm grasp of economics is essential for any citizen of a modern society. Not only are we affected profoundly by the economic decisions we make in our lives, we are also voting citizens, and as such, we ought to understand the philosophies behind each of the fiscal and monetary policies we support. The field of economics, contrary to popular belief, is not just about money. At its core, economics is about making the best use of limited resources to improve society.

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Shin Adachi

I am a pianist and composer. I am also a software engineer at Google, and some people call that my "real job". I am originally from Tokyo, and now based in Los Angeles. Check out my music on iTunes/Spotify! Just search for my name.