Cross-Price Elasticity of Demand II

A British schooner docked in Penzance yesterday carrying 30,000 bottles of wine on a voyage that enthusiasts believe will herald a return to wind power in merchant shipping.

The first commercial cargo of French wine to be transported by sail in the modern era is due in Dublin this week after a six-day journey, which is being touted as a green and ultimately cheap alternative to fuel propulsion.

Hmm, how green and how cheap?

“Originally this was intended as an ecological project enabling producers to put a label on their goods saying they had been moved by a clean means of transport,” said Mr Albert.

“But it could become economically interesting as well given the high price of fuel.” He said CTMV had chartered five sailing ships to transport products such as Fairtrade coffee, jam and alcoholic drinks. “We are 5 per cent more expensive than standard merchant shipping companies at the moment. But we are going to build our own ships and when they enter service, we will be cheaper.”

5% eh? We\’re obviously not going to see the container ships from China being replaced with tea clippers, but this is an interesting idea all the same. If, for example, sea freight were brought under on of the carbon trading schemes or carbon taxes (although it\’s very tough to see a mechanism by which they would) then for certain journeys sail probably would be cheaper.

The actual trade off though is the usual one with green projects: at least here they\’re properly accounted for. More labour is required to sail a ship and that labour is required for longer as compared with diesel engines. If prices move so that said labour is cheaper than fule, all well and good….we can leave the markets themselves to both work that out and do something about it.

There\’s also something rather grand about seeing one of these ships in full flight: but that\’s an externality, a positive one perhaps, but still one not captured by the price system.

14 thoughts on “Cross-Price Elasticity of Demand II”

  1. If I remember correctly when sail started to get replaced by steam the advantage wasn’t speed since sailing vessels where normally faster, or manpower since shovelling coal took a lot of man power.

    Where steam won, particually in naval vessels, was reliability and maneuverability. There was always power when you needed it, and in whichever direction you wanted it. (OK that is unless you had exhausted your stokers to the point where they couldn’t shovel any more. Which would normally be after a couple of days at full power.) This advantage certainly hasn’t changed.

    If maritime transport does end up having to pay for the carbon costs of their fuel (I don’t see how that will happen either) then it could well be nuclear that wins rather than sail. Commercial nuke vessels have been tried, but found uneconomic for anything other than a handful of icebreakers. Nukes would have all of the advantages of fossil fuels though, and by having minimal carbon costs that could actually make them more profitable than fossil fuels.

    If sail where to gain any traction then I would expect it to be nothing like the high maintenance and high crew vessels of old. Something more like a Wingsail, or the Maltese Falcon.

  2. Where steam won, particually in naval vessels, was reliability and maneuverability. There was always power when you needed it, and in whichever direction you wanted it.

    The difference is that modern diesel engines take up far less space than steam engines did, and can be started quickly – so having a dual-fuel ship that can deal with flat calms and suchlike might now be viable.

    I’m willing to bet sizeable amounts of money that theoretically economically viable or no, we’ll never see civilian nuclear ships. “What if it sinks? What if someone pirates one and crashes it into Manhattan?, etc.” And no, it doesn’t matter that neither of these would actually do much harm in practice.

  3. Dearieme:

    Extaordinary thanks for that link. I read something about 50 years ago regarding something similar, a sort of revolving drum or funnel–that I thought showed a certain promise–but had never been able to find anything onit in many desultory attempts.

  4. This “Albert” also shows a lack of business (and economic) sense.

    Particularly, he seems to think they’ll save by building their own ships. If he’s right, they’re already in the wrong business.

  5. Fairly sure he means “have shipbuilders build us a modern sailing ship, rather than keep on using the 100-year-old one we’ve got at the moment”.

  6. Shipping costs are historically high at the moment, if they are having trouble competing now then they may find it very difficult when (if) prices fall back to (and below) long term factor costs.

  7. Amstel Brewing had a ship too old for delivering beer (about 40 yo, I think), so they put it up for auction at Plymouth. A group from Holland bought it and then some of them and others of their group from England sailed it to America.

    Of course, they had re-named it “Mayflower” and the rest, as they say, “is history.”

    The ship didn’t last long. It was re-auctioned and bought by a guy who dimantled it and used much of the wood to build a barn in Old Jordan.
    Many years later, the barnyard of that barn was used to provide a pauper’s grave to a derelict, one William Penn, former “proprietor” of Pennsylvania, which, in terms of the royal grant, spanned from the Atlantic to the Pacific.

    Some people wonder how the Puritans could make themselves intelligible to the natives they encountered in Massachussetts. Wonder no more: they were greeted by a guy, who with outstretched hand, said “Hello, there. My name’s Sam.” No problemo!

  8. “Amstel Brewing had a ship too old for delivering beer”

    I was in Boston a couple of weeks ago, and I reckon the beer they gave me was off that very ship. They should’ve tipped it into the harbour along with the bloody tea.

    But there is nothing easier on the eye than a beautiful ship in full sail. And if they are starting up again, I’d pay a modest premium to buy the goods they bring. But especially if someone was streetsmart enough to publicise her arrival, advertise the goods, and issue commemoration vouchers to all buyers with details and a picture of the ship, her history, and her voyage.

    And around the seaports, set up salerooms so folk can buy stuff straight off the ship. It’s a great family outing, and the feelgood factor goes all the way up to your wallet.

  9. Actually, I might just have the germ of a business idea here. What if we built or converted a few ships for sail. And then we send them to rendezvous in the channel, with the Emma Maersk, and fill up on cargo. Sort of a reverse engineering of what the Russian factory ships and the trawlers did.

    You know, non-perishables. Wicker chairs, rubber ducks, bed linen, teatowels, cuckoo clocks, table linen, ukeleles, silk, earthenware, stuff like that. And then they sail majestically up the river Tyne under full sail. On a Sunday afternoon, at the beginning of December.

    All we have to do is take the money, gift wrap the junk, and send the punters on their merry way to have their commemorative photographs taken in front of our ship.

    What could possibly go wrong?

    Well it was my idea. But if you want to come in with me, I will consider your application, on receipt of a modest subscription. Can’t say fairer than that….

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